ETFs
Growth ETF allocation hits new all-time highs – June 17, 2024
Wall Street has seen a remarkable recovery this year, with the S&P 500 and Nasdaq Composite Index hitting a series of record highs. This is due in part to strong earnings growth prospects, optimism about potential interest rate cuts and enthusiasm for artificial intelligence (AI). Even though the recovery has been widespread, growth stocks are the clear winners. Growth funds generally tend to outperform during an uptrend, pushing many ETFs to new all-time highs.
Below, we’ve profiled five ETFs, with a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), that are leading the way and have made a series of new highs over the past few sessions. These are SPDR S&P 500 Portfolio Growth ETF (Quick quote SPYGSPY – Free report) , Vanguard S&P 500 Growth ETF (Quick quote VOOGVOOG – Free report) , iShares S&P 500 Growth ETF (Quick quote IVWIVW – Free report) , iShares Russell Top 200 Growth ETF (Quick quote IWYIWY – Free report) And Schwab US Large Cap Growth ETF (SCHG quick quoteSCHG – Free report) .
Growth investing focuses on capital appreciation rather than annual income or dividends. This is a stock strategy that aims to profit from companies that are growing above average relative to their industry or the market. This is a more active attempt at value building the portfolio and generating a better return on capital investment. However, these funds provide exposure to stocks with growth characteristics that have comparatively higher P/B, P/S, and P/E ratios and exhibit a higher degree of volatility, particularly compared to value stocks. .
Strong market trends
Most of the rise came from the surge in tech stocks. The Magnificent Seven are the biggest growth engine in the technology sector and the S&P 500 as a whole. It now represents 31% of the weight of the S&P 500. NVIDIA (NVDA) recently surpassed $3 trillion in market capitalization and became one of the most valuable companies in the United States. The stock has climbed 132.2% so far this year, while Meta Platforms (META) and Alphabet (GOOGL) are up 34.9% and 24%, respectively. Apple (AAPL) reclaimed the title of most valuable company this week with a market cap of $3.3 trillion, edging out Microsoft’s (MSFT) market cap of $3.2 trillion (read: Apple jumps on the AI train: buy ETFs).
Inflation in the United States slowed in May for the second consecutive month. The consumer price index rose 3.3% year-on-year in May, down from the 3.4% growth seen in April. On a monthly basis, prices remained stable for the first time since July 2022. A slowdown in inflation indicates that the economy is stabilizing and interest rates may fall.
The Fed, at its last meeting, forecast one rate cut this year and plans four cuts in 2025. The central bank changed the language of its statement, noting that there has been “further modest progress toward committee’s 2% inflation target.” » Previously, the press release had highlighted a “lack” of further progress.
Low rates are generally favorable for growth stocks because they reduce the cost of borrowing, often necessary to finance business expansion. Lower rates generally reduce the attractiveness of fixed-income investments like bonds, prompting investors to seek higher returns in stock markets. Growth stocks, with their high return potential, become more attractive to investors in this environment, driving up demand and, therefore, their prices (read: 3 Undervalued Growth ETF Winners With More Room to Run).
Focus on ETFs
SPDR Portfolio S&P 500 Growth ETF (SPYG Quick QuoteSPY – Free report) – 52-week high: $79.97, up 23% year-to-date
The SPDR Portfolio S&P 500 Growth ETF tracks the S&P 500 Growth Index, holding 228 stocks in its basket with a heavy concentration on the top three companies. It weighs heavily on the information technology sector with a 50.7% allocation, while consumer discretionary and communications services round out the next two spots. The SPDR Portfolio S&P 500 Growth ETF has amassed $29.2 billion in its asset base and charges investors 4 basis points in annual fees. Volume is good, with 2.5 million shares trading on average per day.
Vanguard S&P 500 Growth ETF (VOOG Quick QuoteVOOG – Free report) – 52-week high: $332.86, up 23% year-to-date
The Vanguard S&P 500 Growth ETF also tracks the S&P 500 Growth Index, but holds a lower basket of 229 stocks. Its basket has 229 stocks, with a higher concentration on the three largest companies. The fund is heavily focused on the information technology sector with a 48.6% allocation, while consumer discretionary and communications services round out the next two spots. The Vanguard S&P 500 Growth ETF is relatively less popular and less liquid, with assets under management of $11.5 billion and average daily volume of 120,000 shares. It charges 10 basis points in annual fees.
iShares S&P 500 Growth ETF (IVW Quick QuoteIVW – Free report) – 52-week high: $92.24, up 23% year-to-date
The iShares S&P 500 Growth ETF also tracks the S&P 500 Growth Index. It holds 228 stocks in its basket, with key holdings in information technology, consumer discretionary and communications. The iShares S&P 500 Growth ETF charges 18 basis points in annual fees and has amassed $52.3 billion in its asset base. The fund trades an average daily volume of 3 million shares.
iShares Russell Top 200 Growth ETF (IWY Quick QuoteIWY – Free report) – 52-week high: $213.77, up 22.2% year-to-date
The iShares Russell Top 200 Growth ETF provides exposure to large U.S. companies that are expected to grow at an above-average rate relative to the market. It tracks the Russell Top 200 Growth Index, holding 110 stocks in its basket. The iShares Russell Top 200 Growth ETF holds key holdings in information technology, consumer discretionary and communications each with double-digit exposure. The iShares Russell Top 200 Growth ETF has amassed $11.9 billion in its asset base and trades an average daily volume of 339,000 shares. Its spending rate is 0.20%.
Schwab US Large-Cap Growth ETF (SCHG Quick QuoteSCHG – Free report) – 52-week high: $100.50, up 21.2% year-to-date
With $30.3 billion in assets under management, the Schwab US Large-Cap Growth ETF tracks the Dow Jones US Large-Cap Growth Total Stock Market Index. He holds 249 stocks in his basket, with a heavy concentration on the three largest companies. From a sector perspective, information technology holds the top spot with a 46.1% share, while communication services, consumer discretionary and healthcare each enjoy two-fold exposure. figures in the portfolio. The Schwab US Large-Cap Growth ETF charges 4 basis points in annual fees and sees an average volume of around 1 million shares per day (read: 5 ETFs to buy for June).