Ride Market Rally With High-Beta ETFs & Stocks

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After a volatile January, Wall Street has been showing strong momentum this week with the S&P 500 and the tech-heavy Nasdaq Composite Index scaling new highs.

Solid corporate earnings and expectations of a large stimulus by U.S. President Joe Biden’s administration have rekindled the appeal for the riskier assets. The stronger-than-expected results so far in the fourth quarter have led analysts’ to raise their estimates for the coming quarters. Earnings growth for Q4 has turned modestly positive, following three-straight quarters of decline, thanks to impressive results from the tech sector leaders.

Additionally, signs of a healing labor market, continued optimism surrounding new vaccines, widening reach of vaccination, and easing restrictions are also driving the stock higher.  

While every corner of the market is enjoying this ascent, high-beta ETFs and stocks seem a perfect bet at present.

Why High Beta?

Beta measures the price volatility of stocks or funds relative to the overall market. It has a direct relationship to 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 the stock price or fund is less volatile than the market.

That said, high-beta stocks seek to capitalize on consistent growth with market-beating returns. This is because when markets soar, high-beta stocks experience larger gains than the broader market counterparts and thus, outpace the rivals. However, these exhibit a higher level of volatility.

Given this bullishness, investors could find the following ETFs and stocks as intriguing options:

ETF Picks

We have chosen ETFs that are not confined to a specific sector or industry but offer exposure to the broader stock market.

Pacer Lunt Large Cap Alternator ETF (ALTL - Free Report)

This ETF is a strategy-driven, large-cap ETF that seeks to track the investment returns of an index that alternates exposure between low-volatility and high-beta stocks in the S&P 500 Index.

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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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