Wall Street has seen an impressive rebound from coronavirus’ delta variant-related slump in July. The S&P 500 rose 2.3% last month, marking its sixth consecutive month of gains. Notably, the Nasdaq Composite index and the Dow Jones Industrial Average also inched up 1.2% and 1.3% in the month.
It is worth noting here that the second-quarter earnings season has already seen better-than-expected results, stimulating the rally in stock markets. Per FactSet data, 88% of the S&P 500 companies have reported an earnings surprise (per a CNBC article). Notably, at the end of the reporting season, if the earnings growth is 85.1%, it will stand out as the highest percentage since 2009, according to a CNBC report.
The latest development highlighting the bipartisan infrastructure bill of $550 billion, which the Senate introduced on Aug 1 in addition to the previously approved funds of $450 billion for five years, has brought some optimism. Notably, the 2,702-page legislation is targeted at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.
Consumer confidence in the United States also seems impressive as it has stayed at its highest level since February 2020. The Conference Board's measure of consumer confidence index stands at 129.1, comparing favorably with June’s reading of 128.9. Moreover, July’s reading beat the consensus estimate of the index declining to 123.9, per a Reuters’ poll. However, the metric continues to be below the pre-pandemic level of 132.6 in February 2020.
Strengthening optimism, coronavirus vaccines have been found to be effective against the delta variant. These include vaccines by Pfizer (PFE) /BioNTech and AstraZeneca (AZN). Two doses of their COVID-19 vaccine have been found to be about 88% effective against the variant, per a CNN report. Moreover, Moderna’s (MRNA) COVID-19 vaccine has been successful in producing neutralizing titers against all variants tested, including delta (B.1.617.12).
Moreover, 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.
Going on, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Despite missing the estimate, in absolute term, U.S. GDP came in at $19.4 trillion in second-quarter 2021, exceeding $19.2 trillion recorded in fourth-quarter 2019 (the last quarter before the outbreak of coronavirus).
Meanwhile, the world’s largest economy is witnessing a surge in the number of new delta variant cases in 49 states. It has witnessed a seven-day moving average of about 72,790 new cases per day on Jul 30, per Centers for Disease Control and Prevention (CDC) data and as mentioned in a CNBC report.
Growth ETFs to Ride the Tide
Investors have rotated back into growth-oriented areas of the market in recent weeks on optimism surrounding the economic recovery. In particular, big tech companies have rebounded strongly after being hit by inflation fears and lofty valuation concerns.
Given the bullishness, investors seeking to capitalize on the strong trends should consider growth ETFs. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks. Below, we highlight a few growth ETFs that could be added to the portfolio.
Invesco Dynamic Large Cap Growth ETF ( PWB Quick Quote PWB - Free Report)
The fund is based on the Dynamic Large Cap Growth Intellidex Index. It charges an expense ratio of 0.56%. PWB carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read:
Best ETF Investing Areas to Watch Out For in 2H21). SPDR Portfolio S&P 500 Growth ETF ( SPYG Quick Quote SPYG - Free Report)
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Growth Index. It charges an expense ratio of 0.04%. SPYG carries a Zacks ETF Rank #2, with a Medium-risk outlook (read:
Fed Less Likely to Taper Soon on Delta Concerns: ETFs to Buy). iShares S&P 500 Growth ETF ( IVW Quick Quote IVW - Free Report)
The fund provides exposure to large U.S. companies whose earnings are expected to grow at an above-average rate relative to the market. It charges an expense ratio of 0.18%. IVW carries a Zacks ETF Rank #2, with a Medium-risk outlook.
Schwab U.S. Large-Cap Growth ETF ( SCHG Quick Quote SCHG - 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. Large-Cap Growth Total Stock Market Index. It charges an expense ratio of 0.04%. SCHG carries a Zacks ETF Rank #2, with a Medium-risk outlook (read:
ETF Strategies to Cheer the Dovish Fed Minutes). Vanguard S&P 500 Growth ETF ( VOOG Quick Quote VOOG - Free Report)
The fund seeks to track the performance of the S&P 500 Growth Index. It charges an expense ratio of 0.10%. VOOG carries a Zacks ETF Rank #2, with a Medium-risk outlook.