U.S. Economic Growth Improves: ETFs To Buy

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Includes: IVV, QQQ, SPY
by: Zacks Funds

In its final assessment, the Commerce Department said that U.S. GDP grew at a clip of 1.4% in the first quarter of 2017 compared with 1.2% in the previous month. The first estimate in April was a paltry 0.7%.

The higher growth was attributed to increase in consumer spending and exports. Despite the bullishness surrounding this increase, President Donald Trump's optimistic outlook on the country's growth and his target of 3% remains farfetched. This is because the primary driving factors of the stock market rally, namely tax cuts and deregulation, are still in the uncharted territory.

Consumer spending, which accounts for more than 70% of the U.S. economic activity, increased a mere 0.1% in May compared with 0.6% in the previous month. Moreover, exports in the first quarter were revised upward to show a 7% gain compared with 5.8% reported earlier.

There are other signs showing strength in the economy too, low unemployment rate being one. Unemployment rate was 4.3% in May 2017 compared with 4.4% in the previous month, a 16-year low.

Surprisingly, an upward growth revision was made despite weak retail sales and inventory data. U.S. retail sales contracted 0.3% in May, a 16-month low. American businesses accumulated $2.6 billion worth of inventories in the first quarter of 2017 compared with $4.3 billion in the previous month.

Let us now discuss a few ETFs focused on providing exposure to U.S. equities.

SPDR S&P 500 ETF (NYSEARCA:SPY)

This fund is the most popular ETF traded in the U.S. markets. It seeks to provide exposure to the largest and most stable companies and tracks the S&P 500 index.

It has AUM of $236.74 billion and charges a fee of 9 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 22.32%, 14.58% and 14.53% allocation, respectively (as of June 29, 2017). The fund's top three holdings are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT)and Amazon.com Inc. (NASDAQ:AMZN)with 3.61%, 2.55% and 1.87% allocation, respectively (as of June 29, 2017). The fund has returned 18.38% in the last one year and 9.17% year to date (as of June 30, 2017). It currently has a Zacks ETF Rank 2 with a Medium risk outlook.

iShares Core S&P 500 ETF (NYSEARCA:IVV)

This fund is a low cost ETF that seeks to provide exposure to the large established U.S. companies and tracks the S&P 500 index.

It has AUM of $115.46 billion and charges a fee of 4 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 22.27%, 14.54% and 14.51% allocation, respectively (as of June 29, 2017). The fund's top three holdings are Apple Inc., Microsoft Corporation, and Amazon.com Inc. with 3.61%, 2.54% and 1.86% allocation, respectively (as of June 29, 2017). The fund has returned 17.88% in the last one year and 8.66% year to date (as of June 30, 2017). It currently has a Zacks ETF Rank 2 with a Medium risk outlook.

PowerShares QQQ ETF (NASDAQ:QQQ)

This fund is a popular ETF that maintains a hefty exposure to U.S. tech companies and tracks the Nasdaq 100 index.

It has AUM of $49.56 billion and charges a fee of 20 basis points a year. From a sector look, the fund has high exposures to Information Technology, Consumer Discretionary and Health Care with 57.5%, 22.34% and 11.44% allocation, respectively (as of June 30, 2017). The fund's top three holdings are Apple Inc., Microsoft Corporation, and Amazon.com Inc. with 11.61%, 8.23% and 7.15% allocation, respectively (as of June 30, 2017). The fund has returned 29.45% in the last one year and 16.73% year to date (as of June 30, 2017). It currently has a Zacks ETF Rank 1 (Strong Buy) with a Medium risk outlook.

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