U.S. Stocks Near Record High: Top-Ranked ETFs To Buy

Amid volatile trading in recent weeks, the decade-old U.S. bull is still raging, with the major stock indices near all-time highs. The Dow Jones Industrial Average is just 1% shy of its Oct 3 closing peak while the S&P 500 is within 1% of its all-time closing high. The Nasdaq Composite Index is 1.4% away from the all-time high.

The renewed optimism came from easing recession fears following rounds of upbeat economic data and enthusiasm over trade deal. Additionally, Q1 earnings are coming in better than expected with improving outlook. Earnings from about 15.4% of the total market cap in the S&P 500 Index that has reported results are up barely 0.2% on 2.5% higher revenues. While the growth is much lower than the earnings and revenue improvement of 13.9% and 5.4%, respectively, for the same group of companies in the preceding quarter, it is much better than what many had feared.

Moreover, the breadth of the market — the number of companies climbing rather than falling to rent peaks or troughs — has been improving, as measured by the Value Line Geometric Index. The measure is still about 7.6% below from its all-time high hit on Aug 29 but was up about 23% since its late-December low. This metric also supports the bull thesis.

The encouraging trends have rekindled the appeal for riskier assets, especially the cyclical stocks that tend to outperform during periods of healthy economic growth. Below, we have highlighted five ETFs from the cyclical sectors that have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting their outperformance in the months ahead.

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)

This is the largest and the most-popular product in the consumer discretionary space with AUM of $13.3 billion and average daily volume of around 6.4 million shares. It tracks the Consumer Discretionary Select Sector Index and holds 64 securities with higher concentration on the top firm — Amazon (AMZN - Free Report) — at 23.9%. Other firms make up for a nice mix with each holding no more than 10.1% of the assets. From a sector look, Internet & direct marketing retail takes the top spot with 29.6% of assets, followed by specialty retail (25.8%), hotels restaurants & leisure (19.8%) and textiles apparel & luxury goods (8.4%). The fund charges 13 bps in fees per year and has a Zacks ETF Rank #2.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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