The first half of the year has been generally good for markets, with the S&P 500 and Nasdaq repeatedly hitting new record highs. Year-to-date, the S&P 500 is up about 13% and the Nasdaq is up 14.9%. Will markets continue to rise? Analysts are divided as it is unclear when the Federal Reserve will start cutting interest rates. Much will depend on how inflation data plays out over the next few months. “A U.S. recession is unlikely over the next six months, and leading economic indicators point to stronger global growth, weakening the case for U.S. exceptionalism,” Thomas Poulawek, head of Asia Pacific multi-asset solutions at T. Rowe Price, said on Tuesday. He added, “The future course of inflation is key to navigating the second half of the year. Since the pandemic began in 2020, inflation has been difficult to predict. But it’s becoming clear that inflation will not fall as quickly as central banks would like, and with labor market resilience keeping services inflation elevated, there is a substantial risk that inflation will reaccelerate.” Ed Clissold, chief U.S. strategist at Ned Davis Research, said he believes economic growth can moderate without turning negative, and the Fed is in a position to “cut interest rates at a gradual pace.” With all this uncertainty, investors may be turning to exchange-traded funds and mutual funds to diversify their investments. CNBC Pro has scrutinized 20 of the top-performing U.S.-domiciled ETFs and actively managed funds in the first half of the year to find some that are poised for further gains. Morningstar has provided a list of top-performing funds that have outperformed the S&P 500. The list used FactSet to screen for funds where analysts expect an upside of 10% or more and at least half have given them a buy rating. Copper and mining ETFs were big winners in the first half of the year, with four appearing on the top 20 list. However, only two of the four met the screening criteria: Sprott Junior Copper Miners ETF and Global X Copper Miners ETF. The former stood out with the highest potential upside (45.8%) and high buy rating (79%) of the list. As expected, growth-focused funds dominated the list as the boom in technology and artificial intelligence continued to boost markets this year. One country-specific ETF made it onto the list was the iShares MSCI Turkey ETF, which ranked in the top five with a 29.55% half-year return as of May 31. It also had the second-highest potential upside of 25.7% and a decent buy recommendation of 70%. A category that investors were less fond of also made an appearance. The First Trust RBA American Industrial Renaissance ETF focuses on small and mid-cap stocks and tracks the Richard Bernstein Advisors American Industrial Renaissance Index, which measures the performance of U.S. small and mid-cap stocks in the industrial and community banking sectors.
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