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5 Top-Ranked ETF Winners of 1H With Upside Potential

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Wall Street has been enjoying a huge rally, hitting fresh highs this year, as the U.S. economy is strongly recovering from the pandemic lows with millions of Americans now fully vaccinated and the economy reopening. The huge infrastructure package and expanded stimulus are also driving the stocks higher.

Additionally, signs of a healing labor market and strong corporate profit growth are adding to the strength. The combination of factors has powered activities across all sectors and categories, resulting in increased consumer spending and confidence. Notably, the S&P 500 has risen about 14% so far this year despite the myriad of woes including rising inflation, Biden’s tax hike plans and global chip crisis.

The strength in value and cyclical stocks, which got battered last year in the pandemic, has led the S&P 500 to outperform this year compared to the growth and tech-laden Nasdaq Composite Index, which was the outperformer during the pandemic. The solid trend is likely to continue given the booming economy and resumption of businesses (read: Value Investing Wins in 1H: 7 Best-Performing ETFs).

A measure of U.S. factory activity climbed to a record high in June bolstering economists' expectations for double-digit growth in the second quarter. U.S. consumer sentiment rebounded in early June as inflation fears subsided and households grew more optimistic about future economic growth and employment. Meanwhile, U.S. manufacturing activity hit a record high in May for the second straight month supported by stronger expansion in output and new orders.

While the stock market gains have been broad-based, several ETFs have easily crushed the market by wide margins so far this year and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). Below, we have presented a bunch of top-performing ETFs from various corners of the market that are likely to continue outperforming, should the trends prevail.

First Trust ISE-Revere Natural Gas Index Fund (FCG - Free Report) – Up 90.3%

This fund offers exposure to U.S. companies involved in the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 38 stocks in its basket. The fund has amassed $293.7 million in its asset base while charging 60 bps in annual fees. Volume is good with 1.2 million shares exchanged per day on average. The product has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Will 2021 be the Best Year for Energy ETFs in Three Decades?).

SPDR S&P Retail ETF (XRT - Free Report) – Up 52.1%

With AUM of $885.8 million, this product targets the broad retail sector by tracking the S&P Retail Select Industry Index. It holds 106 securities in its basket with key holdings in Internet & direct marketing retail, apparel retail, automotive retail, and specialty stores. The fund charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report) – Up 43.4%

The fund targets the small-cap segment of the broad consumer discretionary space by tracking the S&P SmallCap 600 Capped Consumer Discretionary Index. It holds 88 securities in its basket with specialty retail taking the largest share at 38.4% while household durables, hotels restaurants and leisure, textile apparel & luxury goods, and auto components account for a double-digit exposure each. The product has attracted $136.1 million in AUM and charges 29 bps in annual fees. It has a Zacks ETF Rank #2 with a High risk outlook (read: 5 Small-Cap Sector ETFs Leading the Russell 2000 Rally).

First Trust Nasdaq Bank ETF (FTXO - Free Report) – Up 33.7%

This fund follows the Nasdaq US Smart Banks Index, which measures the performance of U.S. companies within the banking industry. It holds 30 securities in its basket and charges 60 bps in annual fees. The ETF has AUM of $247.7 million and has a Zacks ETF Rank #2.

Vanguard S&P Small-Cap 600 Value ETF (VIOV - Free Report) – Up 26%

This ETF follows the S&P Small-Cap 600 Value Index, which is composed of the value companies in the S&P 600. It holds 475 securities in its basket with key holdings in financials, industrials and consumer discretionary. The fund has amassed $1.4 billion in its asset base and charges 15 bps in annual fees. It has a Zacks ETF Rank #2 with a Medium risk outlook.

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