5 Top-Ranked ETFs That Outperformed in August
Let's take a look at some top-ranked ETFs that outperformed Wall Street in August.
August has been an encouraging month for investors. Highlights like the coronavirus vaccine news, speculations about the Federal Reserve’s next move, surging cases of the highly-contagious coronavirus delta variant, an impressive second-quarter earnings season, concerns over inflation levels, and geo-political tensions with Taliban taking control over Afghanistan and the return of the U.S. army from the 20-year-long war impacted the investing world.
The S&P 500 and Nasdaq Composite indices managed gains of 2.9% and 4%, respectively, in August. The blue-chip Dow Jones Industrial Average also rose 1.2% in the same period. In fact, the S&P 500 index witnessed its seventh consecutive month of gains.
Notably, the Fed doesn’t look to hike interest rates in the near term. Also, Fed Chairman Jerome Powell seems to have prepared the market for tapering its $120 billion in monthly bond purchases this year. The second-quarter earnings season saw better-than-expected results, stimulating the rally in stock markets. According to a CNBC article, the S&P 500 is on track to witness the largest increase since fourth-quarter 2009 by recording an earnings growth rate of 95.4%.
The United States is witnessing a considerable rise in the number of COVID-19 cases. Going by Johns Hopkins University data, the United States is witnessing an average of 160,000 new COVID-19 cases a day, per a CNN report. Considering the current situation, Dr. Rochelle Walensky, the director of the US Centers for Disease Control and Prevention (CDC), has urged unvaccinated Americans to avoid travel during the Labor Day holiday weekend, according to a CNN report.
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.
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 received full approval. The market participants are also upbeat about the chances of peaking delta variant cases.
According to CDC data, around 38.6% of Americans (including 12 years old and above) are not yet fully vaccinated, as mentioned in a CNN report. The data also reflects 16 times higher hospitalization rate in the unvaccinated population than in the vaccinated.
Against the backdrop, let’s take a look at some top-ranked ETFs holding a Zacks ETF Rank #2 (Buy) that outperformed Wall Street in August:
SPDR S&P Semiconductor ETF XSD — up 6.7% in the past month
The semiconductor space has been gaining from expanding digitization and growing dependency on the Internet owing to some new normal trends like online shopping, work from home, digital payments, digitization of healthcare, rising demand for video gaming and many more. In fact, growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brewing with opportunities in 2021.
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Semiconductor Select Industry Index. It charges an expense ratio of 35 basis points (bps) (read: 4 Chip ETFs You Should Not Ignore).
Invesco S&P 500 Pure Growth ETF RPG — up 5.4%
The Wall Street rally, marked by the S&P 500 index hitting new highs, is putting the spotlight on growth investing.The second-quarter earnings season saw better-than-expected results, stimulating the rally in stock markets. Investors are also relieved about the Fed’s intention to not hike interest rates in the near term. The FDA has granted the first full U.S. approval to Pfizer/BioNTech’s COVID-19 vaccine, Comirnaty has also boosted investors’ confidence. With growth stocks tending to outperform in a trending market (i.e. a market characterized by a prolonged uptrend), investors are taking more interest in growth investing.
The fund is based on the S&P 500 Pure Growth Index. It charges an expense ratio of 0.35% (read: A Spread of Top S&P 500 ETFs to Tap Solid Q2 Earnings Growth).
VanEck Biotech ETF BBH — up 5.3%
The pandemic triggered a race to introduce vaccines and treatment options, opening up investing opportunities in the biotech sector. The space gained on positive COVID-19 vaccine updates. The FDA’s first full U.S. approval to Comirnaty has brought optimism to the space. Moreover, a Reuters report stated that the U.S. government recently announced plans to make COVID-19 vaccine booster shots available starting Sep 20.
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS US Listed Biotech 25 Index, which is intended to track the overall performance of companies involved in the development and production, marketing and sale of drugs based on genetic analysis and diagnostic equipment. It charges an expense ratio of 35 bps (read: Pfizer Vaccine Approval Triggers a Surge in Biotech ETFs).
First Trust Nasdaq Bank ETF FTXO — 5.1%
The banking sector has had an impressive run so far in 2021 after a tough 2020. Notably, improving prospects for the space amid the rebounding U.S. economy are gaining investor attention. It is a well-known fact that an improving U.S. economy can continue to perk up demand for loans. Also, steepening of the yield curve (the difference between short and long-term interest rates) is likely to support banks’ net interest margins. As a result, net interest income, which constitutes a chunk of banks’ revenues, is likely to have received support from the steepening of the yield curve and a modest rise in loan demand.
The investment objective of the fund is to seek investment results that correspond generally to the price and yield, before the fund's fees and expenses, of an index called the Nasdaq US Smart Banks Index. It charges an expense ratio of 60 bps.
iShares U.S. Technology ETF IYW — up 4.9%
Technology continues to play an instrumental role amid the COVID-19 uncertainty in aiding people to maintain safe-distancing norms. Certain other ‘new normal’ trends have also emerged amid the health crisis like work from home, increasing digital payments, growing video streaming as well as soaring video game sales. The pandemic is also a boon for the e-commerce industry as people continue staying indoors and shopping online for all essentials, especially food items.
The fund seeks to provide investment results that before expenses correspond generally with the price and yield performance of the Dow Jones U.S. Technology Capped Index. It charges investors 41 bps in annual fees as stated in the prospectus (read: 5 Tech ETFs Outperforming the Market This Year).
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Pfizer Inc. (PFE): Free Stock Analysis Report
VanEck Vectors Biotech ETF (BBH): ETF Research Reports
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Invesco S&P 500 Pure Growth ETF (RPG): ETF Research Reports
First Trust NASDAQ Bank ETF (FTXO): ETF Research Reports
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