Wall Street extended its best quarterly performance in decades to start the second half buoyed by improving activities in the economy. Rounds of recent data suggest that the U.S. economy has been recovering faster than expected from the COVID-19 pandemic.
This is especially true as it created 4.8 million jobs in June, the highest since the Labor Department began keeping records in 1939, as more restaurants and bars resumed operations. Manufacturing activity rebounded in June, hitting its highest level in more than a year while consumer confidence logged in the biggest gain since 2011. Additionally, unprecedented monetary and fiscal stimulus, a technology sector boom, and potential coronavirus vaccines or treatment have added to the strength.
However, the second wave of coronavirus infection and U.S.-China tensions continued to weigh on the stocks lately.
Given these, we have highlighted a pack of ETFs that are poised to outperform in the second half:
Invesco QQQ QQQ: The recent broad market rally has made Nasdaq Composite Index an outperformer this year powered by the soaring technology sector, which accounts for nearly half of the portfolio. The trend is likely to continue with QQQ looking like an excellent pick. This ETF provides exposure to largest domestic and international non-financial companies listed on the Nasdaq. It is one of the largest and most-popular ETFs in the large-cap space with AUM of $123.2 billion and charges investors 20 bps in annual fees. The product has a Zacks ETF Rank #1 (Strong Buy).
WisdomTree Cloud Computing Fund WCLD: The pandemic has resulted in a dramatic shift in consumer behavior toward the digital world. Cloud computing has encouraged video conferencing, gaming, e-commerce, remote project collaboration, online classes and several other programs. This fund offers exposure to emerging, fast-growing U.S.-listed companies (including ADRs) primarily focused on cloud software and services. It charges investors 45 bps in fees per year and has amassed $498.4 million in its asset base. The fund has a Zacks ETF Rank #2 (Buy) (read: 4 Sector ETFs Up More Than 30% in First-Half 2020).
Amplify Online Retail ETF IBUY: U.S. e-commerce sales are expected to jump 18% this year driven by the coronavirus pandemic, which has forced more shoppers online, according to a new forecast by eMarketer. This ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund has attracted $586.6 million in its asset base and charges 65 bps in fees per year.
First Trust Utilities AlphaDEX Fund FXU: Amid all the uncertainty, the utilities sector is expected to see continued surge. This is because it is relatively protected from large swings in the stock market and is thus considered a safe haven amid market turmoil. Additionally, utilities offer solid dividend payouts and excellent capital appreciation over the longer term. FXU has accumulated $241.1 million in its asset base and has a Zacks ETF Rank #2 with a Medium risk outlook.
Schwab US REIT ETF SCHH: Powell’s dovish outlook is expected to provide a boost to real estate ETFs. In his latest comments, Jerome Powell maintained a dovish stance and stated that there is no expectation of a rate hike through 2022. The central bank has pledged to continue pumping in stimulus until the economy is back on track. With AUM of $4.3 billion, SCHH has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Sector ETFs & Stocks to Explode as Fed Remains Dovish).
MicroSectors FANG+ ETN FNGS: With AUM of $47.6 million, this ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. Four of the five big names — Amazon AMZN, Microsoft MSFT, Apple AAPL and Alphabet GOOGL — surpassed a trillion-dollar market capitalization each for the first time since the COVID-19 pandemic and is expected to head higher (read: Big Tech Stocks Top Trillion-Dollar Each: ETFs to Bet On).
iShares Russell 1000 Growth ETF IWF: Despite the huge volatility, growth investing seems to be the top choice courtesy of massive money flowing into the economy and improving economic activities. This ETF offers exposure to growth stocks of the large-cap segment with key holdings in information technology, consumer discretionary, healthcare and communications. It has AUM of $56.2 billion and a Zacks Rank #1 with a Medium risk outlook.
iShares Edge MSCI Min Vol USA ETF USMV: As the resurgence in coronavirus infections in some parts of the United Sates after reopening sparked concerns about the world economy and its recovery from the pandemic, volatility will continue to rise. As such, investors should focus on low-volatility ETFs like USMV. These products have the potential to outpace the broader market in bearish conditions or in an uncertain environment while providing significant protection to the portfolio. These funds include more stable stocks that have experienced the least price movement in their portfolio. USMV has AUM of $34.3 billion and a Zacks ETF Rank #2 with a Medium risk outlook.
SPDR Gold Trust ETF GLD: Gold has been on stellar ride, logging in the biggest quarterly gain since 2016. The pandemic has spurred demand for the metal as a great store of value and hedge against market turmoil. The trend is likely to continue this year given the persistent headwinds and Fed’s dovish outlook. GLD is the largest and the most-popular gold ETF with AUM of $68.5 billion and has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 ETFs & Stocks to Tap Gold’s Best Quarterly Gain in 4 Years).
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF ZROZ: Government bonds enjoyed a huge rally on increased demand for safe havens amid the coronavirus crisis. The global GDP growth forecast that it would remain weaker than pre-pandemic levels for this year will continue to make Treasuries an attractive investment. While most of the Treasury ETFs appear solid, ZROZ, which follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index has been the biggest winner with 32.4% gains. The fund has a decent level of $370.5 million in AUM and a Zacks Rank #3 with a High risk outlook.
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