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Buy 5 Top-Ranked ETFs to Navigate the Current Bull Market

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Investor confidence on Wall Street seems solid as stocks continue to reach unprecedented levels. The Dow Jones Industrial Average's recent ascent past 40,000 points last week, which is worth a special mention given the fact that the Dow Jones remained a laggard in the big three US equity indexes in the past year, sparked optimism among investors.

Drivers of the Rally

The surge in broader market indices can be attributed to a mix of strong earnings reports, strategic corporate reshuffling, and some macroeconomic indicators that raised chances of a near-term Fed rate cuts.

A recent softening in inflation figures has provided further motivation for investor optimism, fueling speculation that the Fed may reduce interest rates by the year's end. This scenario supports hopes for a 'soft landing' for the economy, reducing fears of a harsh recession and reinforcing the bull market’s momentum.

Earnings and Sector Performance

The current earnings season has been a critical factor bolstering the market's strength, with the S&P 500 tracking to record its highest earnings growth rate since Q2 of 2022. Notably, while big tech companies have been significant contributors, there has also been broader sector participation in driving the market gains. Of the 30 best performing stocks on earnings this season, only five came from the tech sector, according to data compiled by Bespoke Investment, as quoted on Yahoo.

Market Sentiment and Forecasts

Despite the strong performance, top strategists and investors remain cautiously optimistic. While the potential for further gains is significant, investors must remain vigilant to the possibilities of market corrections and volatility. This is especially true given geopolitical risks, presidential election in the United States and any negative surprises in the economic data points. 

But those corrections can be used as good buying opportunities. Furthermore, expectations of a strong fourth quarter post-election suggest that the rally could have legs, with many strategists revising their year-end targets upward for the S&P 500.

BMO Capital Markets boosted the year-end price target for the S&P 500 to 5,600 from 5,100, becoming the most bullish analyst on Wall Street. Deutsche Bank joined the league, raising the price target to 5,500 for this year from 5,100. One of Wall Street’s most prominent bears, Morgan Stanley, turned positive on the outlook for U.S. stocks by lifting the price target for the S&P 500 to 5,400 from 4,500.

ETFs to Play

For investors looking to leverage the ongoing bull market, several ETFs stand out as intriguing bets.

Financial Select Sector SPDR ETF (XLF - Free Report) – Zacks Rank #1 (Strong Buy)

The underlying Financial Select Sector Index seeks to provide an effective representation of the financial sector of the S&P 500 Index. The fund charges 9 bps in fees.

iShares U.S. Equity Factor ETF (LRGF - Free Report) – Zacks Rank #2

The underlying STOXX U.S. Equity Factor Index composes of U.S. large and mid-capitalization stocks that have favorable exposure to target style factors subject to constraints. The fund charges 8 bps in fees.

VanEck Retail ETF (RTH - Free Report) Zacks Rank #2

The underlying MVIS US Listed Retail 25 Index tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. The fund charges 35 bps in fees.

iShares MSCI USA Quality Factor ETF (QUAL - Free Report) Zacks Rank #2

The Underlying MSCI USA Sector Neutral Quality Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid capitalization stocks. The fund charges 15 bps in fees.

Invesco AI and Next Gen Software ETF (IGPT - Free Report) Zacks Rank #1

The underlying STOXX World AC NexGen Software Development Index is comprised of companies with significant exposure to technologies or products that contribute to future software development through direct revenue. The fund charges 60 bps in fees.



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