Just a month ago, ETF investors were pleased to simply hold onto their money. Now they're looking for big gains in the S&P 500 again.
Many high-octane ETFs, punished during the April sell-off, are raging back. It's a sign that in the ETF world, at least, investors are feeling comfortable taking risks again. There's still a ways to go, though, until many of these high-risk ETFs fully recover.
Eight actively traded U.S. diversified ETFs returned 18% or more in just the past month, says Morningstar Direct. The S&P 500 in that time returned 9.8%.
"Some of the ETFs that have rallied in the past month have still lost money for the year," said Todd Rosenbluth, head of research at Vetta Fi. "We have been in a risk-off environment for much of the year due to economic and geopolitical uncertainty."
Looking At Big S&P 500 Bounces
Among actively traded U.S. diversified ETFs, Invesco WilderHill Clean Energy is the bounceback champ. Shares surged nearly 27% in the past month. It's important to note the ETF is still down 7.2% this year so far.
Concerns about President Donald Trump's tariffs pummeled the $269 million-in-assets ETF most of the year. Trump had also been more supportive of oil and gas than alternative clean energy.
However, shares of solar energy firm, SunRun, are the ETF's top holding at roughly 3%. SunRun shares surged starting on May 9 on the news the Republicans' spending bill isn't as harsh on alternative energy plans as originally feared.
Shift To Riskier S&P 500 Stocks
One of the best examples of where ETF investors are getting more brazen is the rally in Invesco S&P 500 High Beta ETF. The $375 million-in-assets fund intentionally overweights the most volatile stocks in the S&P 500.
The ETF's top holdings include wild-moving stocks like Super Micro Computer and Nvidia. And the ETF itself has given its investors a thrill. Shares jumped 22.8% in the past month. They've now posted a positive return of 1.5% this year.
Invesco High Beta is riding the bounce in tech stocks. "SPHB has more than half of its assets in information technology stocks that derive a high percentage of their revenues from outside of the U.S.," Rosenbluth says. "Meanwhile the more defensive sectors are underrepresented."
Shares might be rising, but investors are still cautious. The ETF suffered $25 million of net outflows in the past month, Rosenbluth says.
And it's a similar story with ARK Innovation. The ETF that shoots for huge gains is up 25.1% in the past month. But investors are skeptical.
"ARKK is the most well known of the bounceback ETFs. But the fund has over $300 million of net outflows," Rosenbluth said. "Investors are less interested in this disruptive technology ETF and some have taken profits."
Quality Is Still In
Investors may like more risk, but they're still holding onto quality, too.
VictoryShares Free Cash Flow Growth and Pacer US Large Cap Cash Cows Growth Leaders target companies with strong cash flow — a measure of profitability. Both are up more than 17% in a month.
"The strong rally in higher quality, free cash flow growth ETFs like COWG and GFLW is more encouraging to me," Rosenbluth said. "These ETFs were down less heading into the rally and are constructed based on fundamentals, not just for being highly volatile."
Top Diversified ETFs The Past 30 Days
| Name | Ticker | YTD Return % | One-month Return % |
|---|---|---|---|
| Invesco WilderHill Clean Energy | PBW | -7.2% | 26.76% |
| Simplify Volatility Premium | SVOL | -0.54 | 26.17 |
| ARK Innovation | ARKK | 1.13 | 25.10 |
| Invesco S&P 500 High Beta | SPHB | 1.49 | 22.79 |
| Invesco S&P 500 Pure Growth | RPG | 5.72 | 18.81 |
| iShares Russell Mid-Cap Growth | IWP | 5.54 | 18.78 |
| Pacer US Large Cap Cash Cows Growth Leaders | COWG | 8.60 | 18.58 |
| Fundstrat Granny Shots US Large Cap | GRNY | 4.46 | 18.00 |
