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Will the Hot ETFs of First-Half 2021 Continue to Sizzle?
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With millions of people now vaccinated and easing COVID-induced lockdowns, the global stock market ended first half 2021 on a high note.
American stocks have powered the global rally with the S&P 500 posting the second-best start to a year since 1998. Rapid vaccine rollouts, expanded stimulus, a healing job market and earnings growth have resulted in speedy economic recovery thereby leading to higher activities across all sectors and categories. The gains came despite the rising inflation, which cooled down recently, following the Fed comments that the inflation seems temporary.
Overall, ETFs gathered $471.8 billion in the first half of the year per eftf.com, putting the industry on track to break the annual record of $507.4 billion last year in a matter of weeks. U.S. equity ETFs led the way, accumulating $219.3 billion followed by inflows of $138 billion for international equity ETFs and $84.7 billion for U.S. fixed income ETFs. The solid trend is likely to continue given the growing optimism into the U.S. economy (read: Inside the Growing Popularity of ETFs).
Additionally, President Joe Biden’s proposed tax hike plan will lure more investors to the ETFs. Biden has proposed to increase the top rate on long-term capital gains to 39.6% from 20% to those making more than $1 million a year. These higher taxes would apply to taxable brokerage accounts, but not tax-deferred accounts, which include 401(k) plans. Additionally, Biden seeks to raise the top rate on income taxes to 39.6% from 37%.
Given this, we highlight five ETFs that were the top creators of the first half and can continue to be investors’ darlings in the second should the current market trends prevail:
VOO topped asset flow creation so far this year, gathering $26.6 billion in capital. It tracks the S&P 500 Index and holds 507 stocks in its basket with information technology, healthcare, consumer discretionary, financials and communication services being the top five, with a double-digit allocation each. The ETF charges investors 3 bps in annual fees and trades in an average daily volume of 3.6 million shares. It has AUM of $232.8 billion and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Best ETFs for Long-Term Investors).
This fund has accumulated $20.2 billion in capital, taking its total AUM to $254.2 billion. It provides exposure to the broad stock market by tracking the CRSP US Total Market Index. The ETF holds a large basket of well-diversified 3791 stocks with key holdings in technology, consumer discretionary, industrials, healthcare and financials. It charges 3 bps in fees per year from investors and trades in an average daily volume 3.5 million shares. VTI has a Zacks ETF Rank #2 with a Medium risk outlook.
With AUM of $286.3 billion, this fund, which also tracks the S&P 500 Index, saw inflows of $12.5 billion. It holds 505 stocks in its basket with information technology, healthcare, consumer discretionary, financials and communications being the top five, with a double-digit allocation each. The ETF charges investors 3 bps in annual fees and trades in an average daily volume of 4 million shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
This ETF has accumulated around $12.1 billion in its asset base so far this year. It targets the broad U.S. investment grade bond market by tracking the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. The product holds 10110 securities in its basket with an average maturity and effective duration of 8.5 years and 6.7 years, respectively. BND is the second-largest bond ETF with AUM of $78.8 billion and an average daily volume of 5.2 million shares. It charges 3 bps in annual fees (read: A Quick Guide to the 25 Cheapest ETFs).
This fund has accumulated $10.2 billion in capital, taking its total AUM to $82.3 billion. It targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. The fund holds 338 stocks in its basket with key holdings in financials, healthcare, industrials, and consumer staples. The ETF has AUM of $82.3 billion and charges 4 bps in annual fees. It trades in volume of 2.8 million shares per day on average and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
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Will the Hot ETFs of First-Half 2021 Continue to Sizzle?
With millions of people now vaccinated and easing COVID-induced lockdowns, the global stock market ended first half 2021 on a high note.
American stocks have powered the global rally with the S&P 500 posting the second-best start to a year since 1998. Rapid vaccine rollouts, expanded stimulus, a healing job market and earnings growth have resulted in speedy economic recovery thereby leading to higher activities across all sectors and categories. The gains came despite the rising inflation, which cooled down recently, following the Fed comments that the inflation seems temporary.
Overall, ETFs gathered $471.8 billion in the first half of the year per eftf.com, putting the industry on track to break the annual record of $507.4 billion last year in a matter of weeks. U.S. equity ETFs led the way, accumulating $219.3 billion followed by inflows of $138 billion for international equity ETFs and $84.7 billion for U.S. fixed income ETFs. The solid trend is likely to continue given the growing optimism into the U.S. economy (read: Inside the Growing Popularity of ETFs).
Additionally, President Joe Biden’s proposed tax hike plan will lure more investors to the ETFs. Biden has proposed to increase the top rate on long-term capital gains to 39.6% from 20% to those making more than $1 million a year. These higher taxes would apply to taxable brokerage accounts, but not tax-deferred accounts, which include 401(k) plans. Additionally, Biden seeks to raise the top rate on income taxes to 39.6% from 37%.
Given this, we highlight five ETFs that were the top creators of the first half and can continue to be investors’ darlings in the second should the current market trends prevail:
Vanguard S&P 500 ETF (VOO - Free Report)
VOO topped asset flow creation so far this year, gathering $26.6 billion in capital. It tracks the S&P 500 Index and holds 507 stocks in its basket with information technology, healthcare, consumer discretionary, financials and communication services being the top five, with a double-digit allocation each. The ETF charges investors 3 bps in annual fees and trades in an average daily volume of 3.6 million shares. It has AUM of $232.8 billion and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Best ETFs for Long-Term Investors).
Vanguard Total Stock Market ETF (VTI - Free Report)
This fund has accumulated $20.2 billion in capital, taking its total AUM to $254.2 billion. It provides exposure to the broad stock market by tracking the CRSP US Total Market Index. The ETF holds a large basket of well-diversified 3791 stocks with key holdings in technology, consumer discretionary, industrials, healthcare and financials. It charges 3 bps in fees per year from investors and trades in an average daily volume 3.5 million shares. VTI has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Core S&P 500 ETF (IVV - Free Report)
With AUM of $286.3 billion, this fund, which also tracks the S&P 500 Index, saw inflows of $12.5 billion. It holds 505 stocks in its basket with information technology, healthcare, consumer discretionary, financials and communications being the top five, with a double-digit allocation each. The ETF charges investors 3 bps in annual fees and trades in an average daily volume of 4 million shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Total Bond Market ETF (BND - Free Report)
This ETF has accumulated around $12.1 billion in its asset base so far this year. It targets the broad U.S. investment grade bond market by tracking the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. The product holds 10110 securities in its basket with an average maturity and effective duration of 8.5 years and 6.7 years, respectively. BND is the second-largest bond ETF with AUM of $78.8 billion and an average daily volume of 5.2 million shares. It charges 3 bps in annual fees (read: A Quick Guide to the 25 Cheapest ETFs).
Vanguard Value ETF (VTV - Free Report)
This fund has accumulated $10.2 billion in capital, taking its total AUM to $82.3 billion. It targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. The fund holds 338 stocks in its basket with key holdings in financials, healthcare, industrials, and consumer staples. The ETF has AUM of $82.3 billion and charges 4 bps in annual fees. It trades in volume of 2.8 million shares per day on average and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
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 >>