ETFs to Bet on Analysts’ Bullish Forecast for S&P 500

ETFs to Bet on Analysts’ Bullish Forecast for S&P 500

The S&P 500 Index topped the 5,300 milestone last week for the first time ever, underscoring strong confidence. The latest rally is driven by new bets for rate cuts as soon as September after April inflation data cools for the first time in six months. Traders now see a 68% chance of the Fed’s first rate cut in September, per the CME FedWatch Tool.

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 renewed hopes of rate cuts make Wall Street analysts even more bullish on the S&P 500 Index (read: What is the Best S&P 500 ETF to Buy?).

Investors could tap this opportune moment with ETFs that track the S&P 500 Index. These include SPDR S&P 500 ETF Trust (SPY Free Report) , iShares Core S&P 500 ETF (IVV Free Report) , Vanguard S&P 500 ETF (VOO Free Report) , SPDR Portfolio S&P 500 ETF (SPLG Free Report) and Invesco S&P 500 Top 50 ETF (XLG Free Report) .

Bullish Analysts Forecast

Given the continued momentum in the stock market, BMO Capital Markets boosted the year-end price target for the S&P 500 to 5,600 from 5,100, becoming the most bullish analyst on Wall Street. Deutsche Bank joined the league, raising the price target to 5,500 for this year from 5,100, citing strong corporate earnings to support equity valuations. In fact, it has the highest target among the major brokerages.

One of Wall Street’s most prominent bears, Morgan Stanley, turned positive on the outlook for U.S. stocks by lifting the price target for the S&P 500 to 5,400 from 4,500. It now expects the index to rise 2% this year, a major turn in its view that the benchmark will tumble 15% by December.

Hopes for rate cuts, continued AI adoption as well as strong earnings growth projections are expected to drive the S&P 500 further (read: Growth ETFs to Buy as Easing Inflation Fuels Rate Cut Bets).  

According to a new study from Bank of America, the stock market flashed a bullish signal, suggesting more upside ahead. The S&P 500 advance-decline line, which helps measure breadth or participation in the stock market’s gains among individual stocks, hit a new all-time high on May 17. The mid-cap advance-decline line also reached a new high, while the small-cap index’s line is on the verge of a new 52-week high. This signals that the index is likely to hit record highs this summer.

ETFs to Bet

SPDR S&P 500 ETF Trust (SPY Free Report)

SPDR S&P 500 ETF Trust tracks the S&P 500 Index and holds 503 stocks in its basket, with each accounting for no more than 7% of the assets. SPDR S&P 500 ETF Trust is heavy on the information technology sector, while financials, healthcare and consumer discretionary round off the next three spots with a double-digit allocation each.

SPDR S&P 500 ETF Trust charges investors 9 bps in annual fees and trades in an average daily volume of 60 million shares. It has AUM of $525.8 billion and a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

iShares Core S&P 500 ETF (IVV Free Report)

With an AUM of $463 million, iShares Core S&P 500 ETF is much smaller than SPY and less liquid, trading in an average daily volume of 5 million shares. It charges just 3 bps in annual fees, 6 bps less than the State Street product. iShares Core S&P 500 ETF has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Vanguard S&P 500 ETF (VOO Free Report)

Vanguard S&P 500 ETF also directly tracks the S&P 500 Index and holds 504 stocks in its basket. It has amassed $448 billion in its asset base and charges investors 3 bps in annual fees. Vanguard S&P 500 ETF trades in an average daily volume of 5 million shares and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 ETFs to Play the Burgeoning Corporate Buybacks).

SPDR Portfolio S&P 500 ETF (SPLG Free Report)

SPDR Portfolio S&P 500 ETF follows the S&P 500 Index and holds 503 stocks in its basket, with a 0.02% expense ratio. It has amassed $36 billion in its asset base and trades in a solid volume of 8 million shares a day, on average. SPDR Portfolio S&P 500 ETF has a Zacks ETF Rank #1.

Invesco S&P 500 Top 50 ETF (XLG Free Report)

Invesco S&P 500 Top 50 ETF follows the S&P 500 Top 50 ETF Index, which measures the cap-weighted performance of 50 of the largest companies on the S&P 500 Index, reflecting the performance of the U.S. mega-cap stocks. Invesco S&P 500 Top 50 ETF has been able to manage assets worth $4.3 billion but trades in a volume of about 1.2 million shares a day on average. XLG charges 20 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.


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