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Ride the Latest Fed Minutes Optimism With These ETFs
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The Federal Reserve provided some relief to investors with its decision to maintain rates near zero until 2023, at least. Moreover, the central bank has raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.
Consequently, the Wall Street rally on Mar 17 loudly cheered the Fed’s minutes from the meeting. The Dow Jones Industrial Average index crossed the 33,000 threshold for the first time as it gained 0.6% to reach 33,015.37. Moreover, the S&P 500 was up 0.3% to reach a record closing high of 3,974.12. Furthermore, tech-heavy Nasdaq Composite rose 0.4% on the same day.
Highlighting the optimistic market scenario, Michael Arone, chief investment strategist at State Street Global Advisors, said that “it sounds like the perfect scenario for investors and the outlook and you’re seeing market response to this very optimistic view. Monetary policy is going to remain largely accommodative almost regardless of what happens with interest rates, inflation and asset prices,” as quoted in a CNBC article.
The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020, according to the same article as mentioned above. It has also raised the economic growth forecast from 3.2% to 3.3% for 2022. Moving on, growth is likely to cool down in 2023 to 2.2%. The Fed has predicted the longer-run growth measure at 2.3%.
Importantly, the Fed predicts unemployment to decline to 4.5% from 6.2% at present and compares favorably with a 5% forecast in December 2020. The unemployment levels for 2022 and 2023 are expected at 4.2% and 3.7%, respectively. Moreover, the Fed has predicted the longer-run growth measure at 4%.
The Fed’s projections for core inflation as measured by personal consumption expenditures are 2.2% for 2021, 2% for 2022 and 2.1% for 2023 along with the longer-run measure at 2%.
It is worth noting here that an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the coronavirus pandemic-led economic slowdown.
Notably, President Joe Biden stated that the country is expected to have sufficient COVID-19 vaccines for adults who want to get vaccinated by the end of May, per a YahooFinance article. Encouragingly, Biden is also aiming for a situation where Americans can meet friends and families in small groups for celebrating the Fourth of July, according to a CNBC article.
The reopening of the U.S. economy is boosting confidence. As U.S. economic activities gradually inches toward normalcy, the demand for goods and services is likely to rise.
ETFs to Ride the Fed-Induced Optimism
Investors who seek to capitalize on the strong trends should consider the following ETFs:
This fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the S&P 500 Index. Its AUM is $336.46 billion and the total expense ratio, 0.09% (read: $1.9-T Stimulus to Boost U.S. Equity Demand? ETFs to Gain).
The fund seeks to track the investment results of an index composed of large-capitalization U.S. equities. Its AUM is $260.42 billion and the total expense ratio, 0.03% (read: 5 ETFs That Gained Investors' Attention Last Week).
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
The fund is based on the Dow Jones Industrial Average Yield Weighted index. Its AUM is $119.6 million and the total expense ratio, 0.07% (read: Dow Hits Record High: Will ETFs Rally Further?).
The fund seeks to track the investment results of a broad-based index composed of U.S. equities. Its AUM is $1.53 billion and the total expense ratio, 0.20%.
This fund follows the CRSP US Small Cap Growth Index. The product managed assets worth $17.80 billion, and charges 7 bps in annual fees and expenses (read: 5 Top-Ranked ETFs That Investors Can Bet On).
This fund provides exposure to large and mid-cap stocks that exhibit relatively higher price momentum by tracking the MSCI USA Momentum SR Variant Index. It charges 15 basis points (bps) in fees per year and is a popular choice, with AUM of $14.42 billion (read: ETF Strategies to Gain From the Stimulus & Vaccine Optimism).
The Materials Select Sector SPDR Fund (XLB - Free Report)
The most popular material ETF follows the Materials Select Sector Index. This fund manages $6.63 billion in its asset base. The ETF charges 12 bps in fees per year from investors (read: What's in Store for Material ETFs in Q4 Earnings?).
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Ride the Latest Fed Minutes Optimism With These ETFs
The Federal Reserve provided some relief to investors with its decision to maintain rates near zero until 2023, at least. Moreover, the central bank has raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.
Consequently, the Wall Street rally on Mar 17 loudly cheered the Fed’s minutes from the meeting. The Dow Jones Industrial Average index crossed the 33,000 threshold for the first time as it gained 0.6% to reach 33,015.37. Moreover, the S&P 500 was up 0.3% to reach a record closing high of 3,974.12. Furthermore, tech-heavy Nasdaq Composite rose 0.4% on the same day.
Highlighting the optimistic market scenario, Michael Arone, chief investment strategist at State Street Global Advisors, said that “it sounds like the perfect scenario for investors and the outlook and you’re seeing market response to this very optimistic view. Monetary policy is going to remain largely accommodative almost regardless of what happens with interest rates, inflation and asset prices,” as quoted in a CNBC article.
The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020, according to the same article as mentioned above. It has also raised the economic growth forecast from 3.2% to 3.3% for 2022. Moving on, growth is likely to cool down in 2023 to 2.2%. The Fed has predicted the longer-run growth measure at 2.3%.
Importantly, the Fed predicts unemployment to decline to 4.5% from 6.2% at present and compares favorably with a 5% forecast in December 2020. The unemployment levels for 2022 and 2023 are expected at 4.2% and 3.7%, respectively. Moreover, the Fed has predicted the longer-run growth measure at 4%.
The Fed’s projections for core inflation as measured by personal consumption expenditures are 2.2% for 2021, 2% for 2022 and 2.1% for 2023 along with the longer-run measure at 2%.
It is worth noting here that an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the coronavirus pandemic-led economic slowdown.
Notably, President Joe Biden stated that the country is expected to have sufficient COVID-19 vaccines for adults who want to get vaccinated by the end of May, per a YahooFinance article. Encouragingly, Biden is also aiming for a situation where Americans can meet friends and families in small groups for celebrating the Fourth of July, according to a CNBC article.
The reopening of the U.S. economy is boosting confidence. As U.S. economic activities gradually inches toward normalcy, the demand for goods and services is likely to rise.
ETFs to Ride the Fed-Induced Optimism
Investors who seek to capitalize on the strong trends should consider the following ETFs:
SPDR S&P 500 ETF Trust (SPY - Free Report)
This fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the S&P 500 Index. Its AUM is $336.46 billion and the total expense ratio, 0.09% (read: $1.9-T Stimulus to Boost U.S. Equity Demand? ETFs to Gain).
iShares Core S&P 500 ETF (IVV - Free Report)
The fund seeks to track the investment results of an index composed of large-capitalization U.S. equities. Its AUM is $260.42 billion and the total expense ratio, 0.03% (read: 5 ETFs That Gained Investors' Attention Last Week).
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
The fund is based on the Dow Jones Industrial Average Yield Weighted index. Its AUM is $119.6 million and the total expense ratio, 0.07% (read: Dow Hits Record High: Will ETFs Rally Further?).
iShares Dow Jones U.S. ETF (IYY - Free Report)
The fund seeks to track the investment results of a broad-based index composed of U.S. equities. Its AUM is $1.53 billion and the total expense ratio, 0.20%.
Vanguard Small-Cap Growth ETF (VBK - Free Report)
This fund follows the CRSP US Small Cap Growth Index. The product managed assets worth $17.80 billion, and charges 7 bps in annual fees and expenses (read: 5 Top-Ranked ETFs That Investors Can Bet On).
iShares MSCI USA Momentum Factor ETF (MTUM - Free Report)
This fund provides exposure to large and mid-cap stocks that exhibit relatively higher price momentum by tracking the MSCI USA Momentum SR Variant Index. It charges 15 basis points (bps) in fees per year and is a popular choice, with AUM of $14.42 billion (read: ETF Strategies to Gain From the Stimulus & Vaccine Optimism).
The Materials Select Sector SPDR Fund (XLB - Free Report)
The most popular material ETF follows the Materials Select Sector Index. This fund manages $6.63 billion in its asset base. The ETF charges 12 bps in fees per year from investors (read: What's in Store for Material ETFs in Q4 Earnings?).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>