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After a remarkable run in 2020, stocks continued their rally in the first half of 2021. All three major indexes are now trading at or close to their all-time highs, defying fears about valuations and inflation. Per Bloomberg, this was one of the best first halves ever for the S&P 500 index (SPY - Free Report), which gained 16%.

The Dow Jones (DIA - Free Report) rose 15% and the Nasdaq returned 13% during this period. Looking at sectors, Energy was the biggest gainer, up 46% while Financials jumped 25%. Utilities and Consumer Staples were the worst performers, up between 2% and 3%.

Most strategists believe that the rally will continue into the second half, boosted by strong economic recovery and earnings growth. Per WSJ, whenever the S&P 500 rose between 15% and 18% in the first half, it continued to rise in the second half, but at a slower pace. 

Another reason for continuation of stock market rally is the TINA factor: “there is no alternative to stocks.” Stocks look much more attractive compared to most other asset classes in the rock-bottom interest rate environment. Further, concerns about rising inflation also make equities a better investment compared to bonds or cash.

As a result, retail investors have continued to pour money into equities and equity ETFs this year. Goldman Sachs recently raised their forecast for households’ net equity purchases for the full year to $400 billion from $350 billion, per Bloomberg.

The best performing ETFs of the first half are the Breakwave Dry Bulk Shipping ETF (BDRY - Free Report), the Invesco S&P SmallCap Energy ETF (PSCE - Free Report), and the iPath Series B Carbon ETN (GRN - Free Report). They have returned 260%, 86% and 71% respectively. To learn more, please watch the short video above.

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