Signs of Fatigue in Wall Street Rally? ETF Strategies to Follow

Market Overview - The S&P 500 Index is reaching new all-time highs, but there are signs that the rally may be losing momentum, as indicated by a 17-session streak without a 1% move in either direction, the longest calm period since December [1] - Matt Maley from Miller Tabak & Co. suggests that this low-volatility streak indicates waning momentum following a recovery from April's tariff-related downturn, supported by technical indicators [2] Investor Sentiment - Investors are expressing frustration over the narrow scope of the market rally, which has been primarily driven by tech stocks, leading to a sense of restlessness [3] - The current cautious mood in the market is attributed to several factors, including the beginning of the earnings season, unresolved trade negotiations, and growing expectations that the Federal Reserve will not cut interest rates soon [4] Market Dynamics - Aaron Nordvik from UBS Securities notes that the typical seasonal strength of July is fading, and much of the positive news is already reflected in current price levels, suggesting a diminished reward-to-risk profile [5] - Key earnings reports from Tesla and Alphabet, part of the "Magnificent Seven" tech stocks, are anticipated to influence market direction, particularly regarding their AI investments [6] Volatility and ETF Strategies - Market volatility remains low, with the VIX near its lowest levels of the year, which some interpret as a bullish sign, as historically quiet markets tend to trend higher [7] - In the current market environment, investors are advised to consider various ETF strategies to manage risk, including a combination of defensive and growth allocations [8] ETF Recommendations - A balanced approach is suggested, incorporating growth ETFs like Invesco QQQ Trust (QQQ) alongside defensive options such as iShares U.S. Consumer Staples ETF (IYK) and Utilities Select Sector SPDR (XLU) to mitigate downside risk [9] - The iShares MSCI USA Min Vol Factor ETF (USMV) is recommended for smoother returns and better downside protection without exiting the market entirely [10] - For steady income and quality exposure, ETFs like Schwab U.S. Dividend Equity ETF (SCHD) and Vanguard Dividend Appreciation ETF (VIG) are advised, especially if market momentum retreats [12] - Quality-focused ETFs such as iShares MSCI USA Quality Factor ETF (QUAL) and Invesco S&P 500 Quality ETF (SPHQ) are also recommended for their resilience in uncertain times [13]