High-Beta ETFs To Bet On Renewed Market Momentum

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After a dismal last week, Wall Street regained strong momentum on a vaccination drive with the S&P 500 and Nasdaq Composite index reaching new peaks. This is especially true as the FDA granted full approval to Pfizer (PFE - Free Report) and BioNTech's COVID-19 vaccine, which had been under an emergency use authorization since December.

Now, the full approval will help squash the ongoing surge in the COVID-19 Delta variant and lead to a continued reopening of the economy. The FDA move has rekindled the appetite for riskier assets and hopes of a quicker economic recovery. Additionally, strong corporate profit growth has been powering the rally.

The strong run is expected to continue going forward given that earnings momentum continues to build up. Additionally, the economy has returned to the pre-pandemic level with the GDP rising 6.5% annually in the second quarter, indicating a sustained recovery from the pandemic-induced recession. Trillions of dollars of government stimulus spending and increased broad-based vaccinations will continue to power consumer spending and result in robust growth. In fact, the United States is projected to see the fastest economic growth in decades this year.

The combination of factors has pushed most analysts to raise the forecast for the S&P 500 for this year. Wells Fargo lifted the target price for the index by 8% to 4,825 through the end of the year while UBS increased the S&P 500 target to 4,600 from 4,500. Goldman, earlier this month, raised the target price to 4,700 from 4,300.

While there are several options to play the bullish backdrop, high-beta ETFs seem a perfect bet at present to make huge profits.

Why High Beta?

Beta measures the price volatility of stocks or funds relative to the overall market. It has a direct relationship with market movements. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the stock price or fund is less volatile than the market.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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