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ETFs to Play the Reopening Trade as Omicron Fear Subsides
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Wall Street is steadily rebounding from the omicron-led setback, with all three major indices in the green for the third straight day on Dec 8. The Dow Jones Industrial Average rose 0.1% on the day. Moreover, the S&P 500 and the Nasdaq Composite indices were up 0.3% and 0.6%, respectively, on Dec 8. The upside was primarily driven by optimism from easing worries regarding the severity of the omicron variant and the Federal Reserve increasing the pace of tapering.
Pfizer Inc. (PFE - Free Report) and BioNTech SE (BNTX) have also provided support in easing out worries. Going by their preliminary lab tests, the companies have claimed that three doses of their COVID-19 vaccine will efficiently neutralize the omicron variant. Completion of two doses can assist in providing protection against the disease getting severe and requirements for hospitalizations (per a CNBC article).
Updates from GlaxoSmithKline also uplifted market sentiments to a great extent. The company has announced that its monoclonal antibodies treatment is working efficiently against all strains of the omicron variant, according to the new data (as stated in a CNBC article).
Market optimism was also brought following positive comments from White House chief medical advisor Dr. Anthony Fauci on Dec 5. He addressed the initial data on the omicron variant to be “encouraging” (per a CNBC article). According to the same article, Fauci has said that “Clearly, in South Africa, omicron has a transmission advantage. Although it’s too early to make any definitive statements about it, thus far it does not look like there’s a great degree of severity to it.”
Commenting on the market, Bank of America has mentioned that “The range of possibilities is still wide, but in the bigger picture, we think the odds are still very much in favor of the pandemic phase winding down. In our view, COVID is here to stay, but a shift to the endemic phase is approaching where infections are common but severe outcomes / lockdowns / travel restrictions are not,” as stated in a CNBC article.
Why Consider Reopening Trade?
The improved market sentiments have led to greater attention and confidence in reopening trades. The increasing cases had spooked investors regarding the economic recovery achieved so far and stricter lockdown measures to combat the new variant.
However, the higher probabilities of the omicron variant being mild is stimulating rally in the reopening bets like the travel and tourism sectors, the entertainment and leisure spaces, airline and energy stocks. Norwegian Cruise Line surged 8.2%, becoming the biggest gainer in the S&P 500. It was followed by Carnival and Royal Caribbean, which rose more than 5%, respectively, on Dec 8. United Airlines and Las Vegas Sands were also up more than 4% on the trading day.
ETFs to Ride the Reopening Optimism
Against this backdrop, let’s look at the following ETFs that are well-poised to gain as the recovering U.S. economy from the pandemic lows:
Vanguard Energy ETF seeks to track the performance of the MSCI US Investable Market Energy 25/50 Index. With AUM of $6.08 billion, the fund charges 10 basis points (bps) in fees (read: Will Thanksgiving Help Oil & Energy ETFs Despite Covid Fears?).
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)
Fidelity MSCI Consumer Discretionary Index ETF intends to provide investment results that before expenses generally correspond with the price and yield performance of the MSCI USA IMI Consumer Discretionary Index. It charges investors 8 bps in annual fees as stated in the prospectus (read: Why Reopening-Friendly ETFs Can be Bought on the Dip?).
The Industrial Select Sector SPDR Fund (XLI - Free Report)
The industrial sector, which faced disruption in global supply chains and factory closedowns, is expected to recover from the coronavirus-led slump. The reopening of the U.S. economy and accelerated coronavirus vaccine rollout are expected to drive demand and economic activities in the sector. The Industrial Select Sector SPDR Fund seeks to provide investment results that before expenses generally correspond to the price and yield performance of the Industrial Select Sector Index. It has an expense ratio of 12 bps (read: Fed Plans QE Taper: Time for Cyclical Sector ETFs?).
Small-cap stocks, as indicated by the Russell 2000 Index, have been performing impressively. This upside is being led mainly by small-cap companies closely tied to the U.S. economy and thus are well-positioned to outperform when the economy improves. VIOO seeks to track the performance of the S&P Small-Cap 600 Index. It has an expense ratio of 0.10% (read: 5 Sector ETFs To Win Despite Weak November Jobs Data).
Studying the carriers’ stressed balance sheets, it is safe to say that the space is likely to get massive support from the reopening of the U.S. economy. JETS provides investors access to the global airline industry, including airline operators and manufacturers worldwide. U.S. Global Jets ETF has an expense ratio of 0.60% (read: Travel ETFs Fly High as Omicron Fears Ease).
Image: Bigstock
ETFs to Play the Reopening Trade as Omicron Fear Subsides
Wall Street is steadily rebounding from the omicron-led setback, with all three major indices in the green for the third straight day on Dec 8. The Dow Jones Industrial Average rose 0.1% on the day. Moreover, the S&P 500 and the Nasdaq Composite indices were up 0.3% and 0.6%, respectively, on Dec 8. The upside was primarily driven by optimism from easing worries regarding the severity of the omicron variant and the Federal Reserve increasing the pace of tapering.
Pfizer Inc. (PFE - Free Report) and BioNTech SE (BNTX) have also provided support in easing out worries. Going by their preliminary lab tests, the companies have claimed that three doses of their COVID-19 vaccine will efficiently neutralize the omicron variant. Completion of two doses can assist in providing protection against the disease getting severe and requirements for hospitalizations (per a CNBC article).
Updates from GlaxoSmithKline also uplifted market sentiments to a great extent. The company has announced that its monoclonal antibodies treatment is working efficiently against all strains of the omicron variant, according to the new data (as stated in a CNBC article).
Market optimism was also brought following positive comments from White House chief medical advisor Dr. Anthony Fauci on Dec 5. He addressed the initial data on the omicron variant to be “encouraging” (per a CNBC article). According to the same article, Fauci has said that “Clearly, in South Africa, omicron has a transmission advantage. Although it’s too early to make any definitive statements about it, thus far it does not look like there’s a great degree of severity to it.”
Commenting on the market, Bank of America has mentioned that “The range of possibilities is still wide, but in the bigger picture, we think the odds are still very much in favor of the pandemic phase winding down. In our view, COVID is here to stay, but a shift to the endemic phase is approaching where infections are common but severe outcomes / lockdowns / travel restrictions are not,” as stated in a CNBC article.
Why Consider Reopening Trade?
The improved market sentiments have led to greater attention and confidence in reopening trades. The increasing cases had spooked investors regarding the economic recovery achieved so far and stricter lockdown measures to combat the new variant.
However, the higher probabilities of the omicron variant being mild is stimulating rally in the reopening bets like the travel and tourism sectors, the entertainment and leisure spaces, airline and energy stocks. Norwegian Cruise Line surged 8.2%, becoming the biggest gainer in the S&P 500. It was followed by Carnival and Royal Caribbean, which rose more than 5%, respectively, on Dec 8. United Airlines and Las Vegas Sands were also up more than 4% on the trading day.
ETFs to Ride the Reopening Optimism
Against this backdrop, let’s look at the following ETFs that are well-poised to gain as the recovering U.S. economy from the pandemic lows:
Vanguard Energy ETF (VDE - Free Report)
Vanguard Energy ETF seeks to track the performance of the MSCI US Investable Market Energy 25/50 Index. With AUM of $6.08 billion, the fund charges 10 basis points (bps) in fees (read: Will Thanksgiving Help Oil & Energy ETFs Despite Covid Fears?).
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)
Fidelity MSCI Consumer Discretionary Index ETF intends to provide investment results that before expenses generally correspond with the price and yield performance of the MSCI USA IMI Consumer Discretionary Index. It charges investors 8 bps in annual fees as stated in the prospectus (read: Why Reopening-Friendly ETFs Can be Bought on the Dip?).
The Industrial Select Sector SPDR Fund (XLI - Free Report)
The industrial sector, which faced disruption in global supply chains and factory closedowns, is expected to recover from the coronavirus-led slump. The reopening of the U.S. economy and accelerated coronavirus vaccine rollout are expected to drive demand and economic activities in the sector. The Industrial Select Sector SPDR Fund seeks to provide investment results that before expenses generally correspond to the price and yield performance of the Industrial Select Sector Index. It has an expense ratio of 12 bps (read: Fed Plans QE Taper: Time for Cyclical Sector ETFs?).
Vanguard S&P Small-Cap 600 ETF (VIOO - Free Report)
Small-cap stocks, as indicated by the Russell 2000 Index, have been performing impressively. This upside is being led mainly by small-cap companies closely tied to the U.S. economy and thus are well-positioned to outperform when the economy improves. VIOO seeks to track the performance of the S&P Small-Cap 600 Index. It has an expense ratio of 0.10% (read: 5 Sector ETFs To Win Despite Weak November Jobs Data).
U.S. Global Jets ETF (JETS - Free Report)
Studying the carriers’ stressed balance sheets, it is safe to say that the space is likely to get massive support from the reopening of the U.S. economy. JETS provides investors access to the global airline industry, including airline operators and manufacturers worldwide. U.S. Global Jets ETF has an expense ratio of 0.60% (read: Travel ETFs Fly High as Omicron Fears Ease).
ETFMG Travel Tech ETF (AWAY - Free Report)
ETFMG Travel Tech ETF is the first ETF to focus on technology-focused global travel and tourism companies. It charges an expense ratio of 0.75% (read: ETF Areas to Gain/Lose on Fear of Omicron Strain of Coronavirus).
Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report)
This fund tracks the Dynamic Leisure & Entertainment Intellidex Index and holds a small basket of 31 stocks. PEJ charges 55 bps in annual fees.