Is Turning to Growth ETFs a Smart Move Now?

The S&P 500 has risen about 11% year to date and nearly 30% since rebounding in early April. After advancing 4.2% in August, the index has extended its momentum into September, making it a rewarding time to bet on growth-oriented funds.

Resilient earnings, a supportive macro backdrop and Fed Chair Powell’s signal of potential rate cuts starting in September paint an optimistic picture for the U.S. economy, easing concerns about its overall health.

Over the past year, the S&P 500 Growth Index has delivered a strong return of 28.8%, significantly outperforming the S&P 500 Value Index, which has gained 4.97%. The S&P 500 Growth Index has also started September on a stronger footing, rising 1.12% month to date compared with the S&P 500 Value Index’s gain of 0.10%.

Fed Cuts May Spark Momentum in Growth Investing

According to CNBC, the S&P 500 reached a new record high, marking its 21st record close of the year, after an afternoon rally lifted stocks despite weaker private employment data earlier in the day. The increasing likelihood of an interest rate cut by the Fed is a key tailwind behind the recent market rally.

Per the CME FedWatch tool, markets are anticipating a 99.7% likelihood of a rate cut in September. Markets also estimate a 99.8% likelihood of a rate cut in October and a 100% probability of a rate cut in December, according to the CME FedWatch tool.

Brighter Outlook for the S&P 500

Per Reuters, HSBC lifted its forecast for the S&P 500 to 6,500 from 6,400 for the 2025 end, the bank’s second upgrade in less than a month, supported by robust second-quarter earnings and modest tariff impacts. Other major brokerages, including J.P. Morgan and Morgan Stanley, have set their year-end S&P 500 target at 6,500.

According to another CNBC article, August’s ISM Non-Manufacturing PMI registered 52.0, exceeding expectations and marking an increase from July’s reading of 50.1, indicating continued growth in the services sector. Per Investing.com, a reading above 50 signals expansion in the non-manufacturing sector, reflecting its strengthening role in supporting overall economic growth.

ETFs to Consider

Below, we have highlighted a few growth-focused funds that may appeal to investors.

Vanguard Growth ETF (VUG)

Vanguard Growth ETF seeks to track the performance of the CRSP US Large Cap Growth Index with a basket of 165 securities. The fund has amassed an asset base of $184.99 billion and charges an annual fee of 0.04%.

VUG presently sports a Zacks ETF Rank #1 (Strong Buy), with 61.8% allocated to technology, followed by 18.27% in consumer discretionary.

Vanguard Growth ETF has a one-month average trading volume of about 904,000 shares. VUG has gained 3.76% over the past month and 20.16% over the past three months.

iShares Russell 1000 Growth ETF (IWF)

iShares Russell 1000 Growth ETF seeks to track the performance of the Russell 1000 Growth Index with a basket of 388 securities. The fund has amassed an asset base of $115.53 billion and charges an annual fee of 0.18%.

IWF currently flaunts a Zacks ETF Rank #1, with 51.91% allocated to information technology, followed by 13.33% in consumer discretionary.

iShares Russell 1000 Growth ETF has a one-month average trading volume of about 880,000 shares. VUG has gained 3.76% over the past month and 20.10% over the past three months.

iShares S&P 500 Growth ETF (IVW)

iShares S&P 500 Growth ETF seeks to track the performance of the S&P 500 Growth Index with a basket of 213 securities. The fund has amassed an asset base of $62.56 billion and charges an annual fee of 0.18%.

IVW currently flaunts a Zacks ETF Rank #1, with 41.1% allocated to information technology, followed by 15.95% in communication.

iShares S&P 500 Growth ETF has a one-month average trading volume of about 1.86 million shares. VUG has gained 3.41% over the past month and 20.27% over the past three months.

SPDR Portfolio S&P 500 Growth ETF (SPYG)

SPDR Portfolio S&P 500 Growth ETF seeks to track the performance of the S&P 500 Growth Index with a basket of 213 securities. The fund has amassed an asset base of $39.92 billion and charges an annual fee of 0.04%.

SPYG sports a Zacks ETF Rank #1 at present, with 41.17% allocated to information technology, followed by 15.97% in communication services.

SPDR Portfolio S&P 500 Growth ETF has a one-month average trading volume of about 2.32 million shares. VUG has gained 3.42% over the past month and 20.30% over the past three months.

iShares Core S&P U.S. Growth ETF (IUSG)

iShares Core S&P U.S. Growth ETF seeks to track the performance of the S&P 900 Growth Index with a basket of 455 securities. The fund has amassed an asset base of $24.22 billion and charges an annual fee of 0.04%.

IUSG currently flaunts a Zacks ETF Rank #1, with 39.8% allocated to information technology, followed by 15.18% in communication.

iShares Core S&P U.S. Growth ETF has a one-month average trading volume of about 2.32 million shares. VUG has gained 3.36% over the past month and 19.87% over the past three months.

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This article originally published on Zacks Investment Research (zacks.com).

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