Benzinga - by Zacks, Benzinga Contributor.
Wall Street has been on a remarkable rally this year, with the S&P 500 and the Nasdaq Composite Index hitting a series of record highs on strong earnings growth and artificial intelligence craze. This shows that large-cap stocks have been the clear leader.
We have highlighted five ETFs from the large-cap space that are at the forefront of the market rally so far this year. These are VanEck Vectors Semiconductor ETF (NASDAQ: SMH), Invesco S&P 500 Momentum ETF (ARCA:SPMO), Gabelli Growth Innovators ETF (ARCA:GGRW), Fidelity Blue Chip Growth ETF (BATS: FBCG) and MicroSectors FANG+ ETN (ARCA:FNGS).
Here, we have highlighted some solid reasons as to why the large-cap space is outperforming.
Strong Earnings Reports: Many large-cap companies have reported better-than-expected earnings driven by strong consumer demand and effective cost management. A research report from Deutsche Bank showed that earnings for a basket of stocks labeled "Mega-Cap Growth and Tech" grew 39% year over year in the first quarter, compared with 5.9% growth for the S&P 500.
Magnificent Seven: The "Magnificent Seven" is the biggest engine of growth for the technology sector and the S&P 500 as a whole. It now accounts for 31% of weightage in the S&P 500.
AI Boom: Large-cap stocks have been the biggest beneficiaries of the AI boom. Notably, NVIDIA (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Meta (NASDAQ: META), all with market caps above $1 trillion, are the biggest winners.
Resilience to Higher Rates for a Longer Period: Large-cap stocks have shown strong resilience to longer-than-expected periods of higher interest rates. This is because these stocks are less volatile, have a steady dividend stream and offer stability.
Less Risky Bet: Large-cap stocks are typically less risky as these companies are more established and provide a broader range of products or services. These offer some safety in case of economic slowdown or political issues.
Inflation Hedge: Large-cap companies, especially those with pricing power, can better navigate inflationary pressure by passing on costs to consumers. This makes them attractive to investors looking for inflation protection, given sticky inflation.
Below, we have profiled the abovementioned ETFs:
ETFs in Focus VanEck Vectors Semiconductor ETF – Up 46.1%
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. VanEck Vectors Semiconductor ETF has managed assets worth $22 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 7.2 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
Invesco S&P 500 Momentum ETF – Up 30.1%
Invesco S&P 500 Momentum ETF tracks the S&P 500 Momentum Index, which measures the performance of stocks in the S&P 500 index that have a high "momentum score." It holds 101 securities in its basket and charges 13 bps in fees per year. Information technology is the top sector with a 49.2% share, while consumer discretionary, communication services and healthcare round off the next three spots. Invesco S&P 500 Momentum ETF has AUM of $1.6 billion and trades in average daily volume of 297,000 shares.
Gabelli Growth Innovators ETF – Up 29.7%
Gabelli Growth Innovators ETF is an actively managed fund that seeks to invest in companies in secular growth industries whose competitive moats will enable outsized market share gains and whose future stream of cash flows is undervalued at current market prices, according to the portfolio manager. Gabelli Growth Innovators ETF has gathered $4.9 million in its asset base and trades in an average daily volume of 2,000 shares. The product has an expense ratio of 0.90%.
Fidelity Blue Chip Growth ETF – Up 25.3%
Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 206 securities in its basket with AUM of $1.8 billion. It charges 59 bps in annual fees and trades in an average daily volume of 445,000 shares.
MicroSectors FANG+ ETN – Up 23.4%
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the stocks. MicroSectors FANG+ ETN has accumulated $275.9 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 139,000 shares and has a Zacks ETF Rank #3 (Hold).
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