Wall Street has impressed investors in the first half of 2021, with major indices like the S&P 500 rising 14.4%, while the Nasdaq Composite and the Dow Jones Industrial Average have each climbed more than 12%. Investors have shown immense optimism in the recovering U.S. economy from the pandemic-led slump despite facing rising inflation levels and fears of a rise in interest rates.

Impressive first halves mostly make market participants more optimistic about the rest of the year. According to Refinitiv data going back to 1950, a double-digit gain in the first half has been never followed by an annual decline in the Dow Jones Industrial Average and S&P 500 indexes in that year, per a CNBC article.

Markedly, accelerated vaccine rollout, improving labor market conditions, strong fiscal stimulus support and the reopening of non-essential businesses are expected to expedite the economic recovery pace, keeping investors highly optimistic.

According to the latest data, the U.S. consumer confidence surged to its highest level in about 16 months in June. The Conference Board's measure of consumer confidence index stands at 127.3, comparing favorably with an upwardly revised reading to 120.0 in May. Moreover, June’s reading surpassed the consensus estimate of 119.0, per a Reuters’ poll.

In this regard, Oren Klachkin, lead U.S. economist at Oxford Economics in New York, has said that “Consumers have plenty to be cheerful about after being cooped up at home for more than a year. Looking ahead, low COVID infections, rebounding employment, and elevated savings will buoy confidence and push consumers to spend at a breakneck pace over the summer," per a Reuters article.

Furthermore, per the Fed’s recently-released data, total industrial production rose 0.8% in May. Going on, there was a 0.9%, 1.2% and 0.2% rise, respectively, in manufacturing output, mining and utilities production. Total industrial production rose 16.3% year over year in May.

Wall Street also cheered President Joe Biden’s announcement of the White House striking an infrastructure deal with a bipartisan group of senators. According to the White House, the infrastructure deal will include $579 billion in new spending.

Going by a CNBC article, the proposal will allocate about $312 billion to transportation, with $109 billion going for development in roads, bridges and other major projects, $66 billion in passenger and freight rail and $49 billion in public transit. Notably, about $15 billion will be invested toward electric vehicle infrastructure and electric buses and transit, much lesser than what Biden initially proposed. Furthermore, $266 billion will be allocated toward non-transportation infrastructure, including $73 billion for power, $65 billion for broadband and $55 billion for water.

Meanwhile, inflation levels continue to rise in the United States. According to the Commerce Department, another major inflation indicator, core personal consumption expenditures (PCE) price index, used by the Federal Reserve to set policy, climbed 3.4% year over year in May, per a CNBC article. Notably, it registered the biggest gains since April 1992 and was on par with Wall Street estimates. 

Notably, investors kept the Wall Street rally tight in the recent past, largely due to their growing concerns over the rising inflation levels. They were worried that increasing inflation may hurt corporate margins and profits. They also feared that this persistent escalation in inflation may put pressure on the Federal Reserve to tighten monetary policy, according to a CNBC article.

Going by a CNBC article, Fed Chairman Jerome Powell has remained bullish on the economic recovery achieved so far from the pandemic-led slump. He also maintained that high inflation levels were temporary and will return to 2% over the long term, per the same article.

ETFs to Ride the Wave

Investors who seek to capitalize on the strong trends should consider the following ETFs:

SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - 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 $372.25 billion and the total expense ratio, 0.09% (read: Top Performing ETFs of the First Half).

iShares Core S&P 500 ETF (IVV Quick QuoteIVV - Free Report)

The fund seeks to track the investment results of an index composed of large-capitalization U.S. equities. Its AUM is $286.20 billion and the total expense ratio, 0.03% (read: Inside the Growing Popularity of ETFs).

Vanguard S&P 500 ETF (VOO Quick QuoteVOO - Free Report)

The fund seeks to track the performance of the S&P 500 Index. Its AUM is $231.94 billion and the total expense ratio, 0.03% (read: Best ETFs for Long-Term Investors).

SPDR Dow Jones Industrial Average ETF Trust (DIA Quick QuoteDIA - Free Report)

The fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the Dow Jones Industrial Average. Its AUM is $30.06 billion and the total expense ratio, 0.16% (read: ETFs in Focus as Dow Jones Turns 125 Years).

iShares Dow Jones U.S. ETF (IYY Quick QuoteIYY - Free Report)

The fund seeks to track the investment results of a broad-based index composed of U.S. equities. Its AUM is $1.67 billion and the total expense ratio, 0.20%.

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