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Try These ETF Strategies to Play the Market Optimism for 2H21

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The first half of 2021 has been impressive for investors. Wall Street witnessed strength in all three major indexes. In fact, the S&P 500 has registered its best first half since 2019. Going on, the broad index has also witnessed its fifth straight positive month in June and gained more than 2% in the month.

The world’s largest economy is strongly controlling the coronavirus outbreak with accelerated coronavirus vaccine distribution. In fact, more than 60% of adult Americans have already taken the COVID-19 jab, per a CNBC article. Markedly, the Fed’s continued support with easy monetary policies, fiscal stimulus support and reopening of non-essential business are strengthening hopes of rapid recovery from the coronavirus-led slump.

Majority of market analysts are also highly optimistic about the second half of 2021 after a successful run so far. According to Tom Lee, managing partner and head of research at Fundstrat Global Advisors, investors have “a litany of reasons to stay constructive,” as mentioned in a CNBC article. He has also highlighted thateconomic momentum, strength in credit markets and chances of fiscal stimulus could help investors stay optimistic, per the same CNBC article. Moving on, Lee has raised the S&P 500 target estimate to 4,600 from 4,300 for 2021.

Another analyst, Jeff Kilburg, the chief investment officer at Sanctuary Wealth, is also upbeat about the rest of the year largely on the back of the Fed’s support for U.S. economic recovery (per a CNBC article).

Meanwhile, burgeoning concerns about the spread of the Delta variant of COVID-19 might keep investors on edge. It is feared that the government may once again impose mandates for wearing masks to combat the spread of these variants, per the verified sources. However, JPMorgan’s Marko Kolanovic has shrugged off such concerns saying that the impact on the equity markets will be negligible, largely due to chances of low fatality rates in regions with high COVID-19 vaccination rates, according to a CNBC article.

Furthermore, the latest U.S. consumer confidence data looks impressive as the metric has 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.

ETF Strategies to Follow

Here we discuss certain ETF strategies to help investors gain from optimism surrounding the recovering U.S. economy from the pandemic-led slump despite rising inflation levels and fears of a rise in interest rates.

Momentum ETFs to Consider

While the broader stock market is expected to gain on optimism surrounding the rebounding U.S. economy and accelerated distribution of coronavirus vaccine, momentum investing will likely take centerstage as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Investors can consider iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report) , Invesco DWA Momentum ETF (PDP - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO - Free Report) , VictoryShares USAA MSCI USA Value Momentum ETF (ULVM) and SPDR Russell 1000 Momentum Focus ETF (ONEO) (read: Momentum ETFs & Stocks to Buy Now).

Growth ETFs to Consider

Growth stocks are generally expected to witness a positive revenue and earnings trend at a faster rate than the industry average. As such, growth funds tend to outperform during an uptrend. While there are several options in the growth ETF world, we have highlighted five funds that offer broad-based exposure to the U.S. stock market like Vanguard Growth ETF (VUG - Free Report) , Schwab U.S. Large-Cap Growth ETF (SCHG - Free Report) , iShares Core S&P U.S. Growth ETF (IUSG - Free Report) , SPDR S&P 500 Growth ETF (SPYG) and Vanguard Mega Cap Growth ETF (MGK) (read: 5 Equity ETFs That Sizzled Last Week Amid Market Rout).

Small-Cap ETFs to Watch Out For

Small-cap stocks, as indicated by the Russell 2000 Index, have been outperforming the broader market and hitting new all-time highs in the recent past. In fact, the Russell 2000 index climbed 0.6% in June witnessing its ninth consecutive positive month. The index also saw its longest monthly win since 1995. This upside is being largely led by small-cap companies that are closely tied to the U.S. economy and are thus well-positioned to outperform when the economy improves. The latest release of economic data is also indicating toward an improving economy. Therefore, investors can consider Schwab U.S. Small-Cap ETF (SCHA - Free Report) , SPDR S&P 600 Small Cap ETF (SLY - Free Report) , Vanguard S&P Small-Cap 600 ETF (VIOO) and John Hancock Multifactor Small Cap ETF (JHSC) (read: A Quick Guide to the 25 Cheapest ETFs).

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