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Bet on Growth ETFs to Ride the US Market Optimism

Wall Street is expected to continue to gain on optimism surrounding the rebounding U.S. economy, accelerated coronavirus vaccine rollout and positive economic data releases.

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This story originally appeared on Zacks

The current U.S. economic optimism is dotted by several encouraging factors that can keep driving investor sentiments. Factors like better-than-expected corporate earnings growth, improving labor market conditions, growing consumer confidence, accelerated coronavirus vaccine rollout and the passage of the much-awaited $1.2-trillion infrastructure bill have kept market sentiments positive. Also, the Omicron variant has been discovered to be milder than the previous coronavirus variants like Alpha, Delta and Delta+.

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Notably, investors seeking to gain on the impressive trends should consider growth ETFs. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and have a higher degree of volatility when compared to value stocks. Investors can consider certain ETFs like Invesco Dynamic Large Cap Growth ETF PWB, SPDR Portfolio S&P 500 Growth ETF SPYG, iShares S&P 500 Growth ETF IVW, Schwab U.S. Large-Cap Growth ETF SCHG and Vanguard S&P 500 Growth ETF VOOG.

The two broader market indices, the S&P 500 and the Dow Jones Industrial Average witnessed a record closing on Jan 3. Notably, Apple (AAPL) witnessed a rise in its shares price as it reached the milestone of a $3-trillion market valuation. It became the first company to touch such a prestigious mark. Tesla’s stock climbed 13.5% in a single day on Jan 3 by making more-than-expected 308,600 deliveries in the fourth quarter.

Omicron-related worries are slowly easing out. While providing updates on preparations for the healthcare infrastructure and arrangements, President Joe Biden mentioned that the White House is buying 500 million at-home COVID-19 tests that will be available at free of cost for Americans starting 2022 (as stated in a CNBC article). Biden also mentioned that 1000 medical personnel will be allocated from the military to assist hospitals if the situation gets severe in January and February.

Notably, three studies from South Africa, England and Scotland demonstrated that the Omicron variant is milder than the other variants and has been observed to result in lower hospitalizations (per a CNBC article).

Moreover, the emergency use authorization (EUA) for Pfizer Inc.’s (PFE) antiviral COVID-19 pill, PAXLOVID, has relaxed concerns regarding Omicron to some extent. Pfizer can begin delivering PAXLOVID in the United States on an immediate basis. In November, Pfizer had informed about signing an agreement with the U.S. government to supply 10 million treatment courses of PAXLOVID. The delivery will be completed in 2022. The FDA had also granted a nod to Merck’s antiviral pill for COVID-19.

Commenting on the market, Tom Hainlin, global investment strategist at U.S. Bank Wealth Management, has said that “It’s a glass-half-full start to the year and that’s been our perspective throughout 2021 and heading into 2022. We’re still in that modestly optimistic outlook for the year ahead and think the economy and corporate profits are set up to support rising equity prices, at least in the first part of the year,” as mentioned in a CNBC article.

Meanwhile, investors will be eyeing the Federal Reserve’s inflation and monetary policies in 2022, which is expected to increase rates several times in the current year.

Growth ETFs to Consider:

Below, we have discussed in detail a few growth ETFs that could be added to the portfolio:

Invesco Dynamic Large Cap Growth ETF 

Invesco Dynamic Large Cap Growth ETF is based on the Dynamic Large Cap Growth Intellidex Index. The Style Intellidexes apply a rigorous 10-factor style isolation process to objectively segregate companies into their appropriate investment style and size universe. 

Invesco Dynamic Large Cap Growth ETF has AUM of $838.5 million and charges an expense ratio of 0.56%. PWB carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook. Also, Invesco Dynamic Large Cap Growth ETF trades in three-month average volumes of about 24,000 shares (read: ETF Strategies to Ride the Year-End Santa Rally).

SPDR Portfolio S&P 500 Growth ETF

SPDR Portfolio S&P 500 Growth ETFseeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the S&P 500 Growth Index. The Index contains stocks that exhibit the strongest growth characteristics based on: sales growth, earnings change to price ratio, and momentum.

SPDR Portfolio S&P 500 Growth ETF has AUM of $16.34 billion and charges an expense ratio of 0.04%. SPYG carries a Zacks ETF Rank #2, with a Medium-risk outlook. Also, SPDR Portfolio S&P 500 Growth ETF trades in three-month average volumes of about 2.5 million shares (read: Forget Omicron: Tap S&P 500 ETFs for At Least 6% Gains in 2022).

iShares S&P 500 Growth ETF

iShares S&P 500 Growth ETFprovides exposure to large U.S. companies whose earnings are expected to grow at an above-average rate relative to the market and tracks the S&P 500 Growth Index.

iShares S&P 500 Growth ETF has AUM of $40.64 billion and charges an expense ratio of 0.18%. IVW carries a Zacks ETF Rank #2, with a Medium-risk outlook. Also, iShares S&P 500 Growth ETF trades in three-month average volumes of about 2.1 million shares.

Schwab U.S. Large-Cap Growth ETF 

Schwab U.S. Large-Cap Growth ETF’sgoal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index.

Schwab U.S. Large-Cap Growth ETF has AUM of $17.81 billion and charges an expense ratio of 0.04%. SCHG carries a Zacks ETF Rank #2, with a Medium-risk outlook. Also, Schwab U.S. Large-Cap Growth ETF trades in three-month average volumes of about 378,000 shares.

Vanguard S&P 500 Growth ETF 

Vanguard S&P 500 Growth ETF seeks to track the performance of the S&P 500 Growth Index.

Vanguard S&P 500 Growth ETF has AUM of $7.99 billion and charges an expense ratio of 0.10%. VOOG carries a Zacks ETF Rank #2, with a Medium-risk outlook. Also, Vanguard S&P 500 Growth ETF trades in three-month average volumes of about 121,000 shares.



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Invesco Dynamic Large Cap Growth ETF (PWB): ETF Research Reports

 

Schwab U.S. LargeCap Growth ETF (SCHG): ETF Research Reports

 

iShares S&P 500 Growth ETF (IVW): ETF Research Reports

 

SPDR Portfolio S&P 500 Growth ETF (SPYG): ETF Research Reports

 

Vanguard S&P 500 Growth ETF (VOOG): ETF Research Reports

 

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Zacks Investment Research