The Georgia Senate race is about to wrap up so, hopefully, markets can put an end to the 2020 elections and press forward with some clarity. Markets responded favorably with a rally in the S&P and 10-year yields, presumably on the idea that increased stimulus in the form of infrastructure spending and direct payments. However, protests by supporters of outgoing President Donald Trump have muddied the picture as they storm Capitol Hill to protest the transition of power. This is not a political newsletter so we will attempt to provide some distraction and take a look at some investment ideas for your clients.
- Trivia Question- When was the last time there was a 50/50 split in the Senate? How many times has it occurred in the United States History? (Answer below)
The surge in research comes at an interesting time as expectations around control of the Senate, as far as market participants were concerned, flipped from the Republicans to the Democrats after the former took two seats in a Georgia Senate runoff. This is notable as the search patterns reflect how investors view a Senate that is closer inline with the Biden Administration agenda.
TrackStarIQ Data
Here are some highlights of research surges* this week –
| RANK | TOP ETFS – BY ALL FAs (Surge Traffic) This Week | Ticker | TOP STOCKS- BY ALL FAs (Surge Traffic) This Week | Ticker | TOP INDUSTRIES BY ALL FAs (Surge Traffic) This Week | TOP ETF CATEGORIES BY ALL FAs (Surge Traffic) This Week |
|---|---|---|---|---|---|---|
| 1 | RiverFront Strategic Income Fund | RIGS | The Peck Company Inc | PECK | Textile Mill Products | International Government Bonds |
| 2 | iShares Russell Midcap Growth ETF | IWP | Pinnacle West Capital Corp | PNW | Insurance – Life | High Yield Bonds |
| 3 | Vanguard Small Cap Growth ETF | VBK | Coastal Carolina Bancshares Inc | CCNB | Turbines and turbine generator sets | Hedge Fund |
| 4 | WisdomTree Emerging Markets SmallCap Divdend Fund | DGS | Boston Pvt Finl Hld | BPFH | Advertising Agencies | Foreign Small & Mid Cap Equities |
| 5 | iShares S&P MidCap 400 Growth ETF | IJK | Viewray Inc | VRAY | National commercial banks | Commodity Producers Equities |
| 6 | First Trust ISE Cloud Computing Index Fund | SKYY | Lineage Cell Therapeutics Inc | LCTX | Commodity contracts brokers and dealers | Financials Equities |
| 7 | First Trust ISE Chindia Index Fund | FNI | Global Consortium Inc. | GCGX | REIT – Specialty | Long-Short |
| 8 | VanEck Vectors Fallen Angel High Yield Bond ETF | ANGL | SILVER DOLLAR RES INC. | SLVDF | Finance Services | Commodities |
| 9 | Amplify Advanced Battery Metals and Materials ETF | BATT | The9 Ltd | NCTY | Medicinal and botanicals | Leveraged Real Estate |
| 10 | SPDR S&P Regional Banking ETF | KRE | KushCo Holdings, Inc. | KSHB | Radio and TV communications equipment | Government Bonds |
| 11 | Vanguard Dividend Appreciation ETF | VIG | Brookfield Property Partners L | BPY | Travel Services | Utilities Equities |
| 12 | WisdomTree Emerging Markets Equity Income Fund | DEM | Allena Pharmaceuticals Inc | ALNA | Utilities – Regulated Electric | Volatility |
| 13 | Aptus Defined Risk ETF | DRSK | Private Bancorp of America, Inc. | PBAM | None | Mid Cap Growth Equities |
| 14 | MicroSectors U.S. Big Oil Index 3X Leveraged ETN | NRGU | Bio-Rad Laboratories | BIO | Retail-Eating & Drinking Places | Leveraged Commodities |
| 15 | iShares S&P Asia ETF | AIA | Touchstone Exploration Inc. | PBEGF | Uranium | Leveraged Currency |
| 16 | iShares Preferred and Income Securities ETF | PFF | Mag Silver Corp | MAG | Diagnostics & Research | Diversified Portfolio |
| 17 | Direxion Daily Semiconductor Bull 3x Shares | SOXL | SBA Communications | SBAC | Industrial Metals & Minerals | Small Cap Blend Equities |
| 18 | Direxion Daily Financial Bear 3X Shares | FAZ | Marchex Inc | MCHX | Drug Manufacturers – Specialty & Generic | China Equities |
| 19 | Direxion Daily Aerospace & Defense Bull 3X Shares | DFEN | Foster L B Company | GFSTR | Pay TV | Consumer Discretionary Equities |
| 20 | Global X YieldCo & Renewable Energy Income ETF | YLCO | View Systems, Inc. | VSYM | Broadcasting | Asia Pacific Equities |
*- Surge data is based on the average traffic from the past two days compared to the average traffic from the previous market week.
One of the key themes we saw was an uptick in searches around the small- and mid-cap space. The iRussell Mid-Cap Growth (IWP), Vanguard Small-Cap Growth Index (VBK), and iShares S&P Mid-Cap 400 Growth (IJK) were all at the top of the list of surge in searches by Financial Advisors. These are the companies that would, theoretically, see the greatest benefits from an infrastructure plan. All three of these ETFs have enjoyed a strong run since the November elections. The IWP is up 25% since the November elections and is testing resistance at the $100-psyche level. The VBK is up over 30%, running from $207 to the $270 area over the past two months. The IJK has rallied 20%, breaking above the $60 level, and stretching to an all-time high. The question Financial Advisors will need to ask themselves is whether there still upside at these levels?
Of course, there is a price to pay for any large infrastructure stimulus bills. There will be an increase in issuance of treasury bills in order to fund some of the spending. This has led to a spike in the 10-year yield to over 1% today. The dollar, for its part, has continued to remain under pressure. Given the uncertainty around an increase in debt, Financial Advisors continue to look overseas for opportunity.
We saw that in a surge of research around Emerging Market Small Caps ETF (DGS), the Chindia ETF (FNI), and the Asia ETF (AIA). This group is a little more interesting as charts provide a better setup than some of the parabolic moves we were seeing in the small- and mid-cap plays. DGS has, arguably, the most upside as it is pressing into key resistance at this $48 area and remains well below the all-time highs of $57 set back in late 2017. FNI has rallied 35% since breaking out above $42 resistance back in June, but it has a steady ascending chart which bodes well for its current run. The AIA has had a solid run to end 2021, rallying from $70 to the $89 area back in July. Similar to FNI, this has been an orderly push higher on a daily chart.
These are two key themes that we will continue to watch as we enter into the new year. The parabolic runs in the small- and mid-cap space will make for tough decisions by Financial Advisors. The potential for stops and starts in Capitol Hill around spending bills, which need 60 votes to pass, will lead to some volatility in 2021. Perhaps that is why FAs continue to look overseas until we are able to establish greater stability in the U.S..
Trivia Answer- The last time the Senate was split 50/50 was in 2001. The split would last six months, until Democrats convinced Republican Senator Jim Jeffors (VT) to switch and give the Democrats a 51-49 advantage. This marks the third time a split has happened, the prior two were in 1881 and 1954.