Markets Enter 2021 With Both Chaos And Optimism

Markets are seemingly fighting a tug of war between optimism and pessimism every week. On one hand, the Democrats won control of the Senate which means more stimulus could be coming. Vaccines are also now officially in circulation. On the other hand, the Capitol was raided by insurgent Trump loyalists, the economic recovery could be sputtering, and the pandemic continues to rage onwards with a disorganized vaccine roll-out. Although last week investors largely overlooked the headwinds and sent stocks surging to fresh records, this week has opened with stocks selling off and cooling down. Although the short-term could be a bumpy road, the general outlook for the second half of 2021 is positive. A good way to manage these short-term risks and add diversity to your portfolio is through investing in ETFs. Q.ai’s deep learning algorithms have identified several ETFs to look out for this week based on their fund flows over the last 90-days, 30-days, and 7-days. We have identified two Top Buys, one Attractive, two Neutrals, two Unattractives, and one Top Short this week. 

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Top Buy

Financial Select Sector SPDR Fund (XLF)

The Financial Select Sector SPDR Fund XLF is our first Top Buy for the week. This ETF is considered a benchmark ETF for exposure to banks and other financials, and seeks to effectively represent the S&P 500’s financial sector. The ETF has $28,809,081,988.51 AUM and has seen positive fund flows coinciding with optimism on further stimulus. The ETF has a 90-day fund flow of $6,432,224,106.30, 30-day fund flow of $3,629,098,189.30, and 1-week fund flow of $2,616,307,481.15. Its net expense ratio of .13% is also fairly attractive.

3Energy Select Sector SPDR Fund (XLE)

The Energy Select Sector SPDR Fund XLE is our only other Top Buy for this week. This ETF aims to give investors broad exposure to S&P 500 energy stocks. While still undervalued, energy stocks have seen a nice recovery as of late. The ETF is on the smaller side with $15,701,960,962.98 AUM. The ETF has also seen consistently positive fund flows with a 90-day fund flow of $3,415,566,423.35, 30-day fund flow of $1,426,495,735.10, and 1-week fund flow of $672,239,740.00. With a net expense ratio of .13%, this ETF is fairly attractive as well.

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Attractive

Materials Select Sector SPDR Fund (XLB)

The Materials Select Sector SPDR Fund XLB is our sole Attractive ETF this week. This ETF aims to track the broader materials sector in the S&P 500. With further stimulus, and a dollar that could further fall in value, materials stocks could be set to have a strong 2021. The ETF is on the smaller side with $6,347,648,302.65 AUM. It has also seen consistently positive fund flows, with a 90-day fund flow of $1,315,144,313.60, 30-day fund flow of $953,880,323.35, and 1-week fund flow of $834,365,203.20. Its net expense ratio of 0.13% is also attractive.

Neutral

iShares Russell 2000 ETF (IWM)

The iShares Russell 2000 ETF IWM is our first Neutral ETF this week. The ETF aims to track the small-cap Russell 2000 index. The Russell 2000 went on quite a run in November and December, then briefly pulled back after Christmas. To start off 2021 though, the Russell 2000 recovered and went on another strong run due to vaccine and stimulus optimism under a Democrat controlled government. The ETF is mid-sized with $64,384,674,372.20 AUM. It has seen consistently positive fund flows, with a 90-day fund flow of $9,498,228,625.00, 30-day fund flow of $4,806,962,475.00, and 1-week fund flow of $2,476,696,240.00. Its net expense ratio of 0.02% is also reasonable.

SPDR S&P MidCap 400 ETF Trust (MDY)

The SPDR S&P MidCap 400 ETF Trust MDY is our other Neutral ETF this week. This ETF aims to provide investors with broad exposure to mid-cap stocks with a basket holding high quality midsized companies. It is a small to medium sized ETF with $19,265,630,876.02 AUM. It has also seen consistently positive fund flows with a 90-day fund flow of $523,160,137.29, 30-day fund flow of $653,369,525.00, and 1-week fund flow of $725,128,475.00. Its net expense ratio of 0.24% is also decent.

Unattractive

Vanguard Total Stock Market ETF (VTI)

The Vanguard Total Stock Market ETF VTI is our first Unattractive ETF this week. This ETF aims to track the broader stock market, across all indices. The ETF also includes stocks of all cap sizes, and both growth stocks and value stocks. The ETF is on the larger side with $207,594,850,011.64 AUM. It has seen consistently positive fund flows, with a 90-day fund flow of $15,134,206,593.44, 30-day fund flow of $4,956,445,836.69, and 1-week fund flow of $965,963,736.38. Its net expense ratio of 0.03% is also very cheap and reasonable.

SPDR Gold Shares (GLD)

The SPDR Gold Shares ETF GLD is our other Unattractive ETF this week. This ETF is considered to be the benchmark ETF for investors to invest in the price of gold in an innovative, relatively cost efficient and secure way. SPDR Gold Shares is also the largest physically backed gold ETF in the world. Compared to other ETFs though, this ETF is relatively mid-sized in terms of AUM with $70,771,312,355.06 AUM. It has seen mixed fund flows, with a 90-day fund flow of -$5,529,683,300.00, 30-day fund flow of $150,544,400.00, and 1-week fund flow of $683,646,200.00. Its net expense ratio of 0.4% is pricier compared to other ETFs on this week’s list. 

Top Short

Vanguard Total Bond Market ETF (BND)

The sole Top Short this week is the Vanguard Total Bond Market ETF BND . This ETF seeks to give investors exposure to a broad index of taxable US dollar denominated bonds. With $68,238,682,479.06, this ETF is more on the medium-sized side. It has seen consistent fund flows, with a 90-day fund flow of $6,213,917,000.00, 30-day fund flow of $2,795,467,000.00, and 1-week fund flow of $789,359,000.00. With a net expense ratio of .05%, this ETF is also extremely cheap.

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