The Wall Street optimism was seen last week as the market strongly rebounded with all three major bourses seeing the best week since November. The blue-chip Dow Jones gained 3.6% while the S&P 500 and the tech-heavy Nasdaq Composite Index rose 4.2% and 5.4%, respectively.
Studying the current market optimism, it seems like positive developments with regard to additional stimulus talks have been fuelling the rally. President Joe Biden held a meeting with Treasury Secretary Janet Yellen and the chief executives of some of the country’s major businesses in the Oval Office to talk about his $1.9 trillion coronavirus relief bill and the outlook for the U.S. economy, per a CNBC article.
In order to support the United States’ return to full-employment by 2022, Yellen recently requested Congress to pass Biden’s stimulus plan, per a CNBC article. Going on, the Senate and House each passed a budget resolution, allowing Congress to continue with its goal to pass a $1.9-trillion coronavirus stimulus bill. Along with other benefits, the package includes $1,400 stimulus checks, a supplemental jobless benefit, and COVID-19 vaccine and testing funds.
It is also being believed that wider coronavirus vaccine rollouts are making a strong case in favor of faster U.S. economic recovery in 2021. Biden is expected to increase the distribution of coronavirus vaccines by rolling out more funds to local and state officials, increasing the number of vaccination sites and introducing a national education campaign, per a CNBC article.
ETFs Worth Your Attention
Keeping the current scenario in mind, let’s discuss ETFs which promise great returns in 2021:
Vanguard ESG U.S. Stock ETF ESGV
The health crisis has also impacted the investing world, with market participants showing greater interest toward conscious investing, spurring demand for environmental, social and governance (ESG) funds. Not only the coronavirus pandemic but factors like protests against racism, geo-political tensions and changing climatic conditions are responsible for the growing popularity of sustainable investing funds. Riding on the surging demand, ESG funds are witnessing record inflows in the ongoing year. According to the Forum for Sustainable and Responsible Investment’s 2020 trends report, total U.S.-domiciled sustainably invested assets under management, including institutional and retail, rose 42% to $17.1 trillion compared with $12 trillion between 2018 and 2020, per a CNBC article. Notably, ESG investing has shown some resilience and continues to gain investor attention amid the pandemic.
The fund tracks the performance of the FTSE US All Cap Choice Index comprising large-, mid-, and small-capitalization stocks. It does not include companies operating in adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling and nuclear power industries. It also doesn’t consider companies which do not meet the U.N. global compact principles and diversity criteria. With AUM of $3.33 billion, the fund has an expense ratio of 12 basis points (bps) (read: Will ESG ETFs Flourish Under a Biden Presidency? Let's Explore).
Schwab U.S. Small-Cap ETF SCHA
Small-caps stocks, as indicated by the Russell 2000 Index, has been outperforming the broader-market and is hitting new all-time highs. The index climbed 0.4% to an all-time high on Feb 9 and gained more than 16% so far in 2021. This upside is being largely led by small-cap companies that are closely tied to the U.S. economy and thus are well positioned to outperform when the economy improves. The positive developments like the coronavirus vaccine rollout and introduction of another round of fiscal stimulus are expected to boost the economy.
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Small-Cap Total Stock Market Index. With AUM of $14.69 billion, the fund has an expense ratio of 4 bps (read: Play These ETF Strategies to Ride the US Market Optimism).
SPDR Portfolio S&P 500 Growth ETF SPYG
Given the ongoing market optimism, investors seeking to capitalize on the strong trends should consider growth ETFs. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks.
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Growth Index. It charges an expense ratio of 0.04% and has an AUM of $9.79 billion (read: 5 Growth ETFs to Gain on Stimulus & Vaccine Optimism).
Amplify Online Retail ETF IBUY
Online shopping is gaining favor among shoppers in an attempt to minimize human-to-human contact as coronavirus cases continue to surge in the United States. According to the latest Mastercard (NYSE:MA) Spending Pulse, retail sales excluding automotive and gasoline jumped 9.2% year over year in January. The growth was observed across all 50 states as the holiday season shopping momentum continued into January. The upside in January comes at the back of 3% year-over-year growth in sales during the holiday season. Notably, the pandemic has been a boon for the e-commerce industry as people continue to prefer staying indoors and shopping online.
The fund provides a cost-efficient way for investors to own a basket of companies with significant revenues from online or virtual retail sales. With AUM of $1.75 billion, the fund has an expense ratio of 65 bps.
VanEck Vectors Video Gaming and eSports ETF ESPO
The coronavirus pandemic has lent a push to the video gaming industry as people stayed indoors and switched over to in-house entertainment sources. It also seems like the boom in the video gaming space may remain in the post-pandemic era as the outbreak has changed the lifestyle and preferences of Americans, to a large extent. According to a report from The NPD Group, total consumer spending on video gaming in the United States continues to soar as it registered a 26% year-over-year rise to $18.6 billion in the fourth quarter of 2020. For the pandemic-stricken 2020, consumer spend across all categories within the U.S. games industry came in at $57 billion, climbing 27% from 2019. Notably, digital console and PC content, mobile and subscription spending as well as across hardware and accessories categories witnessed significant traction in 2020.
The fund seeks to replicate, as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 25 stocks in its basket. With AUM of $872.7 million, the fund charges 55 basis points in expense ratio (read: Activision ETFs Set to Shine on Strong Q4 Results).
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