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Large-Cap Growth ETFs Warming Up This Winter

Sanghamitra Saha

Talks and hopes of solid growth in the U.S. economy are rife presently given the big promises by the President-elect Donald Trump. In any case, the economy has been climbing steadily buoyed by recovering housing fundamentals, a healing job market and increasing consumer confidence (read: Auto Sales Hit Fresh High in 2016: ETFs & Stocks to Ride On).

The growth rate in Q3 of 2016 was 3.5% -- the quickest in two years, higher than the prior estimate of 3.2% and above the median forecast of a 3.3% gain. Growth was facilitated by solid numbers from services spending and construction by state and local governments. Though it is unlikely to see the same growth pace in Q4 as evident by a 2.2% rate forecast by Bloomberg, it is still among the best in the developed market pack.

Most importantly, the U.S. economy witnessed a jump in wages in the month of December, corroborating once again to the strong U.S. labor market condition. Average hourly earnings grew 2.9% from December 2015, representing the fastest annual growth since the financial crisis.

The wage increased 0.4% in December sequentially, coming ahead of expectations of a 0.3% uptick. The unemployment rate may have risen to 4.7%, but it stayed below the Fed's estimate of the natural rate of unemployment. This along with still-cheaper fuel should translate into higher spending power.

Things are shaping up quite positively even on the earnings front. Earnings growth entered into the positive territory in Q3 of 2016 following five consecutive quarters of decline. For Q4, the S&P 500 is expected score 3.3% earnings growth on 4.1% revenue growth. Earnings for Q1 of 2017 are expected to surge 10.3% for the S&P 500 on 7.5% higher revenues, as per the Earnings Trends issued on January 4, 2017 (read: Ten Predictions for the ETF Industry in 2017).

The combination of these factors should continue to boost to the stock market. Added to this, expectations of corporate tax reform and fiscal reflation in the Trump administration may offer growth stocks an upside potential. This is especially true as growth investing is basically a momentum play and a great strategy in a trending market.

As we all know, U.S. markets have been flying since Trump’s win on November 8, growth stocks are likely to keep up the momentum as long as the Trump-mania continues.Given this, several large-cap growth ETFs hit a 52-week high on January 6, 2017 and may continue to outperform ahead. Below we highlight a few of them (read: 5 Sector ETFs & Stocks Likely to See a Great Year):

Vanguard Growth ETF VUG

The fund looks to track the largest growth stocks of the U.S. It charges 8 bps in fees.

iShares Russell Top 200 Growth IWY

The fund measures the performance of the largest capitalization growth sector of the U.S. equity market. It charges 20 bps in fees.

Vanguard Mega Cap Growth ETF MGK

The fund looks to track the largest growth stocks in the U.S. market. It charges 7 bps in fees.

iShares Morningstar Large-Cap Growth JKE

The fund offers exposure to the large-capitalization U.S. equities that exhibit growth characteristics. It charges 25 bps in fees.

Schwab US Large-Cap Growth ETF SCHG

The fund gives exposure to the large-cap growth segment of the Dow Jones U.S. Total Stock Market Index. It charges 4 bps in fees.

iShares S&P 500 Growth IVW

The fund follows the S&P 500 Growth Index and tracks the performance of the large capitalization growth sector of the U.S. equity market. It charges 18 bps in fees.

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ISHARS-R T200 G (IWY): ETF Research Reports
 
SCHWAB-US LCG (SCHG): ETF Research Reports
 
ISHARS-SP500 GR (IVW): ETF Research Reports
 
VIPERS-GROWTH (VUG): ETF Research Reports
 
ISHARS-MO LC GR (JKE): ETF Research Reports
 
VANGD-MG CAP GR (MGK): ETF Research Reports
 
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