These top ETFs and funds are beating the S&P 500 — and analysts still see further upside

Published Tue, Jun 11 20247:37 PM EDT

The first half of the year has generally been good for the market, with the S & P 500 and the Nasdaq repeatedly reaching record highs. Year-to-date, the S & P 500 is up around 13% and the Nasdaq has risen 14.9%. Will markets continue soaring? Analysts are split as it's uncertain when the U.S. Federal Reserve will start cutting rates. Much will depend on how the trajectory of inflation data goes in the coming months. "US recession is off the table for the next six months, and leading economic indicators suggest a broadening of global growth, undercutting the US exceptionalism narrative," Thomas Poullaouec, head of multi-asset solutions for Asia-Pacific at T. Rowe Price, said on Tuesday. He added that "the future path of inflation is key to navigate successfully the second half of the year. Inflation has been challenging to predict since the onset of the pandemic in 2020. However, it is becoming evident that inflation will not subside as quickly as central banks want, and there is a meaningful risk of its reacceleration due to a resilient labor market keeping services inflation elevated." Ed Clissold, chief U.S. strategist at Ned Davis Research, was of the view that conditions could allow the Fed to "lower rates at a slow pace," as he believes that economic growth could moderate without turning negative. Against that uncertain backdrop, investors might be looking at exchange-traded funds or mutual funds to diversify their investments. CNBC Pro screened the 20 top-performing U.S.-domiciled ETFs and actively managed funds in the first half of this year for those with further upside. Morningstar provided the list of top-performing funds, which all beat the S & P 500. Using FactSet, that list was screened for funds that analysts give 10% or more upside, and that at least half give a buy rating. Copper and mining ETFs were big winners in the first half of this year, with four showing up in the top 20 list. Of the four, however, only two fit the screening criteria: Sprott Junior Copper Miners ETF and Global X Copper Miners ETF. The former stood out as having the highest potential upside in the list (45.8%) and a high buy rating (79%). Unsurprisingly, growth-focused funds also dominated the list, as the tech and artificial intelligence boom continued to push markets higher this year. One country-specific ETF made it to the list: the iShares MSCI Turkey ETF. It had among the top five half-year returns, at 29.55% as of May 31. It also has the second-highest potential upside at 25.7%, and a decent 70% buy rating. One category that is not typically an investor favorite also showed up: the small- and mid-cap-focused First Trust RBA American Industrial Renaissance ETF. It tracks the Richard Bernstein Advisors American Industrial Renaissance Index, which measures the performance of small- and mid-cap U.S. companies in the industrial and community banking sectors.