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ETFs to Play S&P 500's Fastest Bull Market Rally Since WWII

The S&P 500 has now doubled from its Covid-19 bottom of 2,237.40 on March 23, 2020. Now it has reached to the level of 4,479.71, representing the fastest bull market, according to a CNBC analysis of data from S&P Dow Jones Indices going back to World War II.

On average, it takes more than 1,000 trading days in bull markets to get doubled, the analysis revealed. Solid U.S. economic data points led to this upsurge. Tech stocks were mainly responsible for the S&P 500’s achievement.

Solid Data Points & Stimulus Led to the Rally

The U.S. economy added 943,000 jobs in July 2021, the maximum in 11 months and above market expectations of 870,000. The job gains followed a similar increase in June (+938,000) (read: 4 Sector ETFs to Sizzle on Solid July Jobs Data).

A few more updates also led to the S&P 500 rally. Optimism about corporate earnings and the passage of the infrastructure bill helped the key U.S. equity index go higher. Senate’s approval for infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years is a tailwind for the index.

The 2,702-page legislation is aimed at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years (read: 4 Sector ETFs to Gain from Infrastructure Bill).

Moreover, since the start of the pandemic, there have been continued easy money policy. The Fed has been practicing the QE policy and rates remained at a record low level. The U.S. government also rolled out several fiscal stimulus to counter the ill-effect of the pandemic.  

The rollout of vaccines and the relatively upbeat consumer confidence as well as gradual reopening of economies have been aiding the sectors that have are closely connected to the economic activities. Consumer Discretionary (the S&P 500 puts 11.89%) sector should go up to meet the pent-up demand.

S&P 500 Becoming IT-Heavy; Some Sectors Have Double-Digit Exposure

The S&P 500 puts 27.64% of the fund in Information Technology. Apple (6.18%), Microsoft (5.83%) and Amazon (3.73%) are its top three holdings. With tech stocks having taken a beating in the first quarter of 2021 despite having upbeat long-term potential, we expect a rebound in the tech segment.

This is especially true given the rising virus cases of the Delta variant globally which will prolong the work-learn-shop-from-home culture. Overall, digitization is part and parcel of the modern era. The sector holds strong potential on the fast emergence of the fourth industrial revolution. The S&P 500 also puts 11.23% weight in the Communication Services sector, which is also the need of the hour amid the pandemic.

The financial sector gets a double-digit allocation in the S&P 500 index. If stocks continue to rally and long-term yields rise, yield curve may steepen ahead. If this happens, financial stocks will perform better. In the past one year, Financial Select Sector SPDR Fund XLF has added 52.8% past year versus 32.5% gains in the S&P 500.

ETFs in Focus

Against this backdrop, below we highlight a few S&P 500 ETFs that are clearly beneficiaries of this uptrend.

SPDR S&P 500 ETF SPY –Up 104.4% since Mar 23, 2020

iShares Core S&P 500 ETF IVV – Up 105%

Vanguard S&P 500 ETF VOO – Up 105.3%

SPDR Portfolio S&P 500 Value ETF SPYV – Up 89.8%

SPDR Portfolio S&P 500 Growth ETF SPYG – Up 116%

SPDR Portfolio S&P 500 High Dividend ETF SPYD – Up 103.7%

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SPDR S&P 500 ETF (SPY): ETF Research Reports
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
SPDR Portfolio S&P 500 High Dividend ETF (SPYD): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
SPDR Portfolio S&P 500 Growth ETF (SPYG): ETF Research Reports
SPDR Portfolio S&P 500 Value ETF (SPYV): ETF Research Reports
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