Investors received a reality check on July 19, when US stocks suffered their worst daily loss of 2021, as of mid-July. The S&P 500 fell 1.6%, as renewed worries over the COVID-19 pandemic bubbled up on new confirmed cases and related hospitalizations trended higher in the US and around the world in recent weeks. This comes on top of some other causes for caution, including valuations that are elevated relative to historical averages and some higher inflation reports.

Despite the possibility that there may be an increase in volatility in the coming months, there remains a number of reasons to be bullish about stocks longer term—assuming that pandemic trends do not worsen to the point that economic activity is significantly impacted. US stocks have rallied in large part on continued economic reopening and historic support from central banks and governments worldwide. Moreover, there are some expectations that those pillars of stock market support may be augmented in the coming weeks and months.

If you believe in the markets long-term prospects and you are interested in exploring exchange-traded funds (ETFs) to help build or adjust the equity portion of a diversified portfolio, consider using Fidelitys ETF Screener to quickly sort through a lot of data. You can search for ETFs using a variety of investment themes as well as characteristics like the funds objectives, fundamentals, technicals, performance, volatility, trading characteristics, tax considerations, and analyst ratings.

Below, we feature 3 different ETF screens, plus the top results for each.

COVID momentum trade

Its likely that COVID will continue to be a risk hanging over the market for the foreseeable future—as evidenced by investors getting unnerved earlier this week due to new infections from the Delta variant. Consequently, it may not be surprising to see momentum trends similar to those that have played out since the outset of the pandemic. For example, many of the sectors and industries that were hardest hit at the outset of the pandemic in early 2020—including airlines, hotels, and other travel-related stocks—had the steepest declines on July 19.

While there are no ETFs explicitly designed to provide exposure to investments that a fund manager has constructed to capitalize on market views related to COVID trends, momentum measures may provide an insight into those ETFs that have been able to outperform during the pandemic. The Fidelity.com ETF Screener features several performance filters that highlight ETFs that have had momentum.

Here are the top 10 results for ETFs with the highest 1-year market total returns (54% and above) and a high Sharpe ratio (month-end 1 year) to account for risk-adjusted returns, sorted by highest net assets, as of July 22, 2021:

  • iShares Core S&P Small-Cap ETF (IJR)
  • iShares Russell 2000 ETF (IWM)
  • Vanguard Small-Cap Index Fund ETF Shares (VB)
  • Financial Select Sector SPDR® Fund (XLF)
  • Vanguard Small-Cap Value Index Fund ETF Shares (VBR)
  • Vanguard Extended Market Index Fund ETF Shares (VXF)
  • iShares Russell 2000 Value ETF (IWN)
  • Schwab US Small-Cap ETF (SCHA)
  • Vanguard Financials Index Fund ETF Shares (VFH)
  • iShares S&P Small-Cap 600 Value ETF (IJS)

Of course, just because an ETF performed well in the past does not mean it will continue to do so. As with any screen you run, you should evaluate the quality of the list that is generated. Does it appear that the screen results match your search criteria? Screen results can serve as a jumping off point to do further research to find investments that align with your investing objectives.

Infrastructure

Amid the latest worries over new COVID cases, expectations for potentially significant infrastructure spending is helping drive many segments of the market higher. Theres a long way to go before proposals might be signed into law, but a bipartisan group of US senators continue to work with the White House on a $579 billion infrastructure package for the nations highways, ports, and rail lines. That is on top of an existing transportation bill, which would bring the proposed total spending for infrastructure to $1.2 trillion.

If you are interested in exploring infrastructure-focused ETFs, here are the largest types of these ETFs (sorted by net assets), as of July 22, 2021:

  • Global X US Infrastructure Development ETF (PAVE)
  • iShares Global Infrastructure ETF (IGF)
  • Flexshares Stoxx Global Broad Infrastructure Index Fund (NFRA)
  • iShares US Infrastructure ETF (IFRA)
  • SPDR® S&P Global Infrastructure ETF (GII)
  • ProShares DJ Brookfield Global Infrastructure ETF (TOLZ)
  • iShares Emerging Markets Infrastructure ETF (EMIF)
  • Legg Mason Global Infrastructure ETF (INFR)
  • AGFiQ Global Infrastructure ETF (GLIF)

With any ETF screen you run, you should be aware of the potential for concentration risk. For instance, the holdings of most of the results of this screen are concentrated in the industrials sector. Concentration risk, colloquially speaking, can fall into the category of putting your eggs in a single basket—if you are not diversified across the rest of your investments.

ESG trends

Among the investing trends that have becoming increasingly popular in recent years is sustainable investing as defined by ESG factors—environmental, social, and governance. Generally, ESG factors involve the impact that a companys operations and products have on the environment; the relationship a company has with customers, employees, suppliers, and communities they operate in; and a companys governance policies. The Global Sustainable Investment Alliance recently estimates that sustainable investments now account for more than a third of all global assets.

If you are interested in exploring ESG-focused ETFs, here are the 10 largest ESG ETFs by net assets, as of July 22, 2021:

  • iShares ESG Aware MSCI USA ETF (ESGU)
  • iShares ESG Aware MSCI EM ETF (ESGE)
  • iShares Global Clean Energy ETF (ICLN)
  • iShares ESG Aware MSCI EAFE ETF (ESGD)
  • Vanguard ESG US Stock ETF (ESGV)
  • XTrackers MSCI USA ESG Leaders Equity ETF (USSG)
  • iShares ESG MSCI USA Leaders ETF (SUSL)
  • iShares MSCI USA ESG Select ETF (SUSA)
  • iShares MSCI KLD 400 Social ETF (DSI)
  • First Trust Nasdaq® Clean Edge® Green Energy Index Fund (QCLN)

Its important to understand the holdings within ESG-focused funds. Indeed, the composition of each of these funds can be quite different from one another, and so you will want to dig deeper into each one to determine if it aligns with your objectives and risk tolerance. For example, some results of this screen hold assets in developed markets (like the US), while others hold assets in emerging markets. You would want to do your due diligence to understand the different characteristics and risks of these ETFs. Another factor to consider is that most of the results of this screen are ETFs with relatively limited track records (i.e., several years). An ETF with a relatively limited track record, compared with established funds with longer tenures, may be more difficult to evaluate.

Due diligence

If you think one or more of the ETFs identified by a screen is worth considering to help manage the risk in your portfolio or achieve your objectives, your next step should be to research it further. And always remember to evaluate a funds costs, including the following:

  • Expense ratio: Look for low expense ratios to help reduce your overall costs.
  • Bid-ask spread: Look for small bid-ask spreads to help reduce costs of investing.
  • Tracking error: Look for a low tracking error to find ETFs that indicate a better job of replicating their benchmark indexes.

If you find ETFs with similar objectives, you could compare their expense ratios, bid-ask spreads, and/or tracking error to find the better deal. You can filter for all of these factors using the ETF Screener.

Knowing the individual components of an ETF can also give you a better sense of what you are buying or selling. You can find an ETFs components on its ETF snapshot page on Fidelity.com, under Portfolio Composition. On that page, you can find the ETFs style (value, growth, or blend) and size (large, mid, or small), as well as ratings and key statistics.

Finally, you should fully understand the risks involved in any investment strategy. Any investing opportunity should be considered within the context of a well-diversified investment strategy that conforms to your specific time horizon, objectives, and risk parameters.

Next steps to consider

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