Advisors in Focus- January 6, 2021 - InvestingChannel

Advisors in Focus- January 6, 2021

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 –

RANKTOP ETFS – BY ALL FAs (Surge Traffic) This WeekTickerTOP STOCKS- BY ALL FAs (Surge Traffic) This WeekTickerTOP INDUSTRIES BY ALL FAs (Surge Traffic) This Week TOP ETF CATEGORIES BY ALL FAs (Surge Traffic) This Week
1RiverFront Strategic Income FundRIGSThe Peck Company IncPECKTextile Mill ProductsInternational Government Bonds
2iShares Russell Midcap Growth ETFIWPPinnacle West Capital CorpPNWInsurance – LifeHigh Yield Bonds
3Vanguard Small Cap Growth ETFVBKCoastal Carolina Bancshares IncCCNBTurbines and turbine generator setsHedge Fund
4WisdomTree Emerging Markets SmallCap Divdend FundDGSBoston Pvt Finl HldBPFHAdvertising AgenciesForeign Small & Mid Cap Equities
5iShares S&P MidCap 400 Growth ETFIJKViewray IncVRAYNational commercial banksCommodity Producers Equities
6First Trust ISE Cloud Computing Index FundSKYYLineage Cell Therapeutics IncLCTXCommodity contracts brokers and dealersFinancials Equities
7First Trust ISE Chindia Index FundFNIGlobal Consortium Inc.GCGXREIT – SpecialtyLong-Short
8VanEck Vectors Fallen Angel High Yield Bond ETFANGLSILVER DOLLAR RES INC.SLVDFFinance ServicesCommodities
9Amplify Advanced Battery Metals and Materials ETFBATTThe9 LtdNCTYMedicinal and botanicalsLeveraged Real Estate
10SPDR S&P Regional Banking ETFKREKushCo Holdings, Inc.KSHBRadio and TV communications equipmentGovernment Bonds
11Vanguard Dividend Appreciation ETFVIGBrookfield Property Partners LBPYTravel ServicesUtilities Equities
12WisdomTree Emerging Markets Equity Income FundDEMAllena Pharmaceuticals IncALNAUtilities – Regulated ElectricVolatility
13Aptus Defined Risk ETFDRSKPrivate Bancorp of America, Inc.PBAMNoneMid Cap Growth Equities
14MicroSectors U.S. Big Oil Index 3X Leveraged ETNNRGUBio-Rad LaboratoriesBIORetail-Eating & Drinking PlacesLeveraged Commodities
15iShares S&P Asia ETFAIATouchstone Exploration Inc.PBEGFUraniumLeveraged Currency
16iShares Preferred and Income Securities ETFPFFMag Silver CorpMAGDiagnostics & ResearchDiversified Portfolio
17Direxion Daily Semiconductor Bull 3x SharesSOXLSBA CommunicationsSBACIndustrial Metals & MineralsSmall Cap Blend Equities
18Direxion Daily Financial Bear 3X SharesFAZMarchex IncMCHXDrug Manufacturers – Specialty & GenericChina Equities
19Direxion Daily Aerospace & Defense Bull 3X SharesDFENFoster L B CompanyGFSTRPay TVConsumer Discretionary Equities
20Global X YieldCo & Renewable Energy Income ETFYLCOView Systems, Inc.VSYMBroadcastingAsia 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.

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