Wall Street enters July with renewed optimism after a volatile June, as strategists highlight favorable seasonality, robust earnings growth, and renewed interest in artificial intelligence as potential catalysts for US equities. Wells Fargo, in a note led by Ohsung Kwon, has called for a “strong summer rally ahead,” citing improving investor positioning, delayed AI-related IPOs, and expected second-quarter EPS growth of 22%, up from 19% in the first quarter.
The bank also expects tariff refunds to provide a tailwind, estimating that approximately $36 billion in refunds have already been processed, with an additional $90 billion potentially forthcoming. Consumer staples and industrials are seen as primary beneficiaries of this fiscal boost. For investors seeking exposure to this setup, three exchange-traded funds (ETFs) offer distinct routes: broad-market exposure, AI infrastructure, or concentrated big-tech upside.
VOO: Broad-Market Seasonality Play
The Vanguard S&P 500 ETF (VOO) is the simplest way to capture a broad July rally without making a sector-specific bet. VOO tracks the S&P 500 and charges a low 0.03% expense ratio, contributing to its status as the first ETF to surpass $1 trillion in assets. Wells Fargo’s thesis leans on historical seasonality: the first half of July has been the strongest comparable period for the S&P 500 over the past century, with an average return of 1.35%, as reported by MarketWatch. VOO provides access to this broader move and any earnings boost from tariff refunds, without requiring a narrow call on consumer staples, industrials, or technology.
SOXX: AI Infrastructure Catch-Up Trade
For investors who believe the AI trade is expanding beyond the largest chip designers into the broader semiconductor supply chain, the iShares Semiconductor ETF (SOXX) offers a targeted option. SOXX tracks US-listed semiconductor stocks, with exposure across the chip value chain, including companies tied to AI and digital infrastructure spending. The fund holds 30 positions as of June 30 and carries a 0.34% expense ratio. This aligns with Goldman Sachs’ view: Ben Snider, chief US equity strategist at Goldman Sachs Research, wrote that AI-related investment is expected to drive roughly 40% of S&P 500 EPS growth this year. Goldman also noted that the largest cloud infrastructure companies are projected to spend about $670 billion in 2026, after consensus capex estimates jumped by $130 billion last quarter. For context on AI-related market movements, see our coverage of Nvidia lagging the chip rally as smart money rotates to memory and custom silicon.
QQQ: Concentrated Big-Tech Upside
If July’s rally is once again led by mega-cap technology, the Invesco QQQ ETF (QQQ) remains a direct vehicle to capture that move. QQQ tracks the Nasdaq-100 and has a 0.18% expense ratio. The appeal is straightforward: if investors return to AI leaders, cloud platforms, and dominant growth stocks, QQQ should outperform a broad-market fund. However, that concentration also introduces risk. Goldman’s Snider has warned that market breadth has narrowed to levels not seen since the dotcom era, even as earnings expectations remain strong. He also noted that near-term market swings are likely to track geopolitical volatility. Charles Schwab’s mid-year outlook, authored by Liz Ann Sonders and Kevin Gordon, echoed this caution, stating that while earnings are driving the bull market, leadership remains narrow and concentrated in AI and energy-related sectors. They also warned that markets could be vulnerable to disappointment due to stretched positioning and persistent bond yield pressure. For more on how AI-driven rallies are affecting individual stocks, see our analysis of Tesla stock dropping 3% despite record deliveries amid profit-taking and AI focus.
Each of these ETFs offers a different risk-reward profile for the July rally. VOO provides broad diversification and low cost, SOXX targets the AI infrastructure theme, and QQQ offers concentrated exposure to mega-cap tech. Investors should weigh their own risk tolerance and market outlook when considering these options. For additional perspective on market dynamics, read our report on Dow futures dropping 320 points as the AI rally falters on rate hike fears.
This article is for informational purposes only and does not constitute financial advice.
