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ETFs to Tap as Investors Turn Most Bullish Since November 2021
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Wall Street has regained strong momentum in recent weeks on renewed bets for rate cuts later this year. Additionally, a strong corporate earnings season has also lifted investors’ sentiment. Given this, investors have turned most bullish in two-and-a-half years.
According to the latest survey from Bank of America, expectations of interest rate cuts rather than earnings optimism have made investors the "most bullish" since November 2021. About 82% of global fund managers expect the first rate cut by the Fed in the second half, while 78% say a recession is unlikely in the next 12 months (read: Rate Cut or No Rate Cut, Dividend ETFs You Should Buy).
That being said, we have highlighted five ETFs that could be compelling ways to tap this most bullish view. These are iShares Core S&P 500 ETF (IVV - Free Report) , Vanguard Mega Cap Value ETF (MGV - Free Report) , Roundhill Magnificent Seven ETF (MAGS - Free Report) , Fidelity Blue Chip Growth ETF (FBCG - Free Report) and Invesco QQQ Trust (QQQ - Free Report) .
The survey also showed that cash levels dropped to a three-year low of 4% from 4.2% seen in the previous month. Stock allocation reached its highest since January 2022, reflecting strong investor confidence. In terms of crowded trades, the survey showed that participants still believe "Long Magnificent Seven" to be the most popular and powerful that will drive the market higher. “Long U.S. dollar" will be the second most-crowded trade, overtaking "short Chinese equities," the survey showed.
Rate Cut Bets Rise
The world's largest economy is showing signs of a slowdown, reviving the bets for an earlier rate cut from the Federal Reserve. The economy added a lower-than-expected 175,000 jobs last month, and the unemployment rate unexpectedly jumped to 3.9%. After growing for 15 consecutive months, U.S. service sector activity also unexpectedly contracted in April. In another recent weak data, consumer sentiment, as measured by the University of Michigan’s consumer sentiment index, fell sharply in early May to the lowest level in six months on stubbornly high inflation and interest rates, as well as fears that unemployment could rise (read: 4 Sector ETFs & Stocks Likely to Benefit Despite Soft Jobs Data).
Additionally, the United States had a weak start to the year due to lower consumer and government spending amid growing inflation. The economy expanded at the slowest pace in two years, with GDP rising 1.6% annually in the first quarter.
Traders are now pricing in about a 66% chance of a rate cut in September, according to the CME FedWatch Tool. Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand their operations more easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
iShares Core S&P 500 ETF tracks the S&P 500 Index and holds 503 stocks in its basket, each accounting for no more than 7% of the assets. It is heavy on the information technology sector, while financials, healthcare and consumer discretionary round off its next three spots with a double-digit allocation each. iShares Core S&P 500 ETF charges investors 3 bps in annual fees and trades in an average daily volume of 5 million. It has an AUM of $454.3 billion and a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
Vanguard Mega Cap Value ETF follows the CRSP US Mega Cap Value Index, which measures the performance of the largest value stocks in the U.S. market. It holds 140 stocks in its basket, with each accounting for less than 4.1% of assets. Vanguard Mid-Cap Value ETF has amassed $7.3 billion and trades in an average daily volume of 167,000 shares. It charges 7 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $295.2 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: These 5 ETFs Touch New Highs as U.S. Stocks Resume Rally).
Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 194 securities in its basket with AUM of $1.5 billion. It charges 59 bps in annual fees and trades in an average daily volume of 400,000 shares.
Invesco QQQ Trust provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space, with an AUM of $260 billion and an average daily volume of 42 million shares. QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
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ETFs to Tap as Investors Turn Most Bullish Since November 2021
Wall Street has regained strong momentum in recent weeks on renewed bets for rate cuts later this year. Additionally, a strong corporate earnings season has also lifted investors’ sentiment. Given this, investors have turned most bullish in two-and-a-half years.
According to the latest survey from Bank of America, expectations of interest rate cuts rather than earnings optimism have made investors the "most bullish" since November 2021. About 82% of global fund managers expect the first rate cut by the Fed in the second half, while 78% say a recession is unlikely in the next 12 months (read: Rate Cut or No Rate Cut, Dividend ETFs You Should Buy).
That being said, we have highlighted five ETFs that could be compelling ways to tap this most bullish view. These are iShares Core S&P 500 ETF (IVV - Free Report) , Vanguard Mega Cap Value ETF (MGV - Free Report) , Roundhill Magnificent Seven ETF (MAGS - Free Report) , Fidelity Blue Chip Growth ETF (FBCG - Free Report) and Invesco QQQ Trust (QQQ - Free Report) .
The survey also showed that cash levels dropped to a three-year low of 4% from 4.2% seen in the previous month. Stock allocation reached its highest since January 2022, reflecting strong investor confidence. In terms of crowded trades, the survey showed that participants still believe "Long Magnificent Seven" to be the most popular and powerful that will drive the market higher. “Long U.S. dollar" will be the second most-crowded trade, overtaking "short Chinese equities," the survey showed.
Rate Cut Bets Rise
The world's largest economy is showing signs of a slowdown, reviving the bets for an earlier rate cut from the Federal Reserve. The economy added a lower-than-expected 175,000 jobs last month, and the unemployment rate unexpectedly jumped to 3.9%. After growing for 15 consecutive months, U.S. service sector activity also unexpectedly contracted in April. In another recent weak data, consumer sentiment, as measured by the University of Michigan’s consumer sentiment index, fell sharply in early May to the lowest level in six months on stubbornly high inflation and interest rates, as well as fears that unemployment could rise (read: 4 Sector ETFs & Stocks Likely to Benefit Despite Soft Jobs Data).
Additionally, the United States had a weak start to the year due to lower consumer and government spending amid growing inflation. The economy expanded at the slowest pace in two years, with GDP rising 1.6% annually in the first quarter.
Traders are now pricing in about a 66% chance of a rate cut in September, according to the CME FedWatch Tool. Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand their operations more easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
ETFs to Tap
iShares Core S&P 500 ETF (IVV - Free Report)
iShares Core S&P 500 ETF tracks the S&P 500 Index and holds 503 stocks in its basket, each accounting for no more than 7% of the assets. It is heavy on the information technology sector, while financials, healthcare and consumer discretionary round off its next three spots with a double-digit allocation each. iShares Core S&P 500 ETF charges investors 3 bps in annual fees and trades in an average daily volume of 5 million. It has an AUM of $454.3 billion and a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
Vanguard Mega Cap Value ETF (MGV - Free Report)
Vanguard Mega Cap Value ETF follows the CRSP US Mega Cap Value Index, which measures the performance of the largest value stocks in the U.S. market. It holds 140 stocks in its basket, with each accounting for less than 4.1% of assets. Vanguard Mid-Cap Value ETF has amassed $7.3 billion and trades in an average daily volume of 167,000 shares. It charges 7 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.
Roundhill Magnificent Seven ETF (MAGS - Free Report)
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $295.2 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: These 5 ETFs Touch New Highs as U.S. Stocks Resume Rally).
Fidelity Blue Chip Growth ETF (FBCG - Free Report)
Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 194 securities in its basket with AUM of $1.5 billion. It charges 59 bps in annual fees and trades in an average daily volume of 400,000 shares.
Invesco QQQ Trust (QQQ - Free Report)
Invesco QQQ Trust provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space, with an AUM of $260 billion and an average daily volume of 42 million shares. QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.