Wall Street witnessed an upbeat December due to moderation in inflationary pressures, the likelihood of Fed rate cuts in 2024 and decent corporate earnings. All key U.S. equity gauges — the S&P 500, the Dow Jones, the Nasdaq and the Russell 2000 — gained 1.8%, 1.6%, 2.2% and 4.20%, respectively, in the past month (as of Dec 27, 2023).
As far as rates are concerned, the benchmark treasury yield started the month at 4.22% and was at 3.79% at the end of Dec 26, 2023. Against this backdrop, below we highlight a few ETFs that fetched sizable assets in December.
S&P 500 ETFs Win
SPDR S&P 500 ETF Trust SPY, iShares Core S&P 500 ETF IVV, Vanguard 500 Index Fund ETF VOO and Invesco S&P 500 Equal Weight ETF RSP amassed about $42.39 billion, $6.22 billion, $2.84 billion and $4.54 billion in December, respectively. A solid rally in the S&P 500 in December probably lured investors to focus on the S&P 500 ETFs as risk-on sentiments returned to the market. As the participation in the market broadened, RSP has received special attention from investors. Vanguard Total Stock Market ETF VTI also fetched about $2.83 billion in assets in the quarter.
Small Caps in Vogue
The small-cap ETF, iShares Russell 2000 ETF IWM, has attracted about $3.81 billion in assets. This renewed interest can be attributed to several factors, including the likelihood of a dovish Fed, strong consumer confidence, positive jobs data, and attractive valuations, all of which have bolstered the small-cap segment. As a result, the fund, IWM, has seen a significant increase in assets.
Long-Term Bonds Are Back
iShares 20 Plus Year Treasury Bond ETF TLT,Vanguard Intermediate-Term Corp Bond Index Fund ETF (VCIT) and iShares Core US Aggregate Bond ETF AGG hauled in about $2.10 billion, $4.27 billion and $2.83 billion, respectively. As the Fed rate cut hopes strengthened for 2024, bond yields slumped and revived investors’ interest in long-term bond ETFs all over again.
Short-Term Bond ETFs Fell Out of Favor
The federal funds rate is currently 5.25% to 5.50%. The monetary policymakers forecast that their key short-term rate will reach 3.9% to 5.4% by the end of 2024, down from the September projections of 4.4% to 6.1%. This suggests that the Fed is prepared to cut its benchmark rates by an additional three-quarters of a point until the end of 2024.
This has probably cut demand for short-term bond ETFs like SPDR Bloomberg 1-3 Month T-Bill ETF BIL, iShares 1-3 Year Treasury Bond ETF SHY, iShares 7-10 Year Treasury Bond ETF IEF and iShares Short Treasury Bond ETF SHV. BIL, SHY, IEF and SHV have lost about $2.67 billion, $1.98 billion, $1.82 billion, and $1.59 billion, respectively.
Nasdaq-100 Loses Assets
Invesco QQQ Trust Series 1 QQQ lost about $5.0 billion in the month. Overvaluation concerns after a stupendous rally in 2023 and the broadening of the market breadth probably caused the Nasdaq-100 to fall out of favor.
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Get it free >>iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares 7-10 Year Treasury Bond ETF (IEF): ETF Research Reports
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
Invesco S&P 500 Equal Weight ETF (RSP): ETF Research Reports
iShares Core U.S. Aggregate Bond ETF (AGG): ETF Research Reports
iShares Short Treasury Bond ETF (SHV): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
iShares 1-3 Year Treasury Bond ETF (SHY): ETF Research Reports
Vanguard Intermediate-Term Corporate Bond ETF (VCIT): ETF Research Reports
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
