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ETFs to Win on S&P's Upside Potential on Way to Record Close
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The S&P 500 has been striving for the past few days to go past its record closing of 3,386.15 hit on Feb 19 before coronavirus struck. While the success was short-lived, this blue-chip index was finally able to touch 3,387.59 in intraday trading on Aug 17. The index closed the session at 3,381.99 (read: 5 Sector ETFs That Have Gained More Than 50% This Year).
This shows investors’ optimism about the U.S. market while they brace for the potential economic recovery in 2021, per Goldman Sachs. As reported by Reuters, this will “boost the S&P 500 to 3,600 by the end of the year, Goldman Sachs said, bumping its target for the index by 20% as it trades within striking distance of a record high.” This indicated a 6.4% upside in the S&P 500 from the current level.
Goldman expects GDP to increase by 6.4% and earnings for S&P 500 companies to shoot up 30%. We also believe that hopes of a coronavirusvaccine as well as better-than-feared second-quarter earnings (amid coronavirus situation) perked up investors’ sentiments. Analysts polled by Refinitiv expect earnings for the companies on the S&P 500 index to jump 28.3% next year following a 20.3% decline in 2020, indicated Reuters.
On the virus front, fears are subsiding. Virus-related hospitalizations in Texas and California have been exhibiting a downtrend. America reported just over 42,000 new COVID-19 cases for Sunday, down from a one-week average of 51,523 daily cases, according to New York Times data, as quoted on MarketWatch.
Among the other positive developments, President Trump announced that the U.S. government will buy 100 million doses of Moderna’s coronavirus vaccine. Moderna, AstraZeneca, Pfizer and Johnson & Johnson are some of the prominent names in the vaccine research field, whose candidates are showing promise.
Consumer discretionary, which takes about 10% of the S&P 500, looks to be on the mend. The final reading of the index of consumer sentiment stood at 72.8 in August, up from July's 72.5. Homebuilder confidence in the newly built, single-family home market jumped six points to a record-high 78 in August on the National Association of Home Builders/Wells Fargo Housing Market Index.
ETF Bets
Against this backdrop, we highlight a few S&P 500 ETFs that could prove to be lucrative bets.
The underling S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market. The fund has a Zacks ETF Rank #2 (Buy). It yields 1.73% annually and charges only 3 bps in fees.
The S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market. The Zacks Rank #2 fund yields 1.87% annually and charges 3 bps in fees.
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The Zacks Rank #2 ETF yields 5.87% annually and charges 7 bps in fees.
The S&P 500 Value Index measures the performance of the large-capitalization value sector in the U.S. equity market. The Zacks Rank #2 fund charges just 4 bps in fees and yields 2.70% annually.
The underlying S&P 500 Growth Index measures the performance of the large-capitalization growth sector in the U.S. equity market. The Zacks Rank #1 (Strong Buy) fund charges just 4 bps in fees and yields 1.14% annually.
Image: Bigstock
ETFs to Win on S&P's Upside Potential on Way to Record Close
The S&P 500 has been striving for the past few days to go past its record closing of 3,386.15 hit on Feb 19 before coronavirus struck. While the success was short-lived, this blue-chip index was finally able to touch 3,387.59 in intraday trading on Aug 17. The index closed the session at 3,381.99 (read: 5 Sector ETFs That Have Gained More Than 50% This Year).
This shows investors’ optimism about the U.S. market while they brace for the potential economic recovery in 2021, per Goldman Sachs. As reported by Reuters, this will “boost the S&P 500 to 3,600 by the end of the year, Goldman Sachs said, bumping its target for the index by 20% as it trades within striking distance of a record high.” This indicated a 6.4% upside in the S&P 500 from the current level.
Goldman expects GDP to increase by 6.4% and earnings for S&P 500 companies to shoot up 30%. We also believe that hopes of a coronavirusvaccine as well as better-than-feared second-quarter earnings (amid coronavirus situation) perked up investors’ sentiments. Analysts polled by Refinitiv expect earnings for the companies on the S&P 500 index to jump 28.3% next year following a 20.3% decline in 2020, indicated Reuters.
On the virus front, fears are subsiding. Virus-related hospitalizations in Texas and California have been exhibiting a downtrend. America reported just over 42,000 new COVID-19 cases for Sunday, down from a one-week average of 51,523 daily cases, according to New York Times data, as quoted on MarketWatch.
Among the other positive developments, President Trump announced that the U.S. government will buy 100 million doses of Moderna’s coronavirus vaccine. Moderna, AstraZeneca, Pfizer and Johnson & Johnson are some of the prominent names in the vaccine research field, whose candidates are showing promise.
Consumer discretionary, which takes about 10% of the S&P 500, looks to be on the mend. The final reading of the index of consumer sentiment stood at 72.8 in August, up from July's 72.5. Homebuilder confidence in the newly built, single-family home market jumped six points to a record-high 78 in August on the National Association of Home Builders/Wells Fargo Housing Market Index.
ETF Bets
Against this backdrop, we highlight a few S&P 500 ETFs that could prove to be lucrative bets.
Vanguard S&P 500 ETF (VOO - Free Report)
The underling S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market. The fund has a Zacks ETF Rank #2 (Buy). It yields 1.73% annually and charges only 3 bps in fees.
iShares Core S&P 500 ETF (IVV - Free Report)
The S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market. The Zacks Rank #2 fund yields 1.87% annually and charges 3 bps in fees.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report)
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The Zacks Rank #2 ETF yields 5.87% annually and charges 7 bps in fees.
SPDR Portfolio SP 500 Value ETF (SPYV - Free Report)
The S&P 500 Value Index measures the performance of the large-capitalization value sector in the U.S. equity market. The Zacks Rank #2 fund charges just 4 bps in fees and yields 2.70% annually.
SPDR Portfolio SP 500 Growth ETF (SPYG - Free Report)
The underlying S&P 500 Growth Index measures the performance of the large-capitalization growth sector in the U.S. equity market. The Zacks Rank #1 (Strong Buy) fund charges just 4 bps in fees and yields 1.14% annually.
ProShares Ultra S&P500 ETF (SSO - Free Report)
The fund seeks to deliver two times (2X) the return of the index, charging investors 0.90% in expense ratio.
Direxion Daily S&P 500 Bull 2x Shares (SPUU - Free Report)
While this product provides 2X exposure to the index, it charges a lower fee of 64 bps.
ProShares UltraPro S&P500 ETF (UPRO - Free Report)
This fund provides three times (3X) exposure to the index with an expense ratio of 0.92%.
Direxion Daily S&P 500 Bull 3x Shares (SPXL - Free Report)
Like UPRO, this fund also creates 3X long position in the S&P 500 Index with the same expense ratio.
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