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 Week | Ticker | TOP ETFS BY FAs w/ AUM>$1B (Total Traffic) Last Week | Ticker | TOP INDUSTRIES BY ALL FAs (Total Traffic) Last Week | TOP ETF CATEGORIES BY ALL FAs (Total Traffic) Last Week |
|---|---|---|---|---|---|
| SPDR S&P 500 ETF | SPY | VanEck Vectors Gold Miners ETF | GDX | Biotechnology | Large Cap Growth Equities |
| Invesco QQQ | QQQ | SPDR S&P 500 ETF | SPY | Auto Manufacturers | Leveraged Equities |
| Direxion Daily Aerospace & Defense Bull 3X Shares | DFEN | Invesco QQQ | QQQ | Software – Application | Technology Equities |
| VanEck Vectors Gold Miners ETF | GDX | iShares Russell 2000 ETF | IWM | Aerospace & Defense | Consumer Discretionary Equities |
| iShares Russell 2000 ETF | IWM | iShares MSCI Emerging Markets ETF | EEM | Electrical Equipment & Parts | Precious Metals |
| ProShares UltraPro Short QQQ | SQQQ | iShares Core S&P Mid-Cap ETF | IJH | Drug Manufacturers – Specialty & Generic | All Cap Equities |
| iPath Series B S&P 500 VIX Short-Term Futures ETN | VXX | SPDR S&P Regional Banking ETF | KRE | Internet Retail | Small Cap Growth Equities |
| Consumer Discretionary Select Sector SPDR Fund | XLY | Financial Select Sector SPDR Fund | XLF | Semiconductors | Materials |
| ARK Innovation ETF | ARKK | Global X Video Games & Esports ETF | HERO | Internet Content & Information | Health & Biotech Equities |
| ProShares UltraPro QQQ | TQQQ | ARK Innovation ETF | ARKK | Credit Services | Leveraged Volatility |
| SPDR Dow Jones Industrial Average ETF | DIA | Aberdeen Standard Physical Palladium Shares ETF | PALL | Conglomerates | Energy Equities |
| Energy Select Sector SPDR Fund | XLE | ARK Genomic Revolution ETF | ARKG | Diagnostics & Research | Alternative Energy Equities |
| ProShares Ultra VIX Short-Term Futures | UVXY | Invesco Solar ETF | TAN | Software – Infrastructure | Industrials Equities |
| First Trust Short Duration Managed Municipal ETF | FSMB | Global X Lithium ETF | LIT | Oil & Gas E&P | Large Cap Blend Equities |
| ProShares S&P 500 Ex-Energy ETF | SPXE | Global X Cloud Computing ETF | CLOU | Specialty Retail | Asia Pacific Equities |
| SPDR Gold Trust | GLD | Invesco DB US Dollar Index Bullish Fund | UUP | Drug Manufacturers – General | Financials Equities |
| Vanguard Dividend Appreciation ETF | VIG | iShares MSCI USA ESG Select ETF | SUSA | Medical Devices | Volatility |
| iShares U.S. Medical Devices ETF | IHI | ProShares UltraPro Short QQQ | SQQQ | Entertainment | Leveraged Commodities |
| iShares Silver Trust | SLV | iShares Nasdaq Biotechnology ETF | IBB | Consumer Electronics | Agricultural Commodities |
| ProShares Ultra Bloomberg Natural Gas | BOIL | iShares MSCI Global Silver Miners ETF | SLVP | Communication Equipment | Oil & 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.