These ETFs will help investors survive a ‘not great’ year, says top Wall Street strategist

(MarketWatch) Surprised by the fact that U.S. stocks are on track for double-digit percentage gains this year? 

Here’s one explanation from Sam Stovall, research company CFRA’s chief investment strategist. “It’s the third year of a presidential term in office, which historically is the strongest of the four-year presidential cycle,” he told MarketWatch in a recent telephone interview. 

Since World War II, stocks have gained 16% and risen 84% of the time in year three, he says. As for year four, the average gain has been 6.3%, with markets up 78% of the time. 

“It’s a good year, not a great one,” said Stovall, who also provides our call of the day and some strategies to cope with that outlook. 

Here’s one for a retail investor who doesn’t have the stomach to spend 2020 reacting to geopolitical headlines. “If you’re saying you have to stick with something for a full 12 months, look at those sectors and those sub-industries that are the leaders at the end of the year,” he says. 

That’s because, at least since 1990, “by sticking with winning sectors and sub-industries over the long term, you tend to outperform the broader market.” 

As for sector performances, since October 31 information technology is up 4%, industrials 3.9%, communications services 3.2%, utilities and real estate down 2.4% and 2.8% respectively, and consumer staples up 0.5%, he notes. 

Stovall’s Pacer CFRA-Stovall Equal Weight Seasonal Rotation exchange-traded fund (see performance here) rotates between cyclical and defensive sectors every six months. He also suggests gravitating toward companies that have consistently paid dividends over time, via Vanguard’s Dividend Appreciation ETF and the iShares Core Dividend Growth.


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