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Will ETFs Win During Thanksgiving Week Amid Virus Fears?

Wall Street remains typically upbeat in Thanksgiving week, marking the start of a year-end Santa rally. “The last five trading days of November are traditionally positive, since 1950,” said Sam Stovall, chief investment strategist at CFRA. “There’s a two-thirds likelihood the market is up on the day before Thanksgiving and a 57% likelihood the day after Thanksgiving, and a 71% likelihood that it’s up on Monday,” as quoted on CNBC.

However, this year is a little different given the renewed virus-led lockdown fears in Europe. Wall Street was mixed last week with the S&P 500 (up 0.32%) and the Nasdaq Composite (up 1.24%) gaining and the Dow Jones and the Russell 2000 slumping. This raised doubts over the possibility of a successful thanksgiving week this year.

Already, Wall Street opened the week on a mixed note. But we expect the likes of SPDR S&P 400 Mid Cap Value ETF MDYV, Vanguard Consumer Discretionary ETF VCR, ProShares S&P Technology Dividend Aristocrats ETF TDV and VanEck Vectors Semiconductor ETF SMH to see gains in the near term.

Why Wall Street is Likely to Remain Positive This Thanksgiving

Federal Reserve Chairman Jerome Powell’s term will expire in February. Going against many market watchers’ belief, President Biden has renominated Powell as Federal Reserve chair for the second term. Powell will now face the Senate Banking Committee for renomination before facing the full 100-member Senate for approval. Biden’s second term will give investors clarity about the future monetary policies, which implies the continuation of the previous one.

Plus, solid retail earnings and upbeat monthly retail sales data released lately called for upbeat consumer sentiments. This, in turn, should support a decent Thanksgiving week. Jeff Schulze, investment strategist with ClearBridge Investments, expects fourth-quarter gross domestic product growth in the double digits after theng 2% clip of the third quarter, as quoted on CNBC.

The Philadelphia Fed manufacturing index also displayed solid, better-than-expected activity in the mid-Atlantic region. Stovall, chief investment strategist at CFRA, added that the market could move sideways to lower for some time now but should close 2021 on a higher note.

Against this backdrop, we highlight a few top-ranked ETFs for Thanksgiving week. These ETFs have higher chances of gaining in the week.

ETFs in Focus

SPDR S&P 400 Mid Cap Value ETF

Powell’s nomination means chances of faster-than-expected policy tightening next year. This should boost yields ahead and favor value stocks as the cohort performs well in a rising rate environment. Plus, with virus fear spreading beyond the border, domestic exposure should be warranted currently. Mid-caps that offer the best of both worlds – large and small-caps – have limited foreign exposure.

The underlying S&P MidCap 400 Value Index measures the performance of the mid-capitalization value sector in the U.S. equity market. SPDR S&P 400 Mid Cap Value ETF charges 15 basis points (bps) in fees.

Vanguard Consumer Discretionary ETF

Market watchers are anticipating an impressive retail sales figure in 2021 along with a strong holiday season. The National Retail Federation expects holiday sales to grow 8.5-10.5% in November and December to $843.4-$859 billion. This is higher than last year’s growth of 8.2% and the five-year average of 4.4%. Of these, online and other non-store sales are likely to increase 11-15% to $218.3-$226.2 billion versus $196.7 billion last year.

Retailers are also strongly gearing up for the holiday season, which is considered a busy stretch for many industry players. This makes Zacks Rank #1 fund Vanguard Consumer Discretionary ETF a buy. Vanguard Consumer Discretionary ETF charges 10 bps in fees.

ProShares S&P Technology Dividend Aristocrats ETF

The technology sector has become a darling for investors amid renewed virus fears. The dividend potential in ProShares S&P Technology Dividend Aristocrats ETF is an added advantage.

The underlying S&P Technology Dividend Aristocrats Index targets companies from information technology, Internet and direct marketing retail, interactive home entertainment, and interactive media and services segments of the economy. ProShares S&P Technology Dividend Aristocrats ETF charges 46 bps in fees and yields 1.05% annually.

VanEck Vectors Semiconductor ETF

The semiconductor space has been on a tear as the pandemic has bolstered the demand for chips, leading to the worst global shortage in many years. Corporate earnings from the likes of Nvidia (NVDA), Qualcomm (QCOM) and Advanced Micro Devices (AMD) have been upbeat. The recent upsurge in the electric vehicle industry and increased awareness for clean energy have also made the semiconductor industry an investors’ darling (read: Semiconductor ETFs Flying High on Slew of Q3 Earnings Beat).

VanEck Vectors Semiconductor ETF has a Zacks Rank #1 (Strong Buy). SMH charges 35 bps in fees.



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VanEck Semiconductor ETF (SMH): ETF Research Reports
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
SPDR S&P 400 Mid Cap Value ETF (MDYV): ETF Research Reports
ProShares S&P Technology Dividend Aristocrats ETF (TDV): ETF Research Reports
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