The start of November has been extremely grand for the U.S. stock market with all the three major indices extending October’s remarkable gains. They hit a series of record highs on earnings optimism and regained confidence in economic recovery.
Q3 earnings from 445 S&P 500 members that have reported so far are up 42.9% from the same period last year on 18.6% lower revenues, with 80.2% beating EPS estimates and 74.4% beating revenue estimates. Although earnings and revenue growth has decelerated in the ongoing Q3 earnings season from the first-half’s breakneck speed, it is still very high. Aggregate Q3 earnings for the S&P 500 Index are on track to reach a new all-time quarterly record, surpassing the record set in the preceding quarter (read: ETFs to Ride on a Solid Start to Q3 Earnings). The latest bouts of data and news have bolstered investors’ confidence into the economy leading to further reopening. This is especially true as hiring picked up in October following a summer slowdown and a Pfizer PFE COVID-19 drug, which used with an HIV drug, revealed that the risk of hospitalization and deaths has been reduced substantially by 89%. The Fed’s tapering announcement added to the strength. The central bank will begin tapering bond purchases “later this month” and will reduce buying by $15 billion a month, putting it on track to end the quantitative easing by the middle of next year. The move indicates a solid economic recovery. The combination of all the factors will result in pent-up demand, leading in higher demand for all types of products and services in the economy. While the stock market gains have been broad-based, several ETFs have easily crushed the market by wide margins to start the holiday season month and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). Below we have presented five top-performing ETFs from different industries that are likely to continue outperforming should the trends prevail. iShares North American Tech-Multimedia Networking ETF ( IGN Quick Quote IGN - Free Report) — Up 10.1% Strong earnings and strong macro trends have been fueling the rally into this tech ETF. It provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. It holds 22 securities in its basket and has accumulated $134.3 million in its asset base. The expense ratio comes in at 0.43%. The product sees a lower volume of around 11,000 shares a day and carries a Zacks ETF Rank #2 (read: 5 Technology ETFs At the Forefront of October's Market Rally). Invesco Dynamic Semiconductors ETF ( PSI Quick Quote PSI - Free Report) – Up 9.7% Semiconductor stocks have been rallying as the pandemic has bolstered demand for chips by leaps and bounds, leading to the worst global shortage in many years. This fund tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket with each making up for less than 6% share each. The product has AUM of $809.4 million and sees a moderate average daily volume of 41,000 shares. Expense ratio is 0.56%. PSI has a Zacks ETF Rank #1 (read: 5 Top-Ranked Chip ETFs to Gain on Ongoing Supply Crisis). Invesco DWA Industrials Momentum ETF (PRN) – Up 8.6% As we enter into the best six-month period (from November to April) for the stock market, cyclical stocks tend to benefit the most. This fund provides exposure to 43 industrial companies that are showing relative strength (momentum). It has accumulated $284.2 million in its asset base and charges 60 bps in annual fees. It trades in an average daily volume of 11,000 shares and has a Zacks ETF Rank #2. Invesco S&P SmallCap Momentum ETF ( XSMO Quick Quote XSMO - Free Report) – Up 8.3% With renewed optimism over a sustained economic recovery and robust corporate earnings growth, the small-cap space is surging higher. This ETF offers exposure to 118 stocks having the highest “momentum scores” by tracking the S&P Smallcap 600 Momentum Index. It has gathered $194.8 million in its asset base and charges 39 bps in annual fees. The fund trades in an average daily volume of 6,000 shares and has a Zacks ETF Rank #2. Invesco S&P SmallCap Consumer Discretionary ETF ( PSCD Quick Quote PSCD - Free Report) – Up 8.3% A strengthening economy, progress on new vaccines and better job prospects are supportive of economically sensitive sectors like consumer discretionary, which typically perform well in a maturing economic cycle. This fund targets the small-cap segment of the broad consumer discretionary space by tracking the S&P SmallCap 600 Capped Consumer Discretionary Index. It holds 86 securities in its basket. The product has attracted $61 million in AUM and charges 29 bps in annual fees. It has a Zacks ETF Rank #2 (read: 5 Consumer Discretionary ETFs Rising to New Highs).