Driven by robust consumer spending and solid business investment, the U.S. economy expanded in the second quarter, growing at its fastest pace in nearly two years, according to data by the Commerce Department, as quoted on Reuters.

Growing at a 3.8% annualized rate, the second-quarter economic performance was stronger than initially expected. However, the economy’s momentum is slowing under the strain of tariffs and policy risks, per the abovementioned article.

Additionally, the Organisation for Economic Co-operation and Development (OECD) has raised its growth expectations for the United States to 1.8% in 2025, up from its June forecast of 1.6%, with expectations for 2026 projected at 1.5%, as quoted on CNBC. However, the growth forecasts mark a notable drop from 2.8% in 2024.

This underscores that even amid economic growth, underlying risks and uncertainties continue to remain a concern.

Consumer Spending Fuels GDP Upgrade

According to the Reuters article, the upward revision to second-quarter GDP primarily highlights stronger consumer spending, now estimated to have risen 2.5%, up from the previously anticipated 1.6%.

Being the economy’s main driver and making up over two-thirds of economic activity, consumer spending rose 0.6% last month, after a 0.5% gain in July, according to the Commerce Department's Bureau of Economic Analysis, as quoted in another Reuters article.

According to Fed data, as quoted in the abovementioned Reuters article, household wealth reached a record $176.3 trillion in the second quarter. However, lower-income families remain under pressure from rising import-driven prices, with further challenges expected. Additionally, rising prices are expected to weigh on consumer spending, slowing growth through year-end.

Optimism Persists as AI Sparks Fund Flows

According to LSEG Lipper data, as quoted on Reuters, U.S. equity funds saw renewed inflows in the week to Sept. 24, reversing two consecutive weeks of outflows as investor risk sentiment improved.

Investors added a net $12.06 billion to U.S. equity funds according to the data, following a $39.91 billion outflow. Large-cap equity funds led the gains, drawing $16.94 billion—the largest weekly inflow since April 9.

ETFs to Explore

Large-Cap ETFs

With the fastest growth in nearly two years during the second quarter and potential economic uncertainty, well-capitalized, stable large-cap funds are a smart, balanced choice for investors.

Increasing exposure to large-cap ETFs offers a compelling strategy to capture growth potential while maintaining a defensive stance in uncertain times, offering the best of both worlds.

Investors can consider Vanguard S&P 500 ETF (VOO Quick QuoteVOO - Free Report) , SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report) , iShares Core S&P 500 ETF (IVV Quick QuoteIVV - Free Report) and Vanguard Total Stock Market ETF (VTI Quick QuoteVTI - Free Report) . VOO, SPY and IVV are among the largest funds in the United States.

Growth ETFs

Investors can also explore growth ETFs without the constraint of a low beta, taking on more risk to potentially benefit from a positive economic outlook. Growth funds typically excel during market uptrends, providing exposure to stocks with high growth potential. Growth investing prioritizes capital appreciation over annual income or dividends.

Investors can consider Vanguard Growth ETF (VUG Quick QuoteVUG - Free Report) , iShares Russell 1000 Growth ETF (IWF Quick QuoteIWF - Free Report) , iShares S&P 500 Growth ETF (IVW Quick QuoteIVW - Free Report) , SPDR Portfolio S&P 500 Growth ETF (SPYG Quick QuoteSPYG - Free Report) and iShares Core S&P U.S. Growth ETF (IUSG Quick QuoteIUSG - Free Report) .