Growth stocks provided a rich seam of gains for domestic stock ETFs in the past month, as shares of tech leaders Facebook ( FB ), Adobe ( ADBE ) and Apple ( AAPL ) rekindled after noticeably lagging the postelection rally.
Investors in exchange traded funds were in a perhaps exuberant mood as stock market volatility hit its lowest level in years and the venerable Dow Jones industrial average crossed the psychologically key 20,000 mark, Matthew Bartolini and David Mazza of State Street Global Advisors (SSGA) wrote in a recent note.
A risk-on mood seems to prevail among ETF investors as "the current U.S. equity bull market is less than 30 trading days away from its eighth birthday," they added.
However, there are some yellow flags.
"Valuations are elevated and earnings growth is positive, but not overwhelming so," said Bartolini and Mazza. "Confounding the exuberance is the fact that bond market volatility remains decidedly elevated, nearly 6% higher than prior to the election, while equity volatility has fallen by over 36%."
SPDR S&P 500 ( SPY ) climbed 0.9% in the month ended Feb. 8, padding gains of 2.6% year to date and 12% in 2016.
International stock ETFs did even better in the past month.
Vanguard FTSE Emerging Markets ( VWO ) advanced 4.4% and iShares MSCI EAFE (EFA), investing in foreign developed markets, added 1.2%.
Equity ETFs listed in the U.S. notched just under $30 billion in net inflow in January - the third month in a row since the Nov. 8 election that investors poured more than $25 billion into equity ETFs, according to SSGA. Fixed income ETFs saw $13.41 billion in net inflow last month, following the record $90 billion of fresh assets they gathered in 2016.
Looking ahead, Bartolini and Mazza suggest that truly exuberant ETF investors should consider allocating to ETFs tracking sectors that may benefit from President Trump's policies, such as real assets, oil and gas producers and regional banks.
Other ETF investors may want to position for downside risk in the stock market and consider investing in gold, they added.
These are among the year's best-performing ETFs in some key asset classes, screened for trading volume:
Diversified U.S. Equities
First Trust Nasdaq-100 Equal Weighted (QQEW) gives every stock in its underlying tech-focused, nonfinancial index an equal share of assets. The equal-weighting method gives this large-cap growth ETF a significant midcap stake.
Its 108 holdings include railroad giant CSX Corp. (CSX), electric carmaker Tesla (TSLA) and biotech firm Illumina (ILMN) - stocks that have sizzled so far in 2017.
QQEW is up 7.1% this year through Feb. 8 on the back of a 4% gain in the past month. It has a 0.6% expense ratio.
The market-cap weighted version of the index, as tracked by PowerShares QQQ (QQQ), is up 6.8% year to date.
VanEck Vectors Junior Gold Miners (GDXJ) bets on an asset class that was badly beaten down in the first half of this decade but has since burnished its allure.
It invests in 52 global gold- and silver-mining firms including Iamgold (IMG) and Alamos Gold (AGI), with a pronounced tilt toward small- and midcap firms.
GDXJ has vaulted 33.7% so far in 2017 and 19.2% in the past month, extending a superb 72.9% rally last year. It charges investors 0.56% of their assets for expense fees.
IShares MSCI Brazil Small-Cap (EWZS) also tracks a basket of commodity-tied stocks that are rebounding nicely after a tumble in the first half of this decade.
The portfolio holds 59 stocks, with a heavy slant toward consumer sectors. Its biggest holding is Bradespar, a holding company for mining and utility firms. The stock has vaulted 36.1% so far in 2017.
EWZS itself is up 22.2% year to date following a 15.4% jump in the past month. It rallied 65.8% in 2016. The ETF charges 0.63% for expenses.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.