As we close out a year of record stock market gains, investors are looking to 2018, bracing for volatility while watching for signs that the current bull run has lost its resiliency. But before we bid our final adieu, we offer one last look at tradeable sectors for Q4 and beyond.
We see a range of trends occurring – including serious momentum surging through the semiconductor industry, housing sales enjoying an unexpected rise, global markets continuing to outpace those in the U.S. and geopolitics boosting the defense industry.
Whether you’re a bull or a bear, there are some clear opportunities to take advantage of short-term trends. We don’t side with either optimism or pessimism, but can help tactical thinkers understand the lay of the land on both sides of the trade.
1. Semiconductor Surge
Semiconductors are proving to be an interesting sector for traders looking to express short-term views, which can be seen as an affirmation that scientific innovation can’t be kept at bay. In Q4 alone, we’ve seen a 36% rise in the Direxion Daily Semiconductor Bull 3X Shares leveraged ETF (Ticker: SOXL), which targets the 300% daily return of the index.
In early November, Broadcom moved to purchase Qualcomm in a deal valued at $103 billion. Qualcomm rejected the unsolicited bid, but it remains to be seen whether a showdown will ensue. If completed, it would be a landmark deal and the largest technology takeover ever. Qualcomm has an 8.10% weighting and Broadcom a 7.43% in the benchmark index.
Strong earnings momentum in semiconductors – and tech as a whole – are propelling both sectors forward.
2. Unexpected Housing Spike
Sales of new U.S. single-family homes unexpectedly rose in September, hitting their highest level in nearly 10 years, offering hope that the housing market was regaining speed after appearing to stall in recent months. The market’s bullish reaction can be seen in NAIL, the Direxion Daily 3x Housing Bull ETF, up over 140% YTD.