The first half of 2021 was upbeat for stocks. Among major indexes, small-cap ETF IWM is up about 17% this year, the S&P 500 ETF SPY is up 14%, the Dow Jones ETF DIA is up 12% and the Nasdaq ETF Invesco QQQ Trust QQQ is up about 13% (read: Top ETF Stories of 1H of 2021).

The rollout of $1.9-trillion of COVID-19 stimulus package — including dolling out of $1,400-stimulus checks, the announcement of $2.3-trillion worth of infrastructure plan, joining of Paris Climate Change agreement in support for a green economy and a massive push for coronavirus vaccination — are some of the measures that have helped stocks win.

Meanwhile, several economic indicators came in upbeat. The Fed has held interest rates steady at a near-zero level so far this year. U.S. interest rates have been this low since March 2020. However, the forecast in the June meeting revealed that 13 members of the Federal Open Market Committee believe the Fed will hike rates in 2023 and the majority expect at least two hikes that year, per a CNBC article. Seven of the 18 members see the Fed increasing rates as early as 2022 (read: Fed Rate Hike in the Cards? ETFs to Buy).

The inflationary pressure has also been also building up. The yield curve too steepened this year and banking stocks gained. Biden’s stimulus and infrastructure plan should play a pivotal role in the second half. Against this backdrop, we highlight below a few ETFs that could be winning picks for the second half of 2021.

SPDR S&P Retail ETF XRT – Zacks Rank #2 (Buy)

Widespread vaccination, reopening of the economy and a summer season making Americans feel more optimistic about the economy and leading them to splurge in buying things. Additionally, huge infrastructure spending package and expanded stimulus are acting as a huge catalyst for consumers to spend higher.

Transaction volumes on customers’ credit and debit cards and over the Zelle payment network have grown by 20% so far in 2021 compared to this point in 2019, per the Bank of America (which is the second-biggest U.S. bank) CEO Brian Moynihan, as quoted on CNBC. This indicates that retail stocks should be in fine fettle in the second half of the year (read: Heres Why Retail ETFs Are Good Picks Right Now).

S&P Oil & Gas Exploration & Production SPDR XOP – Zacks Rank #2

Energy stocks are on the course of their best year in more than three decades, per a CNBC article. The group is still up more than 40% for the year. The S&P 500 is up nearly 12% this year. Crude prices are up about 80% over the past year and 50% this year as the demand outlook continues to improve with economic reopening (read: Will 2021 be the Best Year for Energy ETFs in Three Decades?).

Total Stock Market ETF Vanguard VTI – Zacks Rank #2

At the onset of July, new weekly jobless claims dropped below the 400,000 level for the first time in three weeks, indicating strength in the labor market. This along with low rates expected at least for 2021 should keep the stock market charged up.

iShares Transportation Average ETF IYT – Zacks Rank #2

This is an area that was hit hard amid the lockdown. The economic reopening and the resultant improvement in supply chain as well as the slow uptick in the global tourism sector has made this relatively-beaten down area a winning one. Notably, global travel and tourism as a category is one of the largest economic sectors, making up about 10.4% of global GDP, per the ETFMG website. One out of every three millennials are ready to spend $5,000 or more on a vacation.

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Invesco QQQ (QQQ): ETF Research Reports

SPDR S&P 500 ETF (SPY): ETF Research Reports

SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports

iShares Russell 2000 ETF (IWM): ETF Research Reports

iShares Transportation Average ETF (IYT): ETF Research Reports

SPDR S&P Retail ETF (XRT): ETF Research Reports

Vanguard Total Stock Market ETF (VTI): ETF Research Reports

SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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