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Top-Ranked ETFs That Outperformed the Market in Q1
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Wall Street wrapped up the first quarter with a big bang, driven by strong corporate profits, enthusiasm around AI and hopes that the Fed will cut rates.
Notably, the S&P 500 Index logged the best first-quarter performance in five years, having gained 10.2%, while the Dow Jones had its strongest first-quarter performance since 2021, advancing 5.6%. Meanwhile, the Nasdaq Composite Index popped 9.1%. The buoyancy is expected to continue, at least in the near term, given the increasing prospect of a rate cut in June (read: 5 Best Stocks That Powered the S&P 500 ETF in Q1).
Given the bullish outlook, investors should bet on ETFs that were winners in the first quarter and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), underscoring their continued outperformance. These are VanEck Vectors Semiconductor ETF (SMH - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO - Free Report) , Invesco Dorsey Wright Industrials Momentum ETF (PRN - Free Report) , Pacer Data and Digital Revolution ETF (TRFK - Free Report) and Invesco Energy Exploration & Production ETF (PXE - Free Report) .
In the latest meeting, the Fed maintained its interest rates steady in a range of 5.25%-5.50% and signaled three rate cuts this year, citing expanding economic activity and easing but elevated inflation. The move will mark the end of the most aggressive Fed hiking cycle and fuel corporate profits.
Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand their operations more easily and resulting in increased profitability. These, in turn, will stimulate economic growth and provide a boost to the stock market.
Corporate earnings are expected to remain strong. After the growth of 6.7% in earnings and 3.9% in revenues in the final quarter of 2024, the S&P 500 is expected to post earnings growth of 2.5% year over year on 3.5% higher revenues, per the latest Earnings Trends report. The technology sector remains a key growth driver. Though estimates for Q1 earnings have come down since the start of the quarter, the magnitude of cuts compared favorably with the other recent periods.
Further, the craze for AI is expected to stay in 2024, with many experts believing that the AI journey for the market leaders has just begun, and more innovations in this field will unfold.
We have profiled the abovementioned ETFs in detail below:
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment (read: Best and Worst ETF Zones of Q1).
VanEck Vectors Semiconductor ETF holds 26 stocks in its basket and has managed assets worth $18.4 billion. It charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 9 million shares per day and has a Zacks ETF Rank #1 with a High risk outlook.
Invesco S&P MidCap Momentum ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms having the highest momentum scores. It holds 80 stocks in its basket, with key holdings in industrials, information technology, consumer discretionary, and consumer staples.
Invesco S&P MidCap Momentum ETF has AUM of $2.1 billion and charges 34 bps in annual fees. It trades in an average daily volume of 215,000 shares and has a Zacks ETF Rank #2.
Invesco Dorsey Wright Industrials Momentum ETF provides exposure to 49 industrial companies that are showing relative strength (momentum) and follows the Dorsey Wright Industrials Technical Leaders Index. It is widely spread across trading companies & distributors, construction & engineering, electrical equipment and building products (read: Buy 5 Top-Ranked ETFs to Play Broadening US Market Rally).
Invesco Dorsey Wright Industrials Momentum ETF has accumulated $261.6 million in its asset base and charges 60 bps in annual fees. It trades in an average daily volume of 10,000 shares and has a Zacks ETF Rank #2 with a Medium risk outlook.
Pacer Data and Digital Revolution ETF (TRFK - Free Report) – Up 17.8%
Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 78 stocks in its basket.
Pacer Data and Digital Revolution ETF has accumulated $31 million in its asset base and in average daily volume of 26,000 shares. It has an expense ratio of 0.60%.
Invesco Energy Exploration & Production ETF (PXE - Free Report) - Up 16.4%
Invesco Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value (read: Energy ETFs Hit New 52-Week High on Oil Price Surge).
Holding 32 stocks in its basket, Invesco Energy Exploration & Production ETF has amassed $146.8 million in its asset base and charges 60 bps in annual fees. It trades in a volume of 35,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.
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Top-Ranked ETFs That Outperformed the Market in Q1
Wall Street wrapped up the first quarter with a big bang, driven by strong corporate profits, enthusiasm around AI and hopes that the Fed will cut rates.
Notably, the S&P 500 Index logged the best first-quarter performance in five years, having gained 10.2%, while the Dow Jones had its strongest first-quarter performance since 2021, advancing 5.6%. Meanwhile, the Nasdaq Composite Index popped 9.1%. The buoyancy is expected to continue, at least in the near term, given the increasing prospect of a rate cut in June (read: 5 Best Stocks That Powered the S&P 500 ETF in Q1).
Given the bullish outlook, investors should bet on ETFs that were winners in the first quarter and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), underscoring their continued outperformance. These are VanEck Vectors Semiconductor ETF (SMH - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO - Free Report) , Invesco Dorsey Wright Industrials Momentum ETF (PRN - Free Report) , Pacer Data and Digital Revolution ETF (TRFK - Free Report) and Invesco Energy Exploration & Production ETF (PXE - Free Report) .
In the latest meeting, the Fed maintained its interest rates steady in a range of 5.25%-5.50% and signaled three rate cuts this year, citing expanding economic activity and easing but elevated inflation. The move will mark the end of the most aggressive Fed hiking cycle and fuel corporate profits.
Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand their operations more easily and resulting in increased profitability. These, in turn, will stimulate economic growth and provide a boost to the stock market.
Corporate earnings are expected to remain strong. After the growth of 6.7% in earnings and 3.9% in revenues in the final quarter of 2024, the S&P 500 is expected to post earnings growth of 2.5% year over year on 3.5% higher revenues, per the latest Earnings Trends report. The technology sector remains a key growth driver. Though estimates for Q1 earnings have come down since the start of the quarter, the magnitude of cuts compared favorably with the other recent periods.
Further, the craze for AI is expected to stay in 2024, with many experts believing that the AI journey for the market leaders has just begun, and more innovations in this field will unfold.
We have profiled the abovementioned ETFs in detail below:
VanEck Vectors Semiconductor ETF (SMH - Free Report) – Up 28.7%
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment (read: Best and Worst ETF Zones of Q1).
VanEck Vectors Semiconductor ETF holds 26 stocks in its basket and has managed assets worth $18.4 billion. It charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 9 million shares per day and has a Zacks ETF Rank #1 with a High risk outlook.
Invesco S&P MidCap Momentum ETF (XMMO - Free Report) – Up 28%
Invesco S&P MidCap Momentum ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms having the highest momentum scores. It holds 80 stocks in its basket, with key holdings in industrials, information technology, consumer discretionary, and consumer staples.
Invesco S&P MidCap Momentum ETF has AUM of $2.1 billion and charges 34 bps in annual fees. It trades in an average daily volume of 215,000 shares and has a Zacks ETF Rank #2.
Invesco Dorsey Wright Industrials Momentum ETF (PRN - Free Report) – Up 17.9%
Invesco Dorsey Wright Industrials Momentum ETF provides exposure to 49 industrial companies that are showing relative strength (momentum) and follows the Dorsey Wright Industrials Technical Leaders Index. It is widely spread across trading companies & distributors, construction & engineering, electrical equipment and building products (read: Buy 5 Top-Ranked ETFs to Play Broadening US Market Rally).
Invesco Dorsey Wright Industrials Momentum ETF has accumulated $261.6 million in its asset base and charges 60 bps in annual fees. It trades in an average daily volume of 10,000 shares and has a Zacks ETF Rank #2 with a Medium risk outlook.
Pacer Data and Digital Revolution ETF (TRFK - Free Report) – Up 17.8%
Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 78 stocks in its basket.
Pacer Data and Digital Revolution ETF has accumulated $31 million in its asset base and in average daily volume of 26,000 shares. It has an expense ratio of 0.60%.
Invesco Energy Exploration & Production ETF (PXE - Free Report) - Up 16.4%
Invesco Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value (read: Energy ETFs Hit New 52-Week High on Oil Price Surge).
Holding 32 stocks in its basket, Invesco Energy Exploration & Production ETF has amassed $146.8 million in its asset base and charges 60 bps in annual fees. It trades in a volume of 35,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.