U. S. stocks closed the second quarter of 2021 at new highs. Economic growth accelerated as the rollout of vaccines enabled the economy to reopen rapidly. The top ETFs, Fidelity funds, and S&P 500 stocks raked in double-digit gains in this environment. Here is a list of the best, along with what to look forward to in the third quarter.
The S&P 500 gained 8.4% in the second quarter to close at a record high. During the early part of the second quarter, shares of companies most impacted by the pandemic rebounded sharply. The gains came as nearly 60% of U. S. adults received a COVID vaccine, allowing the economy to reopen at a rapid pace. The Federal Reserve raised the 2021 U. S. GDP growth forecast to 7.0% from 6.5% it forecasted in March.
The surge in product demand caused prices to spike. The personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation measure, rose 3.9% on a 12-month basis. The increase in the PCE index exceeded the Federal Reserve’s 2.0% long-term inflation target.
The Federal Reserve raised its 2021 inflation forecast to 3.4% and indicated interest rates could go up as soon as 2023, more than a year earlier than the March forecast. Yields on longer duration bonds fell while yields on shorter duration notes rose in response. The decline in long-term bond yields helped growth stocks and hurt value stocks.
Here, we look at what ETFs, Select SPDRs, Fidelity funds, and S&P 500 stocks returned the most in the second quarter.
Best ETFs of 2Q 2021
Cryptocurrency ethereum and clean energy in various flavors, i.e., natural gas, carbon credits, and electric power, were themes that worked well in the ETF world.
- Grayscale Ethereum Classic Trust, ETC +241.3%
- United States Natural Gas, UNG +36.5%
- KraneShares Global Carbon ETF, KRBN +28.9%
- Grayscale Ethereum Trust, ETH +25.0%
- Global X Lithium & Battery Tech ETF, LIT +24.0%
Best Select Sector SPDR ETFs of 2Q 2021
Real Estate Select Sector SPDR and Technology Select Sector SPDR ETFs took the top positions. Real estate stocks enjoyed a broad rally. Cellular tower, data center, and storage REIT shares rose double-digits as technology trends boosted demand. Shopping center and office REITs rebounded as reopening plays.
- Real Estate Select Sector SPDR Fund, XLRE +13.0%
- Technology Select Sector SPDR Fund, XLK +11.4%
- Energy Select Sector SPDR Fund, XLE +10.9%
- Communication Services Select Sector SPDR, XLC +10.6%
- Health Care Select Sector SPDR Fund, XLV +8.3%
Best Fidelity Funds of 2Q 2021
An increase in demand for oil and natural resources spurred by reopening economies helped Fidelity funds focused on Latin America, natural resources, and energy claim top honors.
- Fidelity Latin America, FLATX +15.1%
- Fidelity Select Natural Resources, FNARX +14.5%
- Fidelity Real Estate Investment, FRESX +13.0%
- Fidelity Select Energy, FSENX +13.0%
- Fidelity Select Brok. & Inv. Mgmt., FSLBX +12.8%
Best S&P 500 Stocks of 2Q 2021
Two of the top five winners for the quarter were information technology companies: semiconductor chip maker NVIDIA and technology services firm Gartner. Other winners include oil & gas producer Devon Energy, swimming pool distributor Pool Corp., and credit data & analytics company Equifax.
- NVIDIA Corporation, NVDA +49.9%
- Devon Energy Corporation, DVN +34.7%
- Pool Corporation, POOL +32.9%
- Gartner, Inc., IT +32.7%
- Equifax Inc., EFX +32.2%
Looking ahead to 3Q 2021
The first trading week of the third quarter is a four-day affair after the markets were closed on July 5 in observance of Independence Day. Trading can, however, be volatile if the minutes from the June FOMC meeting surprise investors.
* The Federal Reserve releases the Federal Open Market Committee June 15-16 meeting minutes on Wednesday. This is likely to be the main event of the week. The June meeting minutes can be a market-mover, akin to the April minutes, if they provide insight into the central bank’s behind-the-scenes discussions on winding down its quantitative easing program.
* In economic data, the Institute of Supply Management reports its services activity index data on Tuesday. Briefing.com forecasts the index to pull back to 62.5 from 64.0, a record set in May. Economists forecast the number of initial claims for unemployment benefits to fall below 350,000.
* The earnings calendar is relatively light before the second-quarter reporting season starts in earnest in about two weeks.
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