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Fed Minutes Rekindle Optimism: 5 ETFs That Surged the Most

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The Fed minutes released yesterday rekindled some optimism in the stock market as there were no surprises. The minutes showed that the central bank will continue raising interest rates by a half-percentage point each in June and July to combat surging inflation and to avoid an economic downturn.

This led to smooth trading in the ETF world as well. While most of the ETFs rallied on the Fed minutes, Roundhill MEME ETF (MEME - Free Report) was the largest beneficiary, rising 7.4%. SPDR S&P Retail ETF (XRT - Free Report) , Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report) , ARK Next Generation Internet ETF (ARKW - Free Report) and Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report) gained at least 5% on the day.

In its latest FOMC meeting, the central bank took the most aggressive policy action in decades to combat soaring inflation by raising rates by 50 bps and pushing the benchmark above 0.75%. The hike marked the biggest interest-rate increase since 2000. Overall, an increase in interest rates means higher loan rates for consumers and businesses, including mortgages, credit cards and auto loans. The central bank hopes that higher borrowing costs will slow spending enough to tame inflation but will not cause a recession (read: ETF Areas to Consider as Fed Remains Super Hawkish).

The initial phase of the rate increase will be good for stocks as it will reflect an improving economy, thereby benefiting cyclical sectors like financials, technology, industrials and consumer discretionary. Additionally, higher interest rates usually indicate a healthy economy, leading to greater consumer power and increased IT spending.

We have detailed five of the ETFs below:

Roundhill MEME ETF (MEME - Free Report)

Roundhill MEME ETF is designed to offer investors exposure to “meme stocks” by tracking the Solactive Roundhill Meme Stock Index, which consists of equal-weighted U.S. listed equity securities that exhibit a combination of elevated social media activity and high short interest. Roundhill MEME ETF is the first ETF globally that has been explicitly designed to track the performance of meme stocks. It holds 25 stocks in its basket with each making up for less than 5% of the assets.

Roundhill MEME ETF has amassed $1 million in its asset base and charges 69 bps in annual fees. It trades in an average daily volume of 5,000 shares.

SPDR S&P Retail ETF (XRT - Free Report)

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid-and small-cap retail stocks. It holds well-diversified 108 stocks in its basket. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, Internet & direct marketing retail, and specialty stores (read: ETFs & Stocks to Win on Uptick in April Retail Sales).

SPDR S&P Retail ETF is the largest and most popular in the retail space with AUM of $444.1 million and an average trading volume of 6.1 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report)

Invesco S&P SmallCap Consumer Discretionary ETF targets the small-cap segment of the broad consumer discretionary space by tracking the S&P SmallCap 600 Capped Consumer Discretionary Index. It holds 89 securities in its basket, with specialty retail taking the largest share at 33.3%, while household durables, hotels, restaurants and leisure, and auto components account for double-digit exposure each.

Invesco S&P SmallCap Consumer Discretionary ETF has attracted $27.4 million in AUM and charges 29 bps in annual fees. It trades in an average daily volume of 4,000 shares and has a Zacks ETF Rank #2 (Buy) with a High-risk outlook.

ARK Next Generation Internet ETF (ARKW - Free Report)

ARK Next Generation Internet ETF is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 36 stocks in its basket, with none accounting for more than 8.1% of the assets (read: 5 Top Tech Areas That Deserve Your Attention Now).

ARK Next Generation Internet ETF has amassed $1.4 billion in its asset base and charges 83 bps in annual fees. It trades in an average daily volume of 1.6 million shares.

Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report)

Pacer US Small Cap Cash Cows 100 ETF is a strategy-driven ETF that aims to provide capital appreciation over time by screening the S&P SmallCap 600 Index for the top 100 companies based on free cash flow yield. CALF tracks the Pacer US Small Cap Cash Cows Index and holds 101 stocks in its basket, with each accounting for less than 3.1% share. Consumer discretionary takes the top spot at 42.8% of assets, followed by industrials (18.6%) and information technology (10.3%).

The fund has amassed $840.2 million in its asset base and trades in an average daily volume of 222,000 shares. It charges 59 bps in annual fees.