U.S. equities staged an impressive comeback in July after a rocky first half of the year.
Key performance drivers for the month were Big Tech outperformance and anticipation of a potential slowing in the pace of future rate hikes by the Fed. The S&P 500 posted a gain of 9.2%, while all factor indexes posted gains, with High Beta and Growth in the lead.
Every factor index rose after a first half in which every factor index had declined. The S&P 500 High Beta Index posted a gain of 15.8% during July, trailed by the S&P 500 Pure Growth Index and the S&P 500 Growth Index, which returned 12.9% and 12.8%, respectively, according to S&P Dow Jones Indices. All other factor indexes returned below the S&P 500’s 9.2%.
While one month does not necessarily mean a trend reversal, if it turns out that the end of the bear market that began in January has passed, then risk-enhancing factors are likely to continue to be the stronger performers. Investors who want to gain exposure to the S&P 500 High Beta Index should look to the Invesco S&P 500 High Beta ETF (SPHB). As of August 4, the fund has returned 16.99% since July 1, according to YCharts.
SPHB tracks a benchmark consisting of some of the largest U.S.-domiciled companies. As a result, investors should think of this fund as a play on mega and large-cap stocks in the U.S. market, according to VettaFi. These securities are usually known as ‘Blue Chips’ and are some of the most famous and profitable companies in the country, including well-known names such as ExxonMobil, Apple, IBM, and GE.
This particular ETF focuses on stocks that have a high beta, which could potentially increase the volatility of this product when compared to more broad-based funds. However, this higher volatility could lead to greater gains when markets are trending upwards but it could also lead to bigger losses when markets experience broad sell-offs as well.
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