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ETFs to Gain on Renewed Market Optimism

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Wall Street has again impressed investors with the two major indices hitting new closing highs. The S&P 500 and the Nasdaq Composite indices rose 0.2% and 0.1%, respectively, to close at new highs on Aug 25. The Dow Jones Industrial Average was also up 0.1% on the same trading day.

The benchmark 10-year Treasury note yield also climbed as high as 1.352% on Aug 25. The rise in the benchmark yield supported the rally in banking stocks like JPMorgan JPM that was up 2% and Wells Fargo WFC that rose around 1.9%.

The FDA granting the first full U.S. approval to Pfizer PFE/BioNTech’s (BNTX) coronavirus vaccine, Comirnaty (BNT162b) has boosted investors’ confidence in some reopening bets like airlines, travel and leisure and casino players. Casino stocks like Penn National Gaming, Caesars Entertainment and MGM Resorts were up about 8.6%, 4% and 2.9%, respectively, on Aug 25.

According to the FDA, the approval has been provided after evaluating an enormous vaccine data covering about 40,000 trial participants and reflecting 91% efficiency in preventing COVID-19 (per a CNBC article). However, the vaccine is still under emergency use authorization for children aged 12 to 15 years, while Pfizer continues to collect more supporting data.

The full FDA approval is expected to increase the confidence for imposing vaccine mandates. Also, the unvaccinated population is now more likely to opt for vaccinations. According to a CNBC article, the Kaiser Family Foundation survey reflected that three in 10 unvaccinated adults were more likely to get jabbed if one of the vaccines receives full approval.

The market participants are also upbeat about the chances of peaking delta variant cases. In this regard, Fundstrat’s Tom Lee has said that “We realize equity markets have been choppy and the wide variance of perspective means investors do not have an easy consensus. But our central case remains that we are shifting further into full risk-on, with an ‘everything rallies’ into year-end. The cadence of incoming data has improved in the past few days, the most notable being the apexing of COVID-19 cases in a number of states,” as mentioned in a CNBC article.

Wells Fargo Securities head of equity strategy Christopher Harvey has boosted optimism among investors by upgrading its year-end price target for the S&P 500 to 4,825 (per a CNBC article). This represents a rise of about 7.5% from the closing price on Aug 24.

In this regard, Harvey noted that “Over the last 31 years, there have been nine instances where the S&P 500 had a price return of 10%+ in the first eight months of the year; over the next four months, the index averaged another +8.4%. None of these instances produced a negative return during those last four months,” as stated in a CNBC article.

Going on, U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Despite missing the estimate, in absolute term, U.S. GDP came in at $19.4 trillion in second-quarter 2021, exceeding $19.2 trillion recorded in fourth-quarter 2019 (the last quarter before the outbreak of coronavirus).

ETFs to Ride the Wave

Investors who seek to capitalize on the strong trends should consider the following ETFs:

SPDR S&P 500 ETF Trust SPY

This fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the S&P 500 Index. It’s total expense ratio is 0.09% (read: Guide to the S&P 500 ETF Investing).

iShares Core S&P 500 ETF IVV

The fund seeks to track the investment results of an index composed of large-capitalization U.S. equities. Its total expense ratio stands at 0.03% (read: Ride the Astounding S&P 500 Index Rally With These ETFs).

Vanguard S&P 500 ETF VOO

The fund seeks to track the performance of the S&P 500 Index. Its charges total expense ratio of 0.03% (read: 5 Hot Equity ETFs of Last Week Amid Volatility).

SPDR Dow Jones Industrial Average ETF Trust DIA

The fund seeks to provide investment results that before expenses correspond generally to the price and the yield performance of the Dow Jones Industrial Average. Its total expense ratio is 0.16%.

iShares Dow Jones U.S. ETF IYY

The fund seeks to track the investment results of a broad-based index composed of U.S. equities. Its total expense ratio comes at 0.20%.

Invesco QQQ QQQ

This ETF provides exposure to 102 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq-100 Index. It charges investors 20 basis points in annual fees (read: Nasdaq Tops 15K for First Time: 5 Best Stocks in the ETF).

Fidelity Nasdaq Composite Index ETF ONEQ

This ETF tracks the Nasdaq Composite Index, holding a broad basket of 1,022 stocks. The expense ratio comes in at 0.21%.


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Wells Fargo & Company (WFC) : Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Invesco QQQ (QQQ): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
Vanguard S&P 500 ETF (VOO): ETF Research Reports
 
iShares Dow Jones U.S. ETF (IYY): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
Fidelity Nasdaq Composite Index ETF (ONEQ): ETF Research Reports
 
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