ETF Edge

Tech has a chance to outperform into year-end as Covid cases rise, market analyst says

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Why FAANG stocks dominate the GSLC ETF

Technology stocks could see yet another leg higher in 2020, according to WallachBeth Capital managing director Andrew McOrmond.

McOrmond said what has already been a banner year for the tech trade could finish strong as the market weighs whether to price in another wave of Covid-19 restrictions or look ahead to a 2021 recovery.

"We're in a tug-of-war between different types of investors," he said Thursday on CNBC's "ETF Edge."

U.S. stocks continued to fall Thursday as fears around the recent uptick in coronavirus case counts persisted. Stay-at-home plays including Zoom Video, Slack, Electronic Arts and Netflix climbed.

"A period like [Thursday] — New York City schools closed — ... just kind of reengages this kind of retail investor and day traders who are very powerful in this market," McOrmond said. "Some of these names like Boeing and these comeback names have kind of just come in a little bit."

"I don't think that means they're a sell, it just means the longer-term money ... doesn't have the turnover that the day traders have," he said. "But there is a chance to be outperforming and have that be a powerful trade if you're on the right side of it like many investors were this year."

Steve Sachs, head of capital markets at Goldman Sachs, said a multifactor approach was the way to go heading into the new year.

His firm runs the Goldman Sachs ActiveBeta US Large Cap Equity ETF (GSLC), in which Apple, Microsoft, Amazon, Alphabet and Facebook are the top holdings.

"Those have been persistent and consistent names at the top holdings of GSLC for a while," Sachs said in the same "ETF Edge" interview.

"The whole design of GSLC is to be an equal-weighted approach to multifactor: quality, value, low volatility, momentum. And look, picking individual factors is tough. Look no further than this year in the marketplace. It's been a difficult proposition," he said. "We think having that consistent and persistent allocation to multiple factors in an equal risk-weighted fashion really tends to produce better risk-adjusted results over time."

GSLC rose 0.5% on Thursday and is up more than 11.5% year to date.

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