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The bulls and bears are currently playing tug-of-war in Wall Street. This is especially true as bulls are powered by solid corporate earnings and a recovering economy. The Q2 earnings season has been showing impressive momentum on the revenue side in terms of both growth and the beat percentages. Q2 earnings are on track to be up 29.9% from the pre-Covid second-quarter 2019 period and reach a new all-time quarterly record.
Meanwhile, the U.S. economy returned to the pre-pandemic level with GDP rising 6.5% annually in the second quarter, indicating a sustained recovery from the pandemic recession, while consumer confidence rose to a 17-month high in July. Meanwhile, the labor market recovery has boomed with 943.000 job additions in July. It marks the biggest job gain since last August. Until July 2021, more than half of the lost jobs during the pandemic had been recovered. The unemployment rate fell to 5.4% — a new low of the pandemic era (read: ETFs to Ride Current Market Rally on Solid Economic Data).
On the other hand, concerns over the fast-spreading Delta variant of COVID-19 and the potential for a slower recovery have been charging the bears. The United States is now averaging more than 100,000 new COVID-19 cases every day, the highest in almost six months. Additionally, a stronger-than-expected jobs report has triggered bets that the Fed would begin slowing the pace of its $120 billion in monthly bond purchases while at the same time increasing interest rates.
Against such a backdrop, investors seeking to capitalize on the improving economic conditions but worried about the resurgence in the pandemic should consider mid-cap stocks in the basket form.
Why Mid-Caps?
While large companies are normally known for stability and the smaller ones for growth, mid caps offer the best of both worlds, simultaneously allowing growth and stability in a portfolio. In fact, these securities are safer options and have the potential to move higher than the large and small-cap counterparts in turbulent times. Further, mid-cap stocks are less volatile than the small caps (see: all the Mid Cap ETFs here).
While there are several ETFs available in the space, we have highlighted five that have been at the forefront of the mid-cap rally over the past week and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting outperformance in the months ahead. These have potentially superior weighting methodologies that could allow them to lead the mid-cap space in the months ahead.
This ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms having the highest momentum scores. It holds 75 stocks in its basket with key holdings in healthcare, information technology, consumer discretionary and industrials. The fund has AUM of $921.5 million and charges 34 bps in annual fees. It has a Zacks ETF Rank #1 (read: ETF Strategies to Cheer the Dovish Fed Minutes).
Invesco S&P MidCap Value with Momentum ETF (XMVM - Free Report)
This fund follows the S&P MidCap 400 High Momentum Value Index, which is composed of 80 securities in the S&P MidCap 400 Index having both the highest "value scores" and "momentum scores. It holds 81 stocks in its basket with key holdings in financials, consumer discretionary, and industrials. The product has accumulated $169.1 million in its asset base while trades in volume of 81,000 shares per day on average. It has a Zacks ETF Rank #2.
This product targets the value segment of the mid-cap space and follows the S&P MidCap 400 Value Index. With AUM of $8.6 billion, it holds a basket of 309 stocks with financials, industrials, consumer discretionary and real estate taking double-digit exposure each. IJJ charges investors 18 bps in annual fees and trades in an average daily volume of 368,000 shares. It has a Zacks ETF Rank #1 (read: Value Investing Wins in 1H: 7 Best-Performing ETFs).
This fund tracks the S&P MidCap 400 Value Index, which is composed of the value companies on the S&P MidCap 400 Index. It holds a well-diversified basket of 309 stocks with key holding in financials, industrials, real estate and consumer discretionary. The product has amassed $807.5 million in its asset base and charges 15 bps in annual fees. It has a Zacks ETF Rank #1.
With AUM of $1.5 billion, this ETF offers pure exposure to stocks exhibiting the strongest value characteristics based on book value to price ratio, earnings to price ratio, and sales to price ratio by tracking the S&P Mid Cap 400 Value Index. It holds 310 securities in its basket and charges 15 bps in annual fees. Financials, industrials, real estate and consumer discretionary are the top four sectors with double-digit exposure each. Volume is good as it exchanges 368,000 shares in hand per day on average. MDYV has a Zacks ETF Rank #1.
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5 Mid-Cap ETFs for Outperformance Amid Volatility
The bulls and bears are currently playing tug-of-war in Wall Street. This is especially true as bulls are powered by solid corporate earnings and a recovering economy. The Q2 earnings season has been showing impressive momentum on the revenue side in terms of both growth and the beat percentages. Q2 earnings are on track to be up 29.9% from the pre-Covid second-quarter 2019 period and reach a new all-time quarterly record.
Meanwhile, the U.S. economy returned to the pre-pandemic level with GDP rising 6.5% annually in the second quarter, indicating a sustained recovery from the pandemic recession, while consumer confidence rose to a 17-month high in July. Meanwhile, the labor market recovery has boomed with 943.000 job additions in July. It marks the biggest job gain since last August. Until July 2021, more than half of the lost jobs during the pandemic had been recovered. The unemployment rate fell to 5.4% — a new low of the pandemic era (read: ETFs to Ride Current Market Rally on Solid Economic Data).
On the other hand, concerns over the fast-spreading Delta variant of COVID-19 and the potential for a slower recovery have been charging the bears. The United States is now averaging more than 100,000 new COVID-19 cases every day, the highest in almost six months. Additionally, a stronger-than-expected jobs report has triggered bets that the Fed would begin slowing the pace of its $120 billion in monthly bond purchases while at the same time increasing interest rates.
Against such a backdrop, investors seeking to capitalize on the improving economic conditions but worried about the resurgence in the pandemic should consider mid-cap stocks in the basket form.
Why Mid-Caps?
While large companies are normally known for stability and the smaller ones for growth, mid caps offer the best of both worlds, simultaneously allowing growth and stability in a portfolio. In fact, these securities are safer options and have the potential to move higher than the large and small-cap counterparts in turbulent times. Further, mid-cap stocks are less volatile than the small caps (see: all the Mid Cap ETFs here).
While there are several ETFs available in the space, we have highlighted five that have been at the forefront of the mid-cap rally over the past week and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting outperformance in the months ahead. These have potentially superior weighting methodologies that could allow them to lead the mid-cap space in the months ahead.
Invesco S&P MidCap Momentum ETF (XMMO - Free Report)
This ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms having the highest momentum scores. It holds 75 stocks in its basket with key holdings in healthcare, information technology, consumer discretionary and industrials. The fund has AUM of $921.5 million and charges 34 bps in annual fees. It has a Zacks ETF Rank #1 (read: ETF Strategies to Cheer the Dovish Fed Minutes).
Invesco S&P MidCap Value with Momentum ETF (XMVM - Free Report)
This fund follows the S&P MidCap 400 High Momentum Value Index, which is composed of 80 securities in the S&P MidCap 400 Index having both the highest "value scores" and "momentum scores. It holds 81 stocks in its basket with key holdings in financials, consumer discretionary, and industrials. The product has accumulated $169.1 million in its asset base while trades in volume of 81,000 shares per day on average. It has a Zacks ETF Rank #2.
iShares S&P Mid-Cap 400 Value ETF (IJJ - Free Report)
This product targets the value segment of the mid-cap space and follows the S&P MidCap 400 Value Index. With AUM of $8.6 billion, it holds a basket of 309 stocks with financials, industrials, consumer discretionary and real estate taking double-digit exposure each. IJJ charges investors 18 bps in annual fees and trades in an average daily volume of 368,000 shares. It has a Zacks ETF Rank #1 (read: Value Investing Wins in 1H: 7 Best-Performing ETFs).
Vanguard S&P Mid-Cap 400 Value ETF (IVOV - Free Report)
This fund tracks the S&P MidCap 400 Value Index, which is composed of the value companies on the S&P MidCap 400 Index. It holds a well-diversified basket of 309 stocks with key holding in financials, industrials, real estate and consumer discretionary. The product has amassed $807.5 million in its asset base and charges 15 bps in annual fees. It has a Zacks ETF Rank #1.
SPDR S&P 400 Mid Cap Value ETF (MDYV - Free Report)
With AUM of $1.5 billion, this ETF offers pure exposure to stocks exhibiting the strongest value characteristics based on book value to price ratio, earnings to price ratio, and sales to price ratio by tracking the S&P Mid Cap 400 Value Index. It holds 310 securities in its basket and charges 15 bps in annual fees. Financials, industrials, real estate and consumer discretionary are the top four sectors with double-digit exposure each. Volume is good as it exchanges 368,000 shares in hand per day on average. MDYV has a Zacks ETF Rank #1.