Although the S&P 500 and other major U.S. equity benchmarks suffered epic fourth-quarter declines, some market observers believe the bull market that started more than a decade ago remains in tact. With the S&P 500 coming off one of its best Q1 showings on record and up 15.46% year-to-date, there is something to those thoughts.
In fact, some market observers believe the current bull market in U.S. stocks can keep going for an extended period of time.
“Bull markets do not die of old age,” reports Barron’s. “Since 1949, the average one has lasted five years and four months, according to Yardeni Research data. The longest ran from 1987 through the dot-com peak in 2000 and lasted more than 12 years; the shortest ran from 1966 to 1968 and lasted a little more than two years.”
The world of ETFs can provide some instruction on this bull market’s lifespan. In Q1, investors added a record $32.5 billion to bond ETFs, nearly double the $17 billion that flowed into equity funds, but that was still good enough for one of the best first quarters of flows for equity ETFs.
For believers that this bull market still has room to run, consider some of the following funds.
Invesco S&P SmallCap 600 Pure Value ETF (RZV)
Expense ratio: 0.35% per year, or $35 on a $10,000 investment.
While growth stocks have dominated their value counterparts for the most of this bull market, some value funds have been stellar performers and that includes the Invesco S&P SmallCap 600 Pure Value ETF (NYSEARCA:RZV). With averaged annualized returns of close to 26% since March 2009, RZV has been one of the best-performing non-leveraged ETFs during this bull market. The fund is up more than 17% and appears to be poised to add to its bull market gains.
The $193.7 million RZV tracks the S&P SmallCap 600 Pure Value Index. That index measures value “by the following risk factors: book value-to-price ratio, earnings-to-price ratio and sales-to-price ratio,” according to Invesco.
As history shows, an extended bull market often boosts the fortunes of smaller stocks. Conservative investors that want to join that party can do so by focusing on the small-cap value, a historically potent combination. RZV holds 166 stocks, nearly a third of which reside in the consumer discretionary sector. The industrial and materials sectors combine for 31% of the fund’s weight.
Invesco QQQ (QQQ)
Expense ratio: 0.20%
In order for this bull market to continue, significant contributions need to come from sectors that are home to marquee stocks, such as the tech sector. This includes Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB). Heavy on those sectors and stocks, the Invesco QQQ (NASDAQ:QQQ), the Nasdaq-100 tracking ETF, has been a stalwart during the current bull market.
Past performances are not guarantees of future returns, but QQQ’s track record over the course of this bull market is breathtaking. When the bull market celebrated its tenth anniversary last month, it was up more than 606% since March 10, 2009, compared to “just” 373% for the S&P 500.
Assuming this bull market continues, it is hard to envision that run extending without contributions from the technology sector, meaning QQQ could continue being a the superior alternative to traditional broad market funds which usually have half the tech exposure found in QQQ.
SPDR S&P 500 Growth ETF (SPYG)
Expense ratio: 0.04%
Among the phenomenons that have emerged in the ETF space during this bull market are the out-performance of growth stocks and investors’ affinity for cheap funds. Both themes are accessible via the SPDR S&P 500 Growth ETF (NYSEARCA:SPYG), which tracks the widely followed S&P 500 Growth Index.
While SPYG is a traditional approach to growth stocks, it is not only one of the least expensive growth ETFs, it is one of the cheapest US-listed equity ETFs of any stripe with an annual fee of just 0.04%. SPYG’s underlying index “contains stocks that exhibit the strongest growth characteristics based on: sales growth, earnings change to price ratio, and momentum,” according to State Street.
This fund has deep bull market potential via an almost 26% weight to technology stocks and a combined 27% weight to the communication services and consumer discretionary sectors. Microsoft and Amazon.com (NASDAQ:AMZN) combine for over 13% of SPYG’s roster.
Global X Internet of Things ETF (SNSR)
Expense ratio: 0.68%
One way for tactical investors to truly capitalize on an extended bull market is to veer away from prosaic funds to focus on specific investment niches and themes. The Global X Internet of Things ETF (NASDAQ:SNSR) is a prime example of a thematic ETF with the potential to be a potent bull market idea.
SNSR is up 18.44% this year and is outperforming many traditional technology funds in the process. What bolsters SNSR’s credibility as a long-term bull market idea is the wide array of applications that the Internet of Things (IoT) touches. SNSR’s components are at the forefront of multiple disruptive technologies, including 5G, artificial intelligence (AI), cloud computing and healthcare innovation.
“While intelligent factories and manufacturing are at the heart of the industrial internet of things (IIoT), there are several use cases for connected devices in the consumer-facing world,” according to Global X research. “In fact, changing customer preferences and behaviors, often driven by tech-savvy younger generations, are encouraging more consumer-facing sectors like healthcare, retail, financial services and real estate to adopt the IoT for a connected future.”
iShares Edge MSCI USA Quality Factor ETF (QUAL)
Expense ratio: 0.15%
On the surface, the iShares Edge MSCI USA Quality Factor ETF (CBOE:QUAL) does not scream “bull market fund,” but a closer examination reveals this ETF’s utility in what is now an aging bull market. As noted earlier, bull markets do not die of old age, but as a bull market advances (and this one is advanced), investors should consider adding some defense to their portfolios.
As an investment factor, quality has varying definitions, but QUAL focuses on these traits to deliver quality exposure: return on equity, earnings variability and debt-to-equity. The strategy works for QUAL as highlighted by the fund’s own bull market of a 2019 gain of more than 18%, which is well ahead of the S&P 500 and other broad equity benchmarks.
Due to the quality factor emphasizing high returns on equity and strong balance sheets, QUAL allocates over a quarter of its weight to technology. Quality can also mean shareholder rewards as highlighted by the fact that 17 of QUAL’s top 20 holdings are dividend payers and many of those 17 companies are steady dividend growers.
VanEck Vectors Video and eSports ETF (ESPO)
Expense ratio: 0.55%
Returning to the idea of disruptive themes being solid bull market ideas, the VanEck Vectors Video Gaming and eSports ETF (NYSEARCA:ESPO) is off and running in its first full year of trading. ESPO, which debuted last October, is up 21.65%, solidifying its own bull market. While no security moves up in a straight line, more bull market behavior can be expected out of ESPO over the long-term.
Data confirm that e-sports are a major disruptive force in traditional media and sporting leagues.
“Esports continue to drive headlines around the world, as revenues and prize pools grow to new heights,” said VanEck. “According to Newzoo’s recently released 2019 Global Esports Market Report, esports revenues exceeded $860 million in 2018 and is expected to grow to $1.7 billion by 2022. Newzoo also reports that the total prize pool for esports matches exceeded $150 million in 2018.”
Look at ESPO’s bull market potential in these terms: in just a few years, television viewership of e-sports could rival the current level of NFL viewership.
Vanguard Mid-Cap Growth ETF (VOT)
Expense ratio: 0.07%
Mid-cap stocks often assert leadership roles in bull markets and this bull market has been no different. As is the case with large- and small-cap equities, mid-cap exposure can be refined into the growth or value boxes. For growth investors, the Vanguard Mid-Cap Growth ETF (NYSEARCA:VOT) is one of the more cost-effective options to consider. Currently, mid-cap growth is on fire.
“The often overlooked and under-allocated mid-cap growth fund category cranked out one of its rare high notes during the first three months of 2019, with an 18.4% return that beat the eight other equity style boxes,” reports InvestmentNews.
VOT holds 169 stocks with a median market value of $17.1 billion, which actually puts the fund in large-cap territory. This Vanguard ETF devotes almost half its combined weight to the industrial and technology sectors.
Todd Shriber does not own any of the aforementioned securities.