1 Tech ETF to Take Advantage of Seasonal Volatility
“Sell in May, and go away.”
It’s an old Wall Street saying. When warm summer weather sets in, many investors go on vacation. So, trading volume in the markets is low and leads to a seasonal market weakness.
And after last week, some believe that it’s coming through as scheduled this year…
May got off to a volatile start. Broad indexes like the S&P 500 and Dow Jones Industrial Average experienced their sharpest one-day drops since March.
Now, there are already concerns that the stock market is overbought. And the Federal Reserve is also hinting at raising interest rates and “significant” market declines ahead.
So, you might be thinking that there are plenty of reasons to sell stocks right now. But “sell in May” shouldn’t be one of them.
Early Weakness Gives Us a Buying Opportunity
First, you don’t have to look far to see that “sell in May” doesn’t always ring true.
Just a year ago, the COVID-19 pandemic disrupted the trend. The massive sell-off came in February and March. And May was clear to run higher.
The S&P 500 and Dow Jones rose more than 4.5% and 6%, respectively, in May 2020 alone. And they continued higher through the end of the year, hitting new highs.
And this year, we’re seeing something similar.
The technology sector usually sees seasonal shifts in sentiment before the rest of the broad market catches up.
Last year, as the No. 1 performing sector, high-flying tech stocks led the way higher. But a few weeks ago, they started to sell off.
Take a look at the chart below. It shows the Technology Select Sector SPDR Fund (NYSE: XLK), which is a good measure of the tech sector.
You can see XLK is down more than 5% since mid-April.
This shift usually doesn’t happen until well into the summer months. But since it’s already starting to play out early, I believe we won’t see the usual seasonal weakness later on.
Over the next few months, I don’t see as much volatility showing up. And this pullback in tech gives us a buying opportunity today…
1 Fund to Buy for the Coming Tech Rebound
Tech stocks will eventually rebound from this early seasonal decline. So, this is a great time to add them to your portfolio at lower prices before they run higher again.
For more exposure to tech, one exchange-traded fund (ETF) is all you need…
The ARK Fintech Innovation ETF (NYSE: ARKF) tracks a unique section of the tech market: fintech. Fintech is focused on technology companies that are disrupting the financial industry and seeing enormous growth in the process.
And ARKF holds a basket of 50 of the most innovative fintech stocks — like U.S. digital payment platforms, Square and PayPal … and Singapore-based digital financial company, Sea.
Now, the ETF has dropped about 20% from its peak in February to today. But fintech has huge long-term potential as the pace of innovation in the space ramps up worldwide.
So, this is a great opportunity to take advantage of this early seasonal weakness and establish a stake in fintech today at low prices.
You’ll be well positioned for quick gains as it bounces back over the next few weeks … as well as long-term gains down the road as this mega trend plays out.
Chad Shoop, CMT
Editor, Quick Hit Profits
Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.