Wall Street has impressed investors with an attractive rally in the three broader indices in August. The S&P 500 and Nasdaq Composite indices are up 3% and 4%, respectively, in the month. The blue-chip Dow Jones Industrial Average has also gained 1.3% in the same period. In fact, the S&P 500 index is on the run to its seventh consecutive month of gains while being at a record high level. Notably, it is going to be the longest run of the S&P 500 index since a 10-month streak ended in December 2017 (per a CNBC article).
The second-quarter earnings season saw better-than-expected results, stimulating the rally in stock markets. According to a CNBC article, the S&P 500 is on track to witness the largest increase since the fourth-quarter 2009 by posting an earnings growth rate of 95.4%. Wells Fargo strategists have also noted that “We believe we’re still in the early innings of the cycle and that strong economic and earnings growth and relatively low rates through 2022 should support higher equity prices and sustain the bull market,” as mentioned in a CNBC article.
Investors are also relieved about the Fed’s intention to not hike interest rates in the near term. Also, Fed Chairman Jerome Powell seems to have prepared the market for tapering its $120 billion in monthly bond purchases this year.
Powell reportedly said that “The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test,” according to a CNBC article.
The FDA granting the first full U.S. approval to Pfizer (PFE)/BioNTech’s (BNTX) coronavirus vaccine, Comirnaty (BNT162b), has also boosted investors’ confidence in some reopening bets like airlines, travel and leisure and casino players.
The full FDA approval is expected to increase the confidence for imposing vaccine mandates. Also, the unvaccinated population is now more likely to opt for vaccinations. According to a CNBC article, the Kaiser Family Foundation survey reflected that three in 10 unvaccinated adults were more likely to get jabbed if one of the vaccines received full approval. The market participants are also upbeat about the chances of peaking delta variant cases.
Going on, 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 terms, U.S. GDP came in at $19.4 trillion for second-quarter 2021, exceeding $19.2 trillion recorded in fourth-quarter 2019 (the last quarter before the outbreak of coronavirus).
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:
Why to Tap S&P 500 ETFs Right Now). 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:
Tap the Current Market Momentum With These ETF Strategies). 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.