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Here's Why Mid-Cap ETFs Are Looking Attractive Now
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Wall Street has delivered decent returns in March so far. The Dow Jones Industrial Average is up 6.9% and the S&P 500 has added 4.3% in the current month. Meanwhile, the Nasdaq Composite has lost about 0.4% amid high-bond yields and increasing inclination toward cyclical stocks.
Resurging coronavirus cases have made investors worried that new lockdown measures to control the spread may hurt the global economic recovery achieved so far,following the reopening of economies. In particular, stocks that were gaining from the reopening economy belonging to sectors like travel, energy, industrial, materials and retail are likely to beimpacted.
Moreover, it is worth noting here that health experts are continuously issuing warnings against reopening of the economy amid the emergence and spread of COVID-19 variants. Despite accelerated vaccine rollout programs, the United States is also seeing a rise in coronavirus cases. Around 30.1 million people in the United States have been infected since January 2020 along with a death toll of more than 546,000. Globally, about 125.6 million COVID-19 cases have been reported along with a death toll of around 2.8 million since the beginning of the outbreak, per a CNN report.
Furthermore, President Joe Biden’s proposal for first major federal tax hike since 1993 has also put investors on the edge. The tax hike plan is likely to hurt on companies’ earnings and equity allocations in the short term. Biden is expected to increase the corporate tax rate to 28% from 21% but keep it below the pre-Trump level of 35%, per some verified sources. The Biden administration is also looking to raise the top marginal tax rate to 39.6% from 37% and taxing capital gains and dividends at a higher ordinary income tax rate.
Meanwhile, on the brighter side, consumer sentiment in the United States has impressed again in March. The strong fiscal support, reopening U.S. economy and the coronavirus vaccine rollout might have instilled optimism among consumers. The University of Michigan’s final sentiment index surged to 84.9, comparing favorably to March’s preliminary reading of 83. The metric also beat the median estimate of 83.6, per a Bloomberg poll. It is important to note that the survey has covered responses received through Feb 24 to Mar 22, according to the article mentioned above.
The unemployment levels are also improving, which signals a recovering economy. The U.S. economy added 379,000 jobs in February 2021, after an upwardly revised 166,000 rise in January, beating market expectations of a rise of 182,000, per verified sources. The U.S. unemployment rate slipped to 6.2% in February 2021, the lowest since April's record high of 14.8% and below market expectations of 6.3%. Still, the unemployment rate remained well above the pre-pandemic levels.
Also, the Fed in its commitment to drive economic recovery has decided to maintain rates near zero until 2023, at least. The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020. 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%.
Mid-Cap ETFs to Consider
As such, investors seeking to capitalize on the strong fundamentals but worried about uncertainty should consider mid-cap ETFs. Below, we have presented five popular mid-cap ETFs:
The fund seeks to track the performance of the CRSP US Mid Cap Index, which measures the investment return of mid-capitalization stocks. It has an AUM of $44.58 billion. It charges a fee of 4 basis points (read: 5 ETFs Most Loved by Investors Last Week).
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P MidCap 400 Index. It has an AUM of $20.02 billion. It charges a fee of 23 basis points (see: all the Mid Cap ETFs here).
The fund provides exposure to mid-sized U.S. companies that are thought to be undervalued by the market relative to comparable companies and tracks the Russell MidCap Value Index. It has an AUM of $12.75 billion. It charges a fee of 24 basis points (read: 5 Top-Ranked Mid-Cap ETFs for Outperformance).
The fund seeks to track the performance of the CRSP US Mid Cap Growth Index, which measures the investment return of mid-capitalization growth stocks. It has an AUM of $10.01 billion. It charges a fee of 7 basis points.
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index. It has an AUM of $8.66 billion and charges a fee of 4 basis points.
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Here's Why Mid-Cap ETFs Are Looking Attractive Now
Wall Street has delivered decent returns in March so far. The Dow Jones Industrial Average is up 6.9% and the S&P 500 has added 4.3% in the current month. Meanwhile, the Nasdaq Composite has lost about 0.4% amid high-bond yields and increasing inclination toward cyclical stocks.
Resurging coronavirus cases have made investors worried that new lockdown measures to control the spread may hurt the global economic recovery achieved so far,following the reopening of economies. In particular, stocks that were gaining from the reopening economy belonging to sectors like travel, energy, industrial, materials and retail are likely to beimpacted.
Moreover, it is worth noting here that health experts are continuously issuing warnings against reopening of the economy amid the emergence and spread of COVID-19 variants. Despite accelerated vaccine rollout programs, the United States is also seeing a rise in coronavirus cases. Around 30.1 million people in the United States have been infected since January 2020 along with a death toll of more than 546,000. Globally, about 125.6 million COVID-19 cases have been reported along with a death toll of around 2.8 million since the beginning of the outbreak, per a CNN report.
Furthermore, President Joe Biden’s proposal for first major federal tax hike since 1993 has also put investors on the edge. The tax hike plan is likely to hurt on companies’ earnings and equity allocations in the short term. Biden is expected to increase the corporate tax rate to 28% from 21% but keep it below the pre-Trump level of 35%, per some verified sources. The Biden administration is also looking to raise the top marginal tax rate to 39.6% from 37% and taxing capital gains and dividends at a higher ordinary income tax rate.
Meanwhile, on the brighter side, consumer sentiment in the United States has impressed again in March. The strong fiscal support, reopening U.S. economy and the coronavirus vaccine rollout might have instilled optimism among consumers. The University of Michigan’s final sentiment index surged to 84.9, comparing favorably to March’s preliminary reading of 83. The metric also beat the median estimate of 83.6, per a Bloomberg poll. It is important to note that the survey has covered responses received through Feb 24 to Mar 22, according to the article mentioned above.
The unemployment levels are also improving, which signals a recovering economy. The U.S. economy added 379,000 jobs in February 2021, after an upwardly revised 166,000 rise in January, beating market expectations of a rise of 182,000, per verified sources. The U.S. unemployment rate slipped to 6.2% in February 2021, the lowest since April's record high of 14.8% and below market expectations of 6.3%. Still, the unemployment rate remained well above the pre-pandemic levels.
Also, the Fed in its commitment to drive economic recovery has decided to maintain rates near zero until 2023, at least. The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020. 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%.
Mid-Cap ETFs to Consider
As such, investors seeking to capitalize on the strong fundamentals but worried about uncertainty should consider mid-cap ETFs. Below, we have presented five popular mid-cap ETFs:
Vanguard Mid-Cap ETF (VO - Free Report)
The fund seeks to track the performance of the CRSP US Mid Cap Index, which measures the investment return of mid-capitalization stocks. It has an AUM of $44.58 billion. It charges a fee of 4 basis points (read: 5 ETFs Most Loved by Investors Last Week).
SPDR S&P MIDCAP 400 ETF Trust (MDY - Free Report)
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P MidCap 400 Index. It has an AUM of $20.02 billion. It charges a fee of 23 basis points (see: all the Mid Cap ETFs here).
iShares Russell Mid-Cap Value ETF (IWS - Free Report)
The fund provides exposure to mid-sized U.S. companies that are thought to be undervalued by the market relative to comparable companies and tracks the Russell MidCap Value Index. It has an AUM of $12.75 billion. It charges a fee of 24 basis points (read: 5 Top-Ranked Mid-Cap ETFs for Outperformance).
Vanguard Mid-Cap Growth ETF (VOT - Free Report)
The fund seeks to track the performance of the CRSP US Mid Cap Growth Index, which measures the investment return of mid-capitalization growth stocks. It has an AUM of $10.01 billion. It charges a fee of 7 basis points.
Schwab U.S. Mid-Cap ETF (SCHM - Free Report)
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index. It has an AUM of $8.66 billion and charges a fee of 4 basis points.
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 >>