Just when it looked like playing it safe with the S&P 500 was the way to go: Growth stock ETFs are perking up.
The most dramatic sign of the bounceback in growth-focused ETFs is the one-month surge by Cathie Wood's ARK Innovation ETF. The exchange traded fund is loaded up with promising but speculative stocks. And this past month so far, the ETF returned more than 22%, says Morningstar Direct. That makes it the top-performing, actively traded U.S. diversified ETF this month, says Morningstar Direct.
But Wood's fund is far from the only growth-oriented ETF that's turning it on this month. All five of the top performing ETFs in the past month focus on higher-volatility or growthier stocks. Invesco S&P 500 High Beta ETF, for instance, has returned 11.3% this month. The S&P 500's monthly return is half that at 5%.
The rally is happening as ETF investors get less fearful about how dramatic the Trump administration's policy shifts will be. "Uncertainty hasn't really gone away, but nerves have settled a bit and the market seems a little more comfortable betting on growth and the resilience of some of our largest companies despite cloudy skies," said Cinthia Murphy of TMX Vetta Fi.
ARK Innovation's Recent Rise Vs. S&P 500
ARK Innovation, which focus on emerging growth areas like AI, cryptocurrency, biotech and robotics, is a good bet again.
Shares of online crypto marketplace Coinbase Global are the second-largest position in the ETF at 9.3%. Only Tesla at 9.8% has a bigger weight. And Coinbase has been a home run. Shares are up more than 36% in a month's time. Virtual world designer Roblox is another big winner for ARK. It's a 6.9% weight in the ETF. And the stock is up more than 13% in just a month.
All told, large growth stocks are pulling out of their early year slide. The SPDR Portfolio S&P 500 Growth ETF is up 5% in the past month. That edges out the 4.1% monthly gain by SPDR Portfolio S&P 500 Value ETF. Now, the growth ETF is up 8% this year, topping the 3.5% gain of the value ETF. Much of growth's gain is due to a resumption in bullishness for themes like AI, Murphy says.
"We've seen a return to AI as a must-own theme," she said. "We could argue there are a few reasons for that, such as the resilience of the Magnificent Seven and other AI-related names, strong earnings, the role of AI infrastructure and tech in the aerospace and defense theme. (There is) even a view some share that these large growth tech names are today some sort of safety play within an equity allocation."
But Risks Remain
Not all investors are going all-in on growth, though. Some value-oriented ETFs are hovering just below the month's top five U.S. diversified funds. iShares MSCI USA Value Factor ETF returned more than 8% this month. It's making big bets on less glamorous tech plays like Cisco Systems, Intel and Micron Technology. Cisco is the ETF's top holding at 7% of the portfolio. And the stock's one-year return is nearly 50%.
Dimensional US Small Cap Value returned more than 7% this month thanks to the antithesis of growth stocks it owns. Its largest bet, at 31% of the portfolio, is the financials sector.
Investors are getting more comfortable owning growth stocks again. But they're still straddling the value fence just in case.
"There's still plenty to worry about. Tariffs and trade remain a concern," Murphy said. "Going into the second half of the year, we'll continue to be on our toes, looking for confirmation of the strength of the U.S. economy and the opportunity in growth, but aware of the risks to the downside."
Top U.S. Diversified ETFs In The Past Month
| Name | Ticker | Market return, one month | Assets ($ billions) |
|---|---|---|---|
| ARK Innovation | ARKK | 22.3% | $6.7 |
| Invesco WilderHill Clean Energy | PBW | 12.7 | $0.3 |
| ARK Space Exploration & Innovation | ARKX | 12.0 | $0.3 |
| Invesco S&P 500 High Beta | SPHB | 11.2 | $0.4 |
| Direxion HCM Tactical EnhU.S.EqStrat | HCMT | 9.6 | $0.5 |
| SPDR S&P Kensho New Economies Comps | KOMP | 8.4 | $2.3 |
| iShares MSCI USA Value Factor | VLUE | 8.0 | $6.8 |
| Invesco S&P SmallCap 600 Revenue | RWJ | 8.0 | $1.6 |
| Dimensional US Small Cap Value | DFSV | 7.5 | $4.8 |
| Invesco S&P 500 GARP | SPGP | 7.5 | $2.8 |
