Yahoo Finance Spread of Growth ETFs at New All-Time Highs
Wall Street has been on a remarkable rally this year, with the S&P 500 and the Nasdaq Composite Index hitting a series of record highs. This is especially thanks to a strong earnings growth outlook, optimism over potential interest rate cuts and the artificial intelligence (AI) craze. While the rally has been broad-based, growth stocks are the clear winners. Growth funds generally tend to outperform during an uptrend, pushing many ETFs to new all-time highs.
Below, we have presented five ETFs, having a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), that are leading the way and have scaled a series of new highs in the latest sessions. These are SPDR Portfolio S&P 500 Growth ETF SPYG, Vanguard S&P 500 Growth ETF VOOG, iShares S&P 500 Growth ETF IVW, iShares Russell Top 200 Growth ETF IWY and Schwab U.S. Large-Cap Growth ETF SCHG.
Growth investing focuses on capital appreciation rather than annual income or dividends. It is a stock-buying strategy that aims to profit from companies that grow at above-average rates compared with their industry or the market. This is a more active attempt versus the value to build up the portfolio and generate more return on the capital investment. However, these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios, and exhibit a higher degree of volatility, especially compared with value stocks.
Strong Market Trends
Most of the rally came from soaring technology stocks. The "Magnificent Seven" is the biggest engine of growth for the technology sector and the S&P 500 as a whole. It now accounts for 31% of weightage in the S&P 500. NVIDIA (NVDA) recently topped $3 trillion in market cap and became one of the most valuable companies in the United States. The stock has soared 132.2% so far this year, while Meta Platforms (META) and Alphabet (GOOGL) have risen 34.9% and 24%, respectively. Apple (AAPL) reclaimed the most valuable company title this week with a market cap of $3.3 trillion, edging out Microsoft's (MSFT) market cap of $3.2 trillion (read: Apple Jumps on the AI Bandwagon: ETFs to Buy).
Inflation in the United States cooled down in May for the second consecutive month. The Consumer Price Index rose 3.3% year over year in May, down from growth of 3.4% witnessed in April. On a monthly basis, prices was flat for the first time since July 2022. Easing inflation indicates that the economy is stabilizing and interest rates may be declining.
The Fed, in its latest meeting, penciled in one rate cut this year and foresees four cuts in 2025. The central bank has altered the language in its statement, noting that there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress.
Low rates are generally favorable for growth stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies. Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets. Growth stocks, with their potential for high returns, become more appealing to investors in this environment, driving up demand and, consequently, their prices (read: 3 Undervalued Growth ETF Winners With More Room to Run).
ETFs in Focus
SPDR Portfolio S&P 500 Growth ETF (SPYG) – 52-Week High: $79.97, Up 23% YTD
SPDR Portfolio S&P 500 Growth ETFfollows the S&P 500 Growth Index, holding 228 stocks in its basket with a heavy concentration on the top three firms. It is heavy on the information technology sector with a 50.7% allocation, while consumer discretionary and communication services round off the next two spots. SPDR Portfolio S&P 500 Growth ETF has amassed $29.2 billion in its asset base and charges investors 4 bps in annual fees. Volume is good, exchanging 2.5 million shares a day on average.
Vanguard S&P 500 Growth ETF (VOOG) – 52-Week High: $332.86, Up 23% YTD
Vanguard S&P 500 Growth ETF also tracks the S&P 500 Growth Index but holds a lower basket of 229 securities. It has 229 stocks in its basket, with a higher concentration on the top three firms. The fund is heavy on the information technology sector with a 48.6% allocation, while consumer discretionary and communication services round off the next two spots. Vanguard S&P 500 Growth ETF is relatively less popular and less liquid, with an AUM of $11.5 billion and an average daily volume of 120,000 shares. It charges 10 bps in annual fees.
iShares S&P 500 Growth ETF (IVW) – 52-Week High: $92.24, Up 23% YTD
iShares S&P 500 Growth ETF also tracks the S&P 500 Growth Index. It holds 228 stocks in its basket, with key holdings in information technology, consumer discretionary and communication. iShares S&P 500 Growth ETF charges 18 bps in annual fees and has amassed $52.3 billion in its asset base. The fund trades in an average daily volume of 3 million shares.
iShares Russell Top 200 Growth ETF (IWY) – 52-Week High: $213.77, Up 22.2% YTD
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 110 stocks in its basket. iShares Russell Top 200 Growth ETF has key holdings in information technology, consumer discretionary and communications with double-digit exposure each. iShares Russell Top 200 Growth ETF has amassed $11.9 billion in its asset base and trades in an average daily volume of 339,000 shares. It has an expense ratio of 0.20%.
Schwab U.S. Large-Cap Growth ETF (SCHG) – 52-Week High: $100.50, Up 21.2% YTD
With an AUM of $30.3 billion, Schwab U.S. Large-Cap Growth ETF follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. It holds 249 stocks in its basket, with a large concentration on the top three firms. From a sector look, information technology takes the top spot at 46.1% share, while communication services, consumer discretionary and health care receive double-digit exposure each in the portfolio. Schwab U.S. Large-Cap Growth ETF charges 4 bps in annual fees and sees an average volume of around 1 million shares a day (read: 5 ETFs to Buy for June).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares Russell Top 200 Growth ETF (IWY): ETF Research Reports
Schwab U.S. Large-Cap 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