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By Debby
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On Tuesday(11/10/2020), boosted by the positive news of coronavirus vaccine from Pfizer and BioNTech, $Dow Jones Industrial Average(.DJI.US)$ continued to climb with the help of cyclical stocks such as manufacturing and energy companies that will be the beneficiaries of economic recovery.
According to the Wall Street Journal, betting against the traditional energy industry while buying renewable, clean energy stocks is becoming a popular way to make money on Wall Street.
Some veteran investors believe that the trend will accelerate and consolidate after Joe Biden takes office because transiting from fossil fuels toward clean energy resources is a main campaign policy of Biden.
The result has been a significant outperformance of strategies that invest in assets that lead to lower carbon emissions.
The $iShares Global Clean Energy ETF(ICLN.US)$ has gained 80% for this year, compared with a roughly 40% decline in the $Spdr Select Sector Fund - Energy Select Sector(XLE.US)$ over the same period.
When to buy an ETF for maximum return
When the pullback provides more room to rise
$Ishares Trust U.S. Aerospace & Defense Etf(ITA.US)$, a $2.5 billion fund that is down 18% for the year to date, soared near 20% over the past days.
Several days ago, Jeff Spiegel, U.S. head of iShares Megatrend & International ETFs, which operated ITA, said that previous price drops could provide an entry opportunity for investors.
When there is support for the long term prospect
According to Wall Street Journal, Jeff Spiegel said that military spending continued to rise in several countries including the U.S., Germany and France in recent years.
Considering the tense global geopolitical dynamics, increased military/defense spending would be a normalized trend among leading countries, which means stable financial supports of military/defense-related stocks as well as ETFs.
As to the above clean energy ETFs, Biden's policy acts as a stimulus and will be long term support if implemented.
When there is a huge catalyst for market shifting
As mentioned above, because of the optimistic progress of the vaccine, markets expect the economy will get back on track. Therefore, these manufacturing, transportation and other cyclical sectors come to a turning point.
To some extent, at least in the short term, this is a catalyst for a shift in sentiment. At this time, those stocks and ETFs with solid historical operating results who also experienced a sharp pullback are worthy of our attention.
Any investment needs analysis and patience. When we expect a maximum return, it especially emphasizes the timing of placing your bets.
Source: WSJ