S&P 500 Reclaims 2,900: Growth ETFs Leading The Rally

After a tumultuous ride last month, Wall Street has staged a solid rebound this month with the three major indices having recovered more than 30% from their mid-March lows. This is primarily thanks to aggressive stimulus efforts and hopes of resumption in economic activity as many states begin to relax lockdown measures. The potential for an effective COVID-19 treatment also prompted a rally in the stock market.

All these developments shrugged off weak rounds of economic data, indicating that complacency has started building up in the stock market. The latest data showed that the U.S. economy contracted at its sharpest pace by 4.8% in the first quarter since the Great Recession, ending the longest expansion in history.

The broad rally helped the S&P 500 Index to reclaim the 2,900 level and put it on track for its best month since 1974. It is up more than 13% for the month. Growth investing took the charge of this ascent with trillions of dollars in government spending spurring growth. The ultra-popular iShares Russell 1000 Growth ETF (IWF - Free Reporthas gained 14.9% this month compared to gains of 13.7% for value counterpart iShares Russell 1000 Value ETF (IWD - Free Report).

The strong trend is likely to continue as more companies are developing vaccines and treatments for the coronavirus and Federal Reserve said it is in no hurry to end its economic stimulus. Further, investors view the weak data as a backward-looking and have now become forward-looking with the economy and business set to reopen, which will provide an uptick in demand.

Given this, we have highlighted five growth ETFs that have soared this month and are likely to do so given that these have a Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Further, these funds are not confined to one sector and offers broad exposure to the market.

Invesco S&P SmallCap 600 Pure Growth ETF (RZG - Free Report) – Up 30.9%

This fund targets the small-cap segment of the broad stock market by tracking the S&P SmallCap 600 Pure Growth Index and charging investors 35 bps in annual fees. Holding 139 securities in its basket, it is well spread out across components with each holding less than 2.2% share. Information technology, consumer discretionary, industrials, and health care are the top four sectors with a double-digit allocation each. The fund has amassed $94.4 million in its asset base while trades in light volume of about 10,000 shares a day on average. It has a Zacks ETF Rank #2.

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