Image: BigstockWall Street has been on a rally this holiday season, especially after Trump’s win in the presidential election. The AI boom and lower rates have also been driving the stock market higher.However, the Fed’s fewer rate cut signal for 2025 took a toll on stocks on Dec. 18. The Dow Jones suffered its 10th straight session of declines — its longest streak of daily losses since October 1974. The S&P 500 Index saw the biggest one-day percentage decline since Aug. 5, while the tech-heavy Nasdaq Composite Index logged its biggest daily decline since July 24.This dip made many ETFs attractive, and we call them the “Secret Santa” funds. These funds are down more than 7% over the past month, but they also have the potential to move higher with the Santa rally. These funds also have maintained favorable Zacks ETF Rank #2 (Buy) ratings, further indicating their outperformance. Energy Select Sector SPDR (XLE – Free Report), Invesco DWA Healthcare Momentum ETF (PTH – Free Report), SPDR S&P Bank ETF (KBE – Free Report), Invesco Dorsey Wright Industrials Momentum ETF (PRN – Free Report), and Invesco S&P 500 Enhanced Value ETF (SPVU – Free Report) could be hidden gems heading into the holiday week.These funds could surprise investors with big returns this Christmas, given the historical trends along with the potential of a Santa Claus rally. A Santa rally refers to the increase in stock prices in the final week of the calendar year (i.e., between Christmas and New Year’s Day) that extends into the first two days of the New Year. This looks more real this year, given the Trump trade boost and the Fed rate cut cycle. As previously mentioned, Trump’s pro-growth and pro-deregulation policies are expected to propel economic growth. Meanwhile, the Fed slashed interest rates for the third time in the past three months, bringing down the benchmark rate to 4.25-4.50%. Lower interest rates generally lead to reduced borrowing costs that help businesses expand their operations more easily and increase profitability. The U.S. economy has been expanding with rising consumer confidence and higher spending power. Economic output increased to the highest level in nearly three years this December. S&P Global’s flash U.S. composite PMI, which captures activity in both the services and manufacturing sectors, came in at 56.6 in December, up from 54.9 in August. Retail sales rose faster than expected in November, reflecting continued resilience in consumer spending and strong economic momentum.

Secret Santa ETFs
We have highlighted the details of each ETF below.

Energy Select Sector SPDR (XLE – Free Report) – Down 11.3%
The Energy Select Sector SPDR fund is the largest and the most popular ETF in the energy space, with an AUM of $33.9 billion and an average daily volume of 11 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index.The ETF holds 22 securities in its basket, with a higher concentration on the top two firms. The fund charges 9 bps in annual fees, and has a Zacks ETF Rank #2 (Buy) rating.

Invesco DWA Healthcare Momentum ETF (PTH – Free Report) – Down 8.1%
The Invesco DWA Healthcare Momentum ETF follows the Dorsey Wright Healthcare Technical Leaders Index and holds a basket of 59 U.S. companies. It has AUM of $127.7 million, and it charges 60 bps in annual fees. Biotechnology takes the largest share at 52.3%, while healthcare providers and pharmaceuticals round off the next two spots with double-digit exposure each.The ETF trades in a light average daily volume of 9,000 shares, and it has a Zacks ETF Rank #2 (Buy) rating.

SPDR S&P Bank ETF (KBE – Free Report) – Down 7.9%
The SPDR S&P Bank ETF offers equal-weight exposure to 94 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with a 71.4% share, while diversified banks, commercial & residential mortgage finance, diversified financial services, and asset management & custody banks take the remainder.The ETF has amassed $2.3 billion in its asset base while trading in a heavy volume of 2 million shares a day, on average. The product charges 35 bps in annual fees, and it has a Zacks ETF Rank #2 (Buy) rating.

Invesco Dorsey Wright Industrials Momentum ETF (PRN – Free Report) – Down 7.2%
The Invesco Dorsey Wright Industrials Momentum ETF provides exposure to 43 industrial companies showing relative strength (momentum), and the ETF follows the Dorsey Wright Industrials Technical Leaders Index. It is widely spread across construction & engineering, aerospace & defense, trading companies & distributors, commercial services, and supplies and building products.The ETF has accumulated $415 million in its asset base, and it charges 60 bps in annual fees. Additionally, it trades in an average daily volume of 26,000 shares, and has a Zacks ETF Rank #2 (Buy) rating.

Invesco S&P 500 Enhanced Value ETF (SPVU – Free Report) – Down 7.2%
Finally, the Invesco S&P 500 Enhanced Value ETF follows the S&P 500 Enhanced Value Index, which measures the performance of stocks in the S&P 500 Index that have the highest “value score.” The product holds 100 stocks in its basket, with key holdings in financials, energy, and communication services.The ETF has accumulated $96.9 million in AUM while trading in a light average daily volume of 4,000 shares. The product charges 13 bps in annual fees, and it has a Zacks ETF Rank #2 (Buy) rating.More By This Author:5 ETFs That Beat The Market In 2024
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