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According to a Bank of America survey, investor exposure to U.S. stocks jumped to the highest level since 2013 after the presidential election, on optimism about stronger economic growth. The survey showed that fund managers expect U.S. stocks to be the best-performing asset class next year, followed by global equities. Investors who responded after the election results said the Russell 2000 index of small-cap stocks would outperform the most.Wall Street has been enjoying a solid rally, with all three major bourses and the small-cap indices hovering near record highs. Donald Trump’s trade and Fed rate cuts lifted investors’ sentiment, making investors most bullish in more than a decade. The S&P 500 topped the 6,000 level and the blue-chip Dow Jones index crossed the 44,000 level for the first time post-election in its best week of 2024. The tech-heavy Nasdaq Composite Index touched 19,000 post-election for the first time. That being said, we have highlighted five ETFs that could be compelling ways to tap the bullish view. These are iShares Core S&P 500 ETF ( – ) , iShares Russell 2000 ETF ( – ) , Invesco QQQ Trust ( – ) , iShares Core S&P U.S. Growth ETF ( – ) and SPDR Dow Jones Industrial Average ETF ( – ).The market is betting that the second Trump administration will provide a boost to stocks, given his more market-friendly policies. During his campaign, Trump proposed corporate tax rate cuts, deregulation and other policies that would favor domestic growth, thus providing more stimulus to the U.S. economy. The anticipation of greater tariff barriers and a step to move manufacturing back home will drive stocks higher.The stock market could witness a stronger rally toward the end of the year following Donald Trump’s victory than it did when he won his first term eight years ago, according to JPMorgan Chase. “Strength in the so-called Magnificent Seven technology stocks will continue to propel equity markets, while financials will be the best performing S&P 500 sector through the end of the year.” Oppenheimer lifted its 2024 year-end price target for the S&P 500 from 5,900 to 6,200, marking the third increase this year. An analyst at Yardeni Research predicts that Trump’s administration may fuel the S&P 500 index’s rally to 7,000 by the end of next year.The Federal Reserve, in its latest meeting, slashed interest rates for the second time this year. It cut key interest rates by 25 bps, bringing down the benchmark rate to 4.5%-4.75%, following the 50-bps cut in September 2024. Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand their operations more easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.The Fed said that recent indicators suggest that “economic activity has continued to expand at a solid pace,” and the “unemployment rate has moved up but remains low.” Inflation has fallen closer to the central bank’s target but “remains somewhat elevated.”
ETFs to Tap
iShares Core S&P 500 ETF (IVV)iShares Core S&P 500 ETF tracks the S&P 500 Index and holds 503 stocks in its basket, each accounting for no more than 7% of the assets. It is heavy on the information technology sector, while financials, healthcare and consumer discretionary round off its next three spots with a double-digit allocation each. iShares Core S&P 500 ETF charges investors 3 bps in annual fees and trades in an average daily volume of 3 million. It has an AUM of $561.7 billion and a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.iShares Russell 2000 ETF (IWM)iShares Russell 2000 ETF is the largest and most popular ETF in the small-cap space, with an AUM of $78.9 billion and an average daily volume of 23 million shares. It tracks the Russell 2000 Index and holds well-diversified 1,973 stocks in its basket. IWM has key holdings in financials, industrials, healthcare, and information technology. iShares Russell 2000 ETF charges 19 bps in annual fees. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.Invesco QQQ Trust (QQQ)Invesco QQQ Trust provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space, with an AUM of $306.1 billion and an average daily volume of 27.4 million shares. QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.iShares Core S&P U.S. Growth ETF (IUSG)iShares Core S&P U.S. Growth ETF tracks the S&P 900 Growth Index, which measures the performance of the large and mid-capitalization growth sector of the U.S. equity market. IUSG is home to 487 stocks with key holdings in information technology, consumer discretionary and communication. iShares Core S&P U.S. Growth ETF has accumulated $20.4 billion in its asset base and charges 4 bps in annual fees. It trades in an average daily volume of 430,000 shares.SPDR Dow Jones Industrial Average ETF (DIA)SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with an AUM of $38 billion and an average daily volume of 3 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket, with each making up for less than 9% share. Financials (23.7%), information technology (19.4%), healthcare (16.7%), consumer discretionary (13.8%) and industrials (12.5%) are the top five sectors. SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.More By This Author:
U.S. Stocks’ Exposure Jumps To A Decade-High Level: ETFs To Tap
