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Top-Ranked ETFs That Outperformed the Market in 1H
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Wall Street wrapped up a blockbuster first half of the year. The S&P 500 index gained a whopping 14.5% while the Dow Jones Industrial Average rose 3.8%. The Nasdaq Composite Index emerged as an outperformer, climbing 18.1%. The ongoing artificial intelligence (AI) craze, rate-cut bets and strong corporate profit growth were the biggest catalysts in driving the stocks higher and will continue to do so for the rest of the year. Wall Street analysts have become more bullish on stocks, citing these as a strong combination of factors.
In the current scenario, investors should bet on ETFs that were winners in the first half and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These are VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Expanded Tech Sector ETF (IGM - Free Report) , SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) , iShares Russell Top 200 Growth ETF (IWY - Free Report) and Invesco AI and Next Gen Software ETF (IGPT - Free Report) .
The "Magnificent Seven" was the biggest engine of growth for the S&P 500 and the Nasdaq. About 60% of the gains were driven by the “mega-cap” tech companies — NVIDIA (NVDA), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META) and Apple (AAPL). NVIDIA alone accounted for 31% of the market’s first-half advance. With the latest surge, NVIDIA, Apple and Microsoft are in the race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities. This technology-driven momentum is expected to continue at least through the summer (read: Tech Sector Dominates First-Half Rally: 5 Best ETFs).
In the latest FOMC meeting, U.S. policymakers penciled in just one rate cut for this year and projected four cuts for 2025. The Fed altered language in its statement, noting “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress. Low rates reduce the cost of borrowing, which is often needed to finance the expansion of companies, thereby driving economic growth. Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets.
Second-quarter earnings are expected to be robust. Per the Zacks Earnings Trends report, second-quarter earnings for the S&P 500 index will be up 8.3% from the same period last year on 4.6% higher revenues. This is the highest quarterly earnings growth pace since 9.9% growth in the first quarter of 2022 and would follow 6.7% earnings growth on 3.2% revenue gains in the first quarter of 2024.
Further, a strong first half for the S&P 500 Index historically bodes well for the rest of the year. Since the early 1950s, when the index climbed more than 10% through June, it has risen by a median of roughly 10% in the second half, per data compiled by Bloomberg. However, elevated valuations, the U.S. presidential election in November and uncertainty about the path of interest-rate cuts will weigh on stocks in the second half of this year.
We have profiled the abovementioned ETFs in detail below:
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. VanEck Vectors Semiconductor ETF has managed assets worth $22.3 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 7 million shares and has a Zacks ETF Rank #1.
iShares Expanded Tech Sector ETF offers broad exposure to the technology sector and technology-related companies in the communication services and consumer discretionary sectors. It tracks the S&P North American Expanded Technology Sector Index, holding 282 stocks in its basket. iShares Expanded Tech Sector ETF has AUM of $5 billion and charges 41 bps in annual fees. It trades in an average daily volume of 397,000 shares and has a Zacks ETF Rank #1.
SPDR Portfolio S&P 500 Growth ETF follows the S&P 500 Growth Index, holding 231 stocks in its basket with a heavy concentration on the top three firms. It is heavy on the information technology sector with a 51.2% allocation, while communication services and consumer discretionary round off the next two spots. SPDR Portfolio S&P 500 Growth ETF has amassed $28.9 billion in its asset base and charges investors 4 bps in annual fees. Volume is good, exchanging 2.3 million shares a day on average. SPYG has a Zacks ETF Rank #2 (read: Growth ETFs Outshine in 1H: What's in Store for 2H?).
iShares Russell Top 200 Growth ETF (IWY - Free Report) – Up 24%
iShares Russell Top 200 Growth ETF offers 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 106 stocks in its basket. iShares Russell Top 200 Growth ETF has key holdings in information technology, communications and consumer discretionary with double-digit exposure each. iShares Russell Top 200 Growth ETF has amassed $12 billion in its asset base and trades in an average daily volume of 344,000 shares. It has an expense ratio of 0.20% and has a Zacks ETF Rank #2.
Invesco AI and Next Gen Software ETF (IGPT - Free Report) – Up 22.8%
Invesco AI and Next Gen Software ETF comprises companies with significant exposure to technologies or products that contribute to future software development through direct revenues. It holds 100 stocks in its basket and charges 60 bps in fees per year from investors. Invesco AI and Next Gen Software ETF has amassed $382 million in its asset base and trades in a volume of 73,000 shares a day on average. It has a Zacks ETF Rank #1 (read: Can NVIDIA's AI Chip Dominance Continue?).
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Top-Ranked ETFs That Outperformed the Market in 1H
Wall Street wrapped up a blockbuster first half of the year. The S&P 500 index gained a whopping 14.5% while the Dow Jones Industrial Average rose 3.8%. The Nasdaq Composite Index emerged as an outperformer, climbing 18.1%. The ongoing artificial intelligence (AI) craze, rate-cut bets and strong corporate profit growth were the biggest catalysts in driving the stocks higher and will continue to do so for the rest of the year. Wall Street analysts have become more bullish on stocks, citing these as a strong combination of factors.
In the current scenario, investors should bet on ETFs that were winners in the first half and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These are VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Expanded Tech Sector ETF (IGM - Free Report) , SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) , iShares Russell Top 200 Growth ETF (IWY - Free Report) and Invesco AI and Next Gen Software ETF (IGPT - Free Report) .
The "Magnificent Seven" was the biggest engine of growth for the S&P 500 and the Nasdaq. About 60% of the gains were driven by the “mega-cap” tech companies — NVIDIA (NVDA), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META) and Apple (AAPL). NVIDIA alone accounted for 31% of the market’s first-half advance. With the latest surge, NVIDIA, Apple and Microsoft are in the race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities. This technology-driven momentum is expected to continue at least through the summer (read: Tech Sector Dominates First-Half Rally: 5 Best ETFs).
In the latest FOMC meeting, U.S. policymakers penciled in just one rate cut for this year and projected four cuts for 2025. The Fed altered language in its statement, noting “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress. Low rates reduce the cost of borrowing, which is often needed to finance the expansion of companies, thereby driving economic growth. Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets.
Second-quarter earnings are expected to be robust. Per the Zacks Earnings Trends report, second-quarter earnings for the S&P 500 index will be up 8.3% from the same period last year on 4.6% higher revenues. This is the highest quarterly earnings growth pace since 9.9% growth in the first quarter of 2022 and would follow 6.7% earnings growth on 3.2% revenue gains in the first quarter of 2024.
Further, a strong first half for the S&P 500 Index historically bodes well for the rest of the year. Since the early 1950s, when the index climbed more than 10% through June, it has risen by a median of roughly 10% in the second half, per data compiled by Bloomberg. However, elevated valuations, the U.S. presidential election in November and uncertainty about the path of interest-rate cuts will weigh on stocks in the second half of this year.
We have profiled the abovementioned ETFs in detail below:
VanEck Vectors Semiconductor ETF (SMH - Free Report) – Up 49.3%
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. VanEck Vectors Semiconductor ETF has managed assets worth $22.3 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 7 million shares and has a Zacks ETF Rank #1.
iShares Expanded Tech Sector ETF (IGM - Free Report) – Up 27.2%
iShares Expanded Tech Sector ETF offers broad exposure to the technology sector and technology-related companies in the communication services and consumer discretionary sectors. It tracks the S&P North American Expanded Technology Sector Index, holding 282 stocks in its basket. iShares Expanded Tech Sector ETF has AUM of $5 billion and charges 41 bps in annual fees. It trades in an average daily volume of 397,000 shares and has a Zacks ETF Rank #1.
SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) – Up 24.4%
SPDR Portfolio S&P 500 Growth ETF follows the S&P 500 Growth Index, holding 231 stocks in its basket with a heavy concentration on the top three firms. It is heavy on the information technology sector with a 51.2% allocation, while communication services and consumer discretionary round off the next two spots. SPDR Portfolio S&P 500 Growth ETF has amassed $28.9 billion in its asset base and charges investors 4 bps in annual fees. Volume is good, exchanging 2.3 million shares a day on average. SPYG has a Zacks ETF Rank #2 (read: Growth ETFs Outshine in 1H: What's in Store for 2H?).
iShares Russell Top 200 Growth ETF (IWY - Free Report) – Up 24%
iShares Russell Top 200 Growth ETF offers 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 106 stocks in its basket. iShares Russell Top 200 Growth ETF has key holdings in information technology, communications and consumer discretionary with double-digit exposure each. iShares Russell Top 200 Growth ETF has amassed $12 billion in its asset base and trades in an average daily volume of 344,000 shares. It has an expense ratio of 0.20% and has a Zacks ETF Rank #2.
Invesco AI and Next Gen Software ETF (IGPT - Free Report) – Up 22.8%
Invesco AI and Next Gen Software ETF comprises companies with significant exposure to technologies or products that contribute to future software development through direct revenues. It holds 100 stocks in its basket and charges 60 bps in fees per year from investors. Invesco AI and Next Gen Software ETF has amassed $382 million in its asset base and trades in a volume of 73,000 shares a day on average. It has a Zacks ETF Rank #1 (read: Can NVIDIA's AI Chip Dominance Continue?).