ETFs tracking meme stocks surge as ‘animal spirits’ return to markets.

• Meme stocks have been on the rise lately as the market’s November rally brings a wave of gains.
• Last trading week, several meme stock ETFs beat the S&P 500.
• Still, ETFs have fallen much further from all-time highs than the S&P 500.

The 2021 meme stock boom has waxed and waned since the height of the pandemic, and the market’s recent rally is refocusing attention on speculative bets as investors chase a year-end rally in stock prices.

In a Tuesday note, DataTrek Research co-founders Nicholas Colas and Jessica Rabe discussed the recent performance of several exchange-traded funds with exposure to popular meme stocks, including the Roundhill MEME ETF (MEME), Robotics & AI ETF (BOTZ) and the iShares Russell 2000 Growth (IWO) .

“The upshot: The resurgence of meme stocks shows investor animal sentiment is starting to run wild again,” DataTrek said.

In the five trading days leading up to Tuesday, each fund directly beat the returns of the S&P 500 Index, even as stocks rallied significantly and Treasury yields fell.

MEME, BOTZ and IWO rose 10.8%, 6.6% and 5.9%, respectively, while the S&P 500 gained 3.1% over the period. Additionally, MEME and BOTZ have outperformed the benchmark index since bottoming on October 27.

The table below shows the top investments for each of the three ETFs and the performance of each investment over the last five days, one month and year-to-date.

“The average returns of the top 5 holdings of these 3 ETFs have outperformed the S&P over the past 5 days, 1 month, and year-to-date, often by significant margins,” DataTrek reports.

It’s worth noting that many of the most famous meme stocks like GameStop and AMC are down significantly during this stretch, signaling that investors have recently been making bullish bets on broader baskets of names rather than trying to pick individual winners.

Still, the recent outperformance of funds with exposure to meme stocks reflects “broadly bullish market conditions,” Colas and Rabe maintain.

DataTrek also noted Tuesday that S&P 500 sector correlations suggest November’s stock rally should continue through the end of the year. The historical indicator indicates investor confidence, with the key indicator hovering around levels seen during previous bull markets.