ETFs
Consumer optimism at its highest in 3 years: 5 ETF choices
U.S. consumers now feel more optimistic about the stock market and slowing inflation, according to the latest survey released by the Federal Reserve Bank of New York. Consumers are currently the most optimistic about the stock market outlook since May 2021.
Given this, we’ve highlighted five ETFs with a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy) that could be compelling ways to exploit this bullish view. These are VanEck Vectors Retail ETF RTH, VanEck Vectors Semiconductor ETF SMH, Invesco AI ETFs and next-generation software IGPT, iShares Core S&P 500 ETF IVV and Invesco QQQ Trust QQQ.
Bullish view
Household expectations for US stock prices have improved to their highest level in three years. Data showing the likelihood of stocks rising over the next 12 months rose to 40.5% in May, up from 38.7% in April. Consumer inflation expectations for next year rose from 3.3% in April to 3.2% in May. Overall, the New York Fed found that households felt better about their financial situation, as more respondents reported being “in a better situation than a year ago,” while Fewer respondents indicated they were “worse off.”
This upbeat sentiment can be attributed to Wall Street’s strong rally, with the S&P 500 and Nasdaq Composite Index hitting a series of record highs. Strong corporate profits, bets on Fed rate cuts and the rise of AI have driven the rally. Notably, a strong positive outlook for corporate earnings has prompted several analysts to raise their year-end price target for the S&P 500. The highest year-end target price for the S&P 500 went from 5,200 at the start of the year to 5,600 (read: 5 Best Performing S&P 500 ETF Stocks of May).
Additionally, the expansion of AI applications promises to pave the way for new growth opportunities in the technology sector and beyond. The global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030, according to a new report from Grand View Research.
A cause for concern?
Recent economic data paints a mixed picture for the economy. Growth in U.S. business activity accelerated sharply to its fastest pace in more than two years in May, following two months of slower growth, driven by a recovery in the services sector. Consumer confidence, as indicated by the Conference Board Confidence Index, increased in May after three months of decline. The latest jobs data also signaled strength in the U.S. economy, reducing expectations of a rate cut. U.S. job growth jumped in May and wage growth accelerated.
However, U.S. manufacturing activity slowed for the second straight month in May, and U.S. construction spending unexpectedly fell for the second straight month in April due to the decline in nonresidential activity. The latest PCE inflation data revealed that US inflation stabilized in April, suggesting that the US central bank’s plans to cut interest rates later this year remained intact (read: Sector ETFs should benefit as rate cut bets increase).
We have highlighted the ETFs mentioned above in detail below:
VanEck Vectors Retail ETF (RTH)
The VanEck Vectors Retail ETF provides exposure to the 26 largest retail companies by tracking the MVIS US Listed Retail 25 Index, which measures the performance of companies involved in retail distribution, wholesalers, online retailers, direct mail and television, multi-line retailers, specialty retailers. food and other commodity retailers and retailers. VanEck Vectors Retail ETF has amassed $208.1 million in its asset base and charges 35 basis points in annual fees. It trades in a lower volume of 5,000 shares per day on average. The VanEck Vectors Retail ETF has a Zacks ETF Rank #2 with a Medium Risk Outlook.
VanEck Vectors Semiconductor ETF (SMH)
The VanEck Vectors Semiconductor ETF provides exposure to companies involved in semiconductor production and equipment. It tracks the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. VanEck Vectors Semiconductor ETF has managed assets worth $21.8 billion and charges 35 basis points in annual fees and expenses. SMH trades an average daily volume of 6.9 million shares and has a Zacks Rank #1 ETF with a High Risk Outlook.
Invesco AI and Next Generation Software ETF (IGPT)
The Invesco AI and Next Gen Software ETF provides exposure to companies with significant exposure to technologies or products that contribute to future software development through direct revenue. He holds 98 stocks in his basket and charges 60 basis points in fees per year to investors. The Invesco AI and Next Gen Software ETF has amassed $342.6 million in its asset base and trades an average volume of 61,000 shares per day. It has a Zacks ETF Rank #1 (Read: Can NVIDIA’s AI Chip Dominance Continue?).
iShares Core S&P 500 ETF (IVV)
The iShares Core S&P 500 ETF tracks the S&P 500 Index and holds 503 stocks in its basket. It is heavily focused on the information technology sector, while the financial and healthcare sectors round out its next two spots with a double-digit allocation each. The iShares Core S&P 500 ETF charges investors 3 basis points in annual fees and trades an average daily volume of 4 million. It has $456.7 billion in assets under management and a Zacks ETF Rank #1 with a Medium Risk Outlook.
Invesco QQQ Trust (QQQ)
Invesco QQQ Trust provides exposure to the 101 largest domestic and international non-financial companies listed on Nasdaq tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space , with assets under management of $275 billion and an average daily volume of 37 million shares. QQQ charges investors 20 basis points in annual fees and has a Zacks ETF Rank #2 with a Medium Risk Outlook.
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Invesco QQQ (QQQ): ETF Research Reports
VanEck Retail ETF (RTH): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
Invesco AI ETF and Next Generation Software (IGPT): ETF Research Reports