Advisors in Focus- November 23, 2020

Good morning and a happy holiday week Monday! For the third week in a row, Financial Advisors and their clients are waking up to promising news on the COVID vaccine and treatment front, leading to pundits coining the phrase ‘Vaccine’ or ‘Medical’ Monday. Astrazeneca (AZN) and Regeneron (REGN) are the latest companies to put forth vaccine and treatment cocktails, respectively. The news is helping offset concerns about a near term rise in COVID cases as we head into a holiday shortened week. The focus in Biotechnology has been evident in searches by Financial Advisors as this has been the most researched industry by total traffic in our search engines for six weeks in a row. However, it is a tax strategy ETF that is garnering our attention this morning.

  • Trivia Question- Who declared the first ever Thanksgiving and in what year?

The First Trust Short Duration Managed Municipal ETF (FSMB) came in at #14 in Top ETF searches by All Financial Advisors last week. The FSMB seeks to provide federally tax-exempt income consistent with capital preservation, or, in layman terms, steady returns with low risk. It invests about 80% of its net assets into municipal debt securities that pay interest that is exempt from federal income tax. It is focused on shorter term duration with approximately 66% of its holdings maturing in the next five years. We would warn you that this is a low volume ETF with only 3.4 mln shares outstanding and an average 30-day volume of 27K. The Net Expense Ratio is a very manageable 0.45% and its 12-month Taxable Equivalent Annualized Distribution yields 2.81%. It is well distributed across states and 60% of its holdings are rated A or higher in terms of credit quality.

TOP ETFS – BY ALL FAs (Total Traffic) Last WeekTickerTOP ETFS BY FAs w/ AUM>$1B (Total Traffic) Last WeekTickerTOP INDUSTRIES BY ALL FAs (Total Traffic) Last Week TOP ETF CATEGORIES BY ALL FAs (Total Traffic) Last Week
SPDR S&P 500 ETFSPYVanEck Vectors Gold Miners ETFGDXBiotechnologyLarge Cap Growth Equities
Invesco QQQQQQSPDR S&P 500 ETFSPYAuto ManufacturersLeveraged Equities
Direxion Daily Aerospace & Defense Bull 3X SharesDFENInvesco QQQQQQSoftware – ApplicationTechnology Equities
VanEck Vectors Gold Miners ETFGDXiShares Russell 2000 ETFIWMAerospace & DefenseConsumer Discretionary Equities
iShares Russell 2000 ETFIWMiShares MSCI Emerging Markets ETFEEMElectrical Equipment & PartsPrecious Metals
ProShares UltraPro Short QQQSQQQiShares Core S&P Mid-Cap ETFIJHDrug Manufacturers – Specialty & GenericAll Cap Equities
iPath Series B S&P 500 VIX Short-Term Futures ETNVXXSPDR S&P Regional Banking ETFKREInternet RetailSmall Cap Growth Equities
Consumer Discretionary Select Sector SPDR FundXLYFinancial Select Sector SPDR FundXLFSemiconductorsMaterials
ARK Innovation ETFARKKGlobal X Video Games & Esports ETFHEROInternet Content & InformationHealth & Biotech Equities
ProShares UltraPro QQQTQQQARK Innovation ETFARKKCredit ServicesLeveraged Volatility
SPDR Dow Jones Industrial Average ETFDIAAberdeen Standard Physical Palladium Shares ETFPALLConglomeratesEnergy Equities
Energy Select Sector SPDR FundXLEARK Genomic Revolution ETFARKGDiagnostics & ResearchAlternative Energy Equities
ProShares Ultra VIX Short-Term FuturesUVXYInvesco Solar ETFTANSoftware – InfrastructureIndustrials Equities
First Trust Short Duration Managed Municipal ETFFSMBGlobal X Lithium ETFLITOil & Gas E&PLarge Cap Blend Equities
ProShares S&P 500 Ex-Energy ETFSPXEGlobal X Cloud Computing ETFCLOUSpecialty RetailAsia Pacific Equities
SPDR Gold TrustGLDInvesco DB US Dollar Index Bullish FundUUPDrug Manufacturers – GeneralFinancials Equities
Vanguard Dividend Appreciation ETFVIGiShares MSCI USA ESG Select ETFSUSAMedical DevicesVolatility
iShares U.S. Medical Devices ETFIHIProShares UltraPro Short QQQSQQQEntertainmentLeveraged Commodities
iShares Silver TrustSLViShares Nasdaq Biotechnology ETFIBBConsumer ElectronicsAgricultural Commodities
ProShares Ultra Bloomberg Natural GasBOILiShares MSCI Global Silver Miners ETFSLVPCommunication EquipmentOil & Gas

The key takeaway from this search trend is that FAs continue to look for tax-exempt strategies as we prepare for the Biden Administration to shake up tax laws and navigate a fiscal support package through a divided Capitol Hill. The size and liquidity in FSMB do give us some pause and needs to be taken into consideration. FAs who prefer better liquidity in tax-exempt ETFs can also look at the iShares National Muni Bond (MUB) and the iShares Shorter-term National Muni ETF (SUB).

Other names of interest

  • Aerospace & Defense 3x Bull (DFEN)- We mentioned this last week and FAs certainly paid attention as this debuted at #3 this week in Searches by All FAs (Total Traffic). DFEN continues to test its 200-sma for resistance.
  • S&P 500 Ex-Energy ETF (SPXE)- A sign of the times as this ETF tracks the S&P less the energy sector. This can serve as a risk management tool for FAs who have a large exposure to energy or offer investors a way to reduce exposure to underperforming sectors. SPXE has a 0.27% Expense ratio and pays a dividend yield of 1.58%.
  • Palladium ETF (PALL)- This debuted on the FAs AUM +$1 bln list and the monthly chart looks good for longer term investors. As it suggests, the fund tracks the price of Palladium bullion. With positioning around a potential global recovery in 2021 taking place, this is a commodity we would watch heading into 2021.

Trivia Answer- President George Washington first called for Thanksgiving celebration in 1777. The holiday was to be held on the last Thursday of November and to celebrate the Revolutionary War and the ratification of the Constitution. While Thanksgiving was not made an official holiday until much later, Mr. Washington is credited for the reason why we celebrate.

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