Solid Data Fuels Trade Of Momentum ETFs & Stocks

While Trump’s protectionist trade policies have been weighing on the stock market, a slew of upbeat economic data has spread optimism. This is especially attributable to the robust job and manufacturing data for the month of May.

Inside The Numbers

After two months of lackluster gains, hiring in the United States rebounded with the addition of 223,000 jobs in May, which was much more than expected. The unemployment rate dropped from 3.9% to 3.8%, the lowest since 2000 while average hourly wages rose 8 cents, pushing the year-over-year increase to 2.7%.

Manufacturing activity expanded faster than expected, indicating that American manufacturing is enjoying a 21-month winning streak. The ISM manufacturing index jumped to 58.7 in May, up from 57.3 in April and 58.4 projected by Reuters while order backlogs grew the most in 14 years. Of the 18 manufacturing industries, 16 expanded, led by textile mills and producers of nonmetallic minerals.

Meanwhile, data from the Commerce Department shows that construction spending increased 1.8% in April - the biggest increase since January 2016 after a 1.7% decline in March.

Other Data

The rounds of other economic data have also boosted confidence in the economy. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased the most in five months, by 0.6% in April, while consumer confidence rebounded near an 18-year high in May. The Consumer Confidence Index, as indicated by the Conference Board, rose to 128.0 from 125.6 in April. The upbeat data underscores the economy's strong fundamentals and consumers’ enthusiasm to spend more.

Amid bullish sentiments, momentum investing would be a winning strategy for those seeking higher returns in a short spell. This is because the strategy looks to fetch profits from buying hot stocks that have shown an uptrend over the past few weeks or months.

Here we present five ETFs and stocks that could lead to outperformance in the current market environment. Further, these could even beat broader market returns in the coming months if these trends prevail.

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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 specific ...

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