After a disappointing 2022, many investors were biting their nails as they second-guessed the market’s strong start to 2023.
But now that we’re well past the midway point and the S&P 500 is sitting on year-to-date returns of about 20% through July 31, it’s hard to not get excited about this bull market rally.
The stock market environment has all the hallmarks of a “risk on” rager, with once-battered names rebounding sharply and aggressive growth areas that continue to put up great numbers. But it’s not just Wall Street that’s rallying, as you’ll see from some of the overseas plays on this list.
[Sign up for stock news with our Invested newsletter.]
If you’re looking to capitalize on the favorable investing environment, here are some of the high-flying exchange-traded funds, or ETFs, to watch in the second half of the year:
| ETF | Year-to-date return as of July 31 |
| SPDR S&P Regional Banking ETF (ticker: KRE) | -15.6% |
| United States Oil Fund (USO) | 4.4% |
| ARK Innovation ETF (ARKK) | 61.5% |
| ARK Fintech Innovation ETF (ARKF) | 69.6% |
| KraneShares CSI China Internet ETF (KWEB) | 5.8% |
| Invesco Emerging Markets Sovereign Debt ETF (PCY) | 10.2% |
| Vanguard S&P 500 ETF (VOO) | 20.7% |
SPDR S&P Regional Banking ETF (KRE)
Earlier this year, in the wake of the collapse of Silicon Valley Bank, regional banks really took it on the chin. But thanks to stabilization in the sector along with yet another interest rate increase from the Federal Reserve, regional banks have gotten some spring back in their step. Specifically, the nearly $4 billion KRE has rallied to log a roughly 20% return in the past month or so. It’s down 15.6% so far in 2023, but its components, including Zions Bancorporation NA (ZION) and Western Alliance Bancorp (WAL), are among the best performers on Wall Street in July and are riding strong momentum into the second half of the year. KRE has an expense ratio of 0.35%.
United States Oil Fund (USO)
At more than $1.5 billion in assets, USO is the largest and most prominent way for investors to dive directly into crude oil. The fund invests primarily in crude oil derivatives contracts, including more than half of its assets weighted toward near-term futures contracts that mature in the next few months. To be clear, this does not give you a one-to-one exposure to crude oil prices that you see on your favorite website, given the tie to futures. But with oil up about 22% from its June lows, USO has been able to ride that general momentum higher lately, and it’s up a modest 4.4% so far this year. With many pundits predicting oil to push as high as $100 by year-end, the momentum may very well continue. USO charges an expense ratio of 0.6%.
ARK Innovation ETF (ARKK)
This iconic hyper-growth fund run by guru Cathie Wood made a lot of headlines in past years thanks to its outperformance in “risk on” environments. And while ARKK really struggled in 2022, the fund is up a whopping 61.5% so far in 2023. Things are looking up in a year that has been generally good for most growth-oriented names and downright phenomenal for many of this fund’s holdings. Those include top positions such as electric vehicles leader Tesla Inc. (TSLA) and crypto exchange operator Coinbase Global Inc. (COIN), which have doubled and nearly tripled year to date, respectively, and show no signs of slowing down. ARKK charges an expense ratio of 0.75%.
ARK Fintech Innovation ETF (ARKF)
A different flavor of the broader ARK Innovation ETF is this fintech-focused fund that looks only at companies that derive a significant portion of their revenue from fintech innovation, which includes blockchain, “frictionless” funding platforms and digital transaction technology, to name a few themes. These include Coinbase, e-commerce platform Shopify Inc. (SHOP), and mobile payments and blockchain technology leader Block Inc. (SQ). While there are a bunch of disruptive technologies out there, the potential to upend traditional finance is a particularly interesting trend for many investors. And with ARKF up a stunning 70% so far in 2023, it’s clear there’s big profit potential in this corner of the tech sector. Like ARKK, this fund has an expense ratio of 0.75%.
[READ: 7 of the Best Growth Funds to Buy and Hold]
KraneShares CSI China Internet ETF (KWEB)
Another high-growth tech fund that has been booming lately is KWEB, a go-to for investors seeking to play the digital economy in China and the Asia-Pacific region. That includes e-commerce giant Alibaba Group Holding Ltd. (BABA) and tech conglomerate Tencent Holdings Ltd. (TCEHY), among others. While Chinese leaders like these haven’t exactly kept up with their domestic peers in the U.S. tech sector, momentum has been strong this summer. Signs of previous government interference in the sector now seem to be fading, even as the hopes for an economic stimulus are rising. If you’re looking to get in on the ground floor of a tech turnaround in China, now may be the time to consider KWEB, which charges an expense ratio of 0.69%. The fund has gained 5.8% year to date, as of July 31.
Invesco Emerging Markets Sovereign Debt ETF (PCY)
While perhaps not the most obvious “risk on” trade, emerging-market debt has been having one heck of a year. Not only is the PCY fund up an impressive 10.2% year to date — one of the best returns among bond funds in a rising rate environment — it yields a stunning 7.6% at present. The prospects of a recovering global economy have reduced some of the fear around emerging markets, and nations like Kazakhstan, El Salvador and Kenya that have bonds in this fund all seem to be looking up after a rough few years. A perceived reduction in default risk, plus the mammoth yield of these government bonds, has added up to impressive returns. PCY charges an expense ratio of 0.5%.
Vanguard S&P 500 ETF (VOO)
With roughly 20% returns year to date, it may be simpler to just dive into the flagship S&P 500 index and forget about what’s fashionable. VOO is among the lowest-cost index funds out there, with an expense ratio of 0.03%. It also has a mammoth scale, with more than $300 billion in the ETF alone and almost $900 billion across all similar share classes. You never know when the hot trades will turn cold, and VOO continues to be a solid way to gain exposure to growth without the hassle of more tactical ETFs.
More from U.S. News
7 of the Best High-Dividend ETFs
7 Best Dividend ETFs to Buy Now
7 Best ETFs to Buy Now originally appeared on usnews.com
Update 08/01/23: This story was previously published at an earlier date and has been updated with new information.
