Since 1991, there have been nine instances when less than 40% of large-cap fund managers undershoot the S&P 500 by the end of the third quarter, and in each of the times, the S&P 500 rallied 2% more in the following fourth quarters than in years when active funds outperformed.
Investors who have a strong conviction in the continue equities market rally can target the faster moving growth and momentum stocks. For instance, the iShares Russell 1000 Growth ETF (NYSEArca: IWF) has gained 4.7% over the past month, whereas the Russell 1000 index is up 4.3%. The iShares S&P 500 Growth ETF (NYSEArca: IVW) has increased 4.4% over the past month, compared to the 4.2% gain in the S&P 500.
Additionally, momentum ETFs, such as the First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV) and iShares MSCI USA Momentum Factor ETF (NYSEArca: MTUM), have been gaining speed. Over the past month, FV is up 7.1% and MTUM is up 4.9%. [How to Utilize Smart-Beta ETFs in Your Portfolio]
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Max Chen contributed to this article.