The stock market pulled back in March, but came roaring back in April to challenge earlier 2023 highs. As of May 1, the S&P 500 index was up about 9% on the year.
The U.S. economy is certainly not without its challenges, with steady interest rate increases reshaping both business and consumer spending outlooks. However, it’s undeniable that things have settled down after the volatility brought on by the war in Ukraine last year and the world is now adjusting to the “new normal.”
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In such an environment, tactical ETFs can sometimes be a powerful investment tool. These diversified assets allow you to play big picture trends through a basket of a few dozen or even a few hundred holdings. So what are the best ETFs to buy right now as we enter May? Here are a few ideas that may fit, depending on your personal risk tolerance and investing goals.
| ETF | Year-to-date performance (to May 1) |
| ProShares Bitcoin Strategy ETF (BITO) | 58.7% |
| SPDR EURO STOXX 50 ETF (FEZ) | 17.7% |
| Vanguard Mega Cap Growth ETF (MGK) | 19.7% |
| Communication Services Select Sector SPDR Fund (XLC) | 22.3% |
| iShares U.S. Home Construction ETF (ITB) | 22.1% |
| iShares MSCI Mexico ETF (EWW) | 21.8% |
| SPDR Portfolio Aggregate Bond ETF (SPAB) | 2.7% |
Best Aggressive ETF for May: ProShares Bitcoin Strategy ETF (BITO)
With more than 58% gains for far this year, including another 52-week high set in April, BITO is the play for momentum investors right now. Bitcoin (BTC) and related miners and digital finance stocks have been on a tear in 2023, and that doesn’t seem to be slowing down at all as we charge into May. As with all aggressive investments, you should definitely do your own research into the broader trends here as well as some serious soul-searching about your risk tolerance. But if you don’t mind some spice in your portfolio, the ProShares Bitcoin Strategy ETF may be worth a look as it hopes to push to even higher highs.
Best Conservative ETF for May: SPDR EURO STOXX 50 ETF (FEZ)
The Euro Stoxx 50 is Europe’s version of the Dow Jones Industrial Average. It’s a focused list of core companies like French energy giant TotalEnergies SE (TOT), German software giant SAP SE (SAP) and luxury goods giant LVMH Moet Hennessy Louis Vuitton SA (LVMHY), among others. These are massive multinational names with staying power — however, with the general environment in Europe a bit easier thanks to lower inflation and better growth prospects than last year, FEZ has tacked on roughly 18% since the start of the year. This is a decent fund in any long-term portfolio for diversification purposes alone, but could be worth buying into this May thanks to recent momentum as well.
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Other Tactical ETFs to Consider
Beyond the high-octane growth story of Bitcoin, there are other opportunities that may make tactical sense as investments to add to your portfolio right now. All of the following ETFs have unique but different trends that could lift them in the coming weeks.
Vanguard Mega Cap Growth ETF (MGK)
This low-cost Vanguard index fund takes the largest U.S. listed corporations, then screens them for growth metrics like revenue expansion and profitability. The result is a focused list of 100 of the biggest and growthy-est names on Wall Street, like Apple Inc. (AAPL) and Amazon.com Inc. (AMZN). The fund is up about 20% year to date in 2023 thanks to the return of a “risk on” environment.
Communication Services Select Sector SPDR Fund (XLC)
A unique group of megacap growth stocks that have been on the rebound are digital communications leaders like Facebook parent Meta Platforms Inc. (META) and Google parent Alphabet Inc. (GOOG, GOOGL). That’s in part thanks to a recovery from previous troubles in 2022, but recent strong earnings performance has translated directly into better returns for stocks in this sector. XLC is up about 22% since Jan. 1.
iShares U.S. Home Construction ETF (ITB)
As further proof that investors are banking on growth and expansion in the economy despite the pressure of high rates, homebuilders have been on an absolute tear this year. As a result, ITB is up about 22% year to date as the U.S. real estate market enters its important spring home-buying season. So far, higher mortgage rates haven’t deterred home shoppers, and tight inventories in many key markets continue to point to an upside for builders.
iShares MSCI Mexico ETF (EWW)
Looking toward emerging markets, the iShares MSCI Mexico ETF is a great example of an opportunity outside America’s borders. This region was hit hard by the pandemic and subsequently struggled to get back on its feet thanks to fears of weak spending in the U.S. due to red-hot inflation. But as with other growth-oriented investments on this list of the best ETFs to buy, those fears have largely not been realized as spending continues at a decent clip. EWW is up 21% year to date, and more than 40% from its 2022 lows.
SPDR Portfolio Aggregate Bond ETF (SPAB)
OK, you may wonder why in the world a long-term bond fund is on this list of other stock-focused funds capitalizing on a rosy environment for equities right now. Well, the answer is that after some serious tightening of monetary policy lately, some think the Federal Reserve has put a serious dent in inflation concerns. In fact, some on Wall Street are not just predicting a pause in rate hikes in 2023 but perhaps even a rate cut by the end of the year. Considering the 30-day SEC yield on SPAB is 4%, you could lock in some decent income potential as well as a potential tailwind for bonds if and when monetary policy normalizes this summer. It’s anything but a sure bet, but it’s probably not any more or less crazy than betting cryptocurrencies have nowhere to go but up.
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7 Best ETFs to Buy Now originally appeared on usnews.com
Update 05/02/23: This story was previously published at an earlier date and has been updated with new information.
