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U.S. ETFs in Focus as Market Cap Hits $30 trillion

Zacks Equity Research
Updated
Best Buy (BBY) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

The U.S. stock market added $6.9 trillion in market cap since President Donald Trump’s inauguration. Based on Russell 3000, market cap reached $30.6 trillion on Jan 18. Paul Hickey, co-founder of Bespoke told CNBC, "I think the performance in the first year has exceeded almost everybody's expectations".

Per a CNBC article, Trump’s performance marks the best performance since the election of Franklin D. Roosevelt, when the Dow added 96.5%, ahead only of Trump’s 31.3%.

Economic Scenario

The markets have been rallying since Trump got elected owing to his pro-business polices. Although the rally occasionally stalled because of political uncertainty and doubts around his tax reform, it was back in full swing after the tax reform was signed into law at the end of last year. For instance, the SPDR S&P 500 ETF (SPY) has added 4.6% so far this year, in merely three weeks of trading.

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Coming to economic data, United States’ GDP grew 3.2% in the third quarter compared with 3.1% in the previous quarter. Although the third quarter reading was below market expectations of 3.3%, it was the highest since first quarter 2015. U.S. retail sales grew 4.2% in 2017 compared with 3.2% in 2016, showing signs of a strengthening economy (read: US Industrial Production Beats Expectations: ETFs in Focus).     

Although the S&P 500 returned 23% in Trump’s first year compared with Barrack Obama’s 41%, analysts say that Obama had the benefit of a lower base whereas Trump’s administration was already amid a bull run. Trump’s tax reform passage has increased overall optimism in his administration. Lindsey Bell, investment strategist at CFRA Research, told Newsmax, “There is hope and anticipation for progress in policy. Infrastructure will be the next major one, it should help boost economic and corporate activity.”

Let us now discuss a few ETFs focused on providing exposure to U.S. equities.

SPDR S&P 500 ETF SPY

This fund is the most popular ETF traded in the U.S. markets. It seeks to provide exposure to the largest and most stable companies and tracks the S&P 500 index.

It has AUM of $285.7 billion and charges a fee of 9 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 24.1%, 14.9% and 14.0% allocation, respectively (as of Jan 17, 2018). The fund’s top three holdings are Apple Inc AAPL, Microsoft Corporation MSFT and Amazon.com Inc AMZN with 3.8%, 2.9% and 2.2% allocation, respectively (as of Jan 17, 2018). The fund has returned 25.5% in a year. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Core S&P 500 ETF IVV

This fund is a low-cost ETF that seeks to provide exposure to the large established U.S. companies and tracks the S&P 500 index.

It has AUM of $151.8 billion and charges a fee of 4 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 24.0%, 14.8% and 14.0% allocation, respectively (as of Jan 17, 2018). The fund’s top three holdings are Apple Inc, Microsoft Corporation and Amazon.com Inc with 3.8%, 2.9% and 2.2% allocation, respectively (as of Jan 17, 2018). The fund has returned 25.7% in a year. It has a Zacks ETF Rank #3 with a Medium risk outlook.

PowerShares QQQ ETF QQQ

This fund is a popular ETF that maintains a hefty exposure to U.S. tech companies and tracks the Nasdaq 100 index.

It has AUM of $61.6 billion and charges a fee of 20 basis points a year. From a sector look, the fund has high exposures to Information Technology, Consumer Discretionary and Health Care with 60.9%, 21.2% and 10.3% allocation, respectively (as of Jan 17, 2018). The fund’s top three holdings are Apple Inc, Microsoft Corporation, and Amazon.com Inc with 11.8%, 8.9% and 8.0% allocation, respectively (as of Jan 17, 2018). The fund has returned 36.0% in a year. It has a Zacks ETF Rank #2 with a Medium risk outlook.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
NASDAQ-100 SHRS (QQQ): ETF Research Reports
 
SPDR-SP 500 TR (SPY): ETF Research Reports
 
ISHARS-SP500 (IVV): ETF Research Reports
 
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