The S&P 500 just posted its strongest May performance in more than three decades, largely driven by a surge in the “Magnificent Seven” tech stocks: Apple AAPL, Alphabet GOOGL, GOOG , Microsoft MSFT, Amazon AMZN, Meta META, Tesla TSLA and NVIDIA NVDA (read: 4 ETF Areas Up At Least 25% in May).
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While easing trade tensions was the key to the stock outperformance, Big Tech benefited the most from easing trade tensions. Strong Q1 earnings from Big Tech have also been a key driver (read: S&P 500 ETFs Log Best May in 30+ Yrs on AI, Large-Cap Safety).
In Q1, the Magnificent Seven posted a combined 27.7% earnings increase year over year, compared to 9.4% growth among the other 493 S&P 500 companies, according to FactSet’s senior earnings analyst John Butters. Additionally, these companies outpaced analyst expectations, beating estimates by 11.7% on average — well above the 4.6% beat from the rest of the index, as quoted on Yahoo Finance.
Notably, June is not known for good returns. A consensus carried out from 1950 to 2024 shows that June ended up offering positive stock returns in 40 years and negative returns in 35 years, per moneychimp.com, with an average positive return of 0.08%.
Moreover, trade tensions are not over yet. U.S. President Donald Trump recently said that China’s president, Xi Jinping, was “extremely hard” to make a deal with. U.S.-EU trade tensions are also still present.
Against this backdrop, we highlight a few exchange-traded fund (ETF) options that can come across as intriguing bets for the month. The below-mentioned ETFs have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Aerospace – Global X Defense Tech ETF SHLD
The Aerospace sector holds the best Zacks Sector Rank #1 out of 16.
The underlying Global X Defense Tech Index seeks to provide exposure to defense technology companies that are positioned to benefit from technology, services, systems and hardware that cater to the defense and military sector. The fund charges 50 bps in fees.
Medical – Health Care Select Sector SPDR ETF XLV
The medical sector, too, holds an upbeat Zacks Sector Rank #4 out of 16.
The underlying Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; healthcare providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. The ETF charges 8 bps in fees.
Technology – Technology Select Sector SPDR ETF XLK
The prospect for the tech sector is also bullish. The Computer and Technology sector falls in the top 32% segment of the 16 Zacks-classified sector universe.