Should You Boost Your Allocation to Growth ETFs Now?

November has been a volatile month for the S&P 500, with the index down about 3.7% so far this month, leaving investors nervous and uncertain about the economy’s near-term direction. However, upgraded growth forecasts from institutions, supported by strong earnings growth and productivity gains from accelerating AI adoption, point to a brighter economic trajectory.

Additionally, rising expectations for another Fed rate cut in December, along with hopes for a rebound in the AI sector, add yet another layer of support to the improving outlook.

Over the past year, the S&P 500 Growth Index has delivered a strong return of 18.86%, significantly outperforming the S&P 500 Value Index, which has gained 1.83%. The index also outperformed the broader S&P 500, which has advanced 11% during the same period.

Why Investors Suddenly See a Cut Coming?

According to Yahoo Finance, investor sentiment has strengthened after New York Fed president John Williams indicated that a December rate cut remains on the table. Per the CME FedWatch tool, markets are anticipating a 75.3% rate cut in the December meeting, signifying an improvement from the odds seen just last week.

Raised Forecasts Add Momentum to the Market

Morgan Stanley MS expects U.S. equities to outperform global peers next year and has lifted its 2026 outlook for the broad market index. According to Reuter, the firm projects S&P 500 to climb to 7,800 by year-end 2026, marking an increase of about 18.13% from current levels, supported by strong earnings growth and productivity boosts from AI adoption.

The firm’s optimistic outlook follows a similar upgrade from UBS. According to UBS forecasts, as quoted by Yahoo Finance, the S&P 500 is expected to reach 7,500 by the end of next year, supported by strong corporate earnings and continued strength in the resilient tech sector, further reinforcing confidence in the ongoing AI-driven momentum (Read: U.S. Outperformance in Sight? ETFs to Play Morgan Stanley's Forecast).

Investors Are Pouring Back Into the Market

Per LSEG Lipper data, as quoted on Reuters, U.S. equity funds saw inflows for the fifth straight week as investors prioritized strong third-quarter earnings and looked past worries about stretched tech valuations.

In the week ending Nov. 19, U.S. equity funds pulled in a net $4.36 billion, nearly four times the roughly $965 million recorded the week before.

According to Mark Haefele, CIO of UBS Global Wealth Management, resilient economic data, strong corporate earnings prospects, and accelerating tailwinds from AI and longevity trends all reinforce the bullish view on U.S. equities, as noted in the aforementioned Reuters article.

ETFs to Explore

Investors can also explore growth ETFs without the constraint of a low beta, taking on more risk to potentially benefit from a positive economic outlook. Growth funds typically excel during market uptrends, providing exposure to stocks with high growth potential.

Below, we have highlighted a few growth-focused funds (that may appeal to investors), each presently sporting a Zacks ETF Rank #1 (Strong Buy).

Vanguard Growth ETF VUG

Vanguard Growth ETF tracks the performance of CRSP US Large Cap Growth Index with a basket of 160 securities. The fund has amassed an asset base of $196.85 billion and charges an annual fee of 0.04%. The fund has allocated 85.6% to large-cap securities.

Vanguard Growth ETF has one-month average trading volume of about 1.28 million shares. VUG has gained 9.57% over the past three months and 25.54% over the past year.

iShares Russell 1000 Growth ETF IWF

iShares Russell 1000 Growth ETF seeks to track the performance of Russell 1000 Growth Index with a basket of 380 securities. The fund has amassed an asset base of $121.09 billion and charges an annual fee of 0.18%. The fund has allocated 98.5% to large-cap securities.

iShares Russell 1000 Growth ETF has a one-month average trading volume of about 1.35 million shares. IWF has gained 10.46% over the past three months and 25.30% over the past year.

iShares S&P 500 Growth ETF IVW

iShares S&P 500 Growth ETF seeks to track the performance of S&P 500 Growth Index with a basket of 216 securities. The fund has amassed an asset base of $64.71 billion and charges an annual fee of 0.18%. The fund has allocated 99.6% to large-cap securities.

iShares S&P 500 Growth ETF has a one-month average trading volume of about 3.06 million shares. IVW has gained 9.75% over the past three months and 26.67% over the past year.

SPDR Portfolio S&P 500 Growth ETF SPYG

SPDR Portfolio S&P 500 Growth ETF seeks to track the performance of S&P 500 Growth Index with a basket of 216 securities. The fund has amassed an asset base of $43.67 billion and charges an annual fee of 0.04%. The fund has allocated 99.64% to large-cap securities.

SPDR Portfolio S&P 500 Growth ETF has a one-month average trading volume of about 3.59 million shares. SPYG has gained 9.79% over the past three months and 26.84% over the past year.

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

iShares Core S&P U.S. Growth ETF seeks to track the performance of S&P 900 Growth Index with a basket of 462 securities. The fund has amassed an asset base of $25.25 billion and charges an annual fee of 0.04%. The fund has allocated 96.78% to large-cap securities.

iShares Core S&P U.S. Growth ETF has a one-month average trading volume of about 365,000 shares. IUSG has gained 9.58% over the past three months and 25.63% over the past year.

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