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Wall Street has shown a remarkable rally with the three major indices on track to wrap up the first nine months of 2024 near record highs. The artificial intelligence (AI) craze and rate-cut optimism have been the major driving factors amid recession fears, geopolitical tensions and the sell-off in tech stocks that weighed on investors’ confidence.
After holding the rates at a 23-year high for 14 consecutive months since July 2023, Federal Reserve Chair Jerome Powell kicked off the new rate cycle era by initiating a 50 basis points cut in interest rates. This marked the first rate cut since 2020 to address slowing economic growth and showed greater confidence that inflation is moving sustainably toward the 2% target level.
The central bank projects two more rate cuts of 50 bps in its final two meetings this year, due in November and December. It also indicates another 100-bps rate cut next year and a 50-bps cut in 2026, which means four rate cuts in 2025 and two in 2026. Lower interest rates will lead to reduced borrowing costs, helping businesses to expand operations easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
Some interesting facts from the first nine months:
U.S. stocks achieved multiple records with the tech-heavy Nasdaq being the outperformer in the first half and the Dow Jones in the third quarter. The shift in sentiments from the technology to the cyclical sectors came on rate cuts optimism.
The utility sector has gained immense investor attraction in recent months as a new emerging AI play, especially after the technology lost momentum on overvaluation concerns. This is especially true as AI is bolstering the demand for electricity, as data centers require tons of energy for computing and cooling power. Utility is also one of the biggest beneficiaries of a rate cut as these offer higher returns due to their outsized yields. Further, the stock market volatility has raised the appeal for utility stocks as a defensive investment or safe haven amid economic or political turmoil.
Meanwhile, Bitcoin regained momentum lately spurred by expectations of a reduction in borrowing costs by the Fed, which led to greater demand for speculative assets. The world's largest cryptocurrency enjoyed an incredible run in the first quarter amid the launch of new spot Bitcoin ETFs and growing optimism about the tokens but cooled down in the second quarter (read: Fed Rate Cuts Raise Appeal for Bitcoin ETFs).
On the commodity side, precious metals like gold and silver and base metals like copper performed well during the first nine months. Rate cut bets and geopolitical tension drive up the price for both the precious metals, which are considered a store of wealth for investors. Copper prices rallied on bullish long-term trends and tight supply conditions amid a rush to build data centers and the continued electrification of the global economy.
We have highlighted three ETFs each from the best and worst-performing zones in the first nine months of 2024.
Grayscale Bitcoin Trust is the world’s largest Bitcoin ETF that enables investors to gain exposure to Bitcoin in the form of security while avoiding the challenges of buying, storing, and safekeeping Bitcoin directly. It owns and passively holds actual Bitcoins through the Custodian, Coinbase Custody. Grayscale Bitcoin Trust has an AUM of $14 billion and charges 1.50% in annual fees from investors. It trades in a volume of 4.2 million shares a day on average.
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. VanEck Vectors Semiconductor ETF has managed assets worth $24 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 9 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
Reaves Utilities ETF is the only actively managed ETF that seeks to provide returns through a combination of capital appreciation and income, primarily through investments in utility stocks. It holds 17 stocks with a heavy concentration on the top three firms. UTES has AUM of $192.1 million and trades in an average daily volume of 39,000 shares. It charges 49 bps in annual fees (read: The Top ETF of the First Nine Months and Its Best Stocks).
AdvisorShares Psychedelics ETF invests in the emerging psychedelic drugs sector, offering exposure to those biotechnology, pharmaceutical and life sciences companies, which AdvisorShares sees as leading the way in this nascent industry. It is an actively managed fund and holds 26 stocks in its basket with a heavy concentration on the top firm. AdvisorShares Psychedelics ETF has accumulated $4.6 million in its asset base and charges 99 bps in annual fees. It trades in an average daily volume of 39,000 shares.
Lithium prices have plunged this year as a slowdown in the China economy took a toll on sales of electric vehicles in the country. Sprott Lithium Miners ETF is a pure-play U.S.-listed ETF focused on lithium mining companies that are providing the critical minerals necessary for the clean energy transition. It follows the Nasdaq Sprott Lithium Miners Index, holding 44 stocks in its basket. Sprott Lithium Miners ETF has gathered $5.9 million in its asset base and charges 65 bps in annual fees. It trades in an average daily volume of 11,000 shares.
Invesco WilderHill Clean Energy ETF (PBW - Free Report) ) – Down 31.1%
Invesco WilderHill Clean Energy ETF offers exposure to companies that are publicly traded in the United States and are engaged in the business of advancement of cleaner energy and conservation. It follows the WilderHill Clean Energy Index and holds 70 stocks in its basket.
Invesco WilderHill Clean Energy ETF has amassed $285.6 million in its asset base and trades in a solid volume of around 237,000 shares a day. It charges investors 66 bps in fees per year.
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Top and Flop ETFs of the First Nine Months
Wall Street has shown a remarkable rally with the three major indices on track to wrap up the first nine months of 2024 near record highs. The artificial intelligence (AI) craze and rate-cut optimism have been the major driving factors amid recession fears, geopolitical tensions and the sell-off in tech stocks that weighed on investors’ confidence.
The S&P 500, the Dow Jones Industrial and the Nasdaq Composite have risen 20.3%, 12.3% and 20.7%, respectively, so far this year (read: 5 ETFs Up More Than 35% in the First Nine Months).
After holding the rates at a 23-year high for 14 consecutive months since July 2023, Federal Reserve Chair Jerome Powell kicked off the new rate cycle era by initiating a 50 basis points cut in interest rates. This marked the first rate cut since 2020 to address slowing economic growth and showed greater confidence that inflation is moving sustainably toward the 2% target level.
The central bank projects two more rate cuts of 50 bps in its final two meetings this year, due in November and December. It also indicates another 100-bps rate cut next year and a 50-bps cut in 2026, which means four rate cuts in 2025 and two in 2026. Lower interest rates will lead to reduced borrowing costs, helping businesses to expand operations easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
Some interesting facts from the first nine months:
U.S. stocks achieved multiple records with the tech-heavy Nasdaq being the outperformer in the first half and the Dow Jones in the third quarter. The shift in sentiments from the technology to the cyclical sectors came on rate cuts optimism.
The utility sector has gained immense investor attraction in recent months as a new emerging AI play, especially after the technology lost momentum on overvaluation concerns. This is especially true as AI is bolstering the demand for electricity, as data centers require tons of energy for computing and cooling power. Utility is also one of the biggest beneficiaries of a rate cut as these offer higher returns due to their outsized yields. Further, the stock market volatility has raised the appeal for utility stocks as a defensive investment or safe haven amid economic or political turmoil.
Meanwhile, Bitcoin regained momentum lately spurred by expectations of a reduction in borrowing costs by the Fed, which led to greater demand for speculative assets. The world's largest cryptocurrency enjoyed an incredible run in the first quarter amid the launch of new spot Bitcoin ETFs and growing optimism about the tokens but cooled down in the second quarter (read: Fed Rate Cuts Raise Appeal for Bitcoin ETFs).
On the commodity side, precious metals like gold and silver and base metals like copper performed well during the first nine months. Rate cut bets and geopolitical tension drive up the price for both the precious metals, which are considered a store of wealth for investors. Copper prices rallied on bullish long-term trends and tight supply conditions amid a rush to build data centers and the continued electrification of the global economy.
We have highlighted three ETFs each from the best and worst-performing zones in the first nine months of 2024.
Best ETFs
Grayscale Bitcoin Trust (GBTC - Free Report) ) – Up 51.1%
Grayscale Bitcoin Trust is the world’s largest Bitcoin ETF that enables investors to gain exposure to Bitcoin in the form of security while avoiding the challenges of buying, storing, and safekeeping Bitcoin directly. It owns and passively holds actual Bitcoins through the Custodian, Coinbase Custody. Grayscale Bitcoin Trust has an AUM of $14 billion and charges 1.50% in annual fees from investors. It trades in a volume of 4.2 million shares a day on average.
VanEck Vectors Semiconductor ETF (SMH - Free Report) ) – Up 44.5%
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. VanEck Vectors Semiconductor ETF has managed assets worth $24 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 9 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
Reaves Utilities ETF (UTES - Free Report) ) – Up 43.1%
Reaves Utilities ETF is the only actively managed ETF that seeks to provide returns through a combination of capital appreciation and income, primarily through investments in utility stocks. It holds 17 stocks with a heavy concentration on the top three firms. UTES has AUM of $192.1 million and trades in an average daily volume of 39,000 shares. It charges 49 bps in annual fees (read: The Top ETF of the First Nine Months and Its Best Stocks).
Worst ETFs
AdvisorShares Psychedelics ETF (PSIL - Free Report) ) – Down 42.8%
AdvisorShares Psychedelics ETF invests in the emerging psychedelic drugs sector, offering exposure to those biotechnology, pharmaceutical and life sciences companies, which AdvisorShares sees as leading the way in this nascent industry. It is an actively managed fund and holds 26 stocks in its basket with a heavy concentration on the top firm. AdvisorShares Psychedelics ETF has accumulated $4.6 million in its asset base and charges 99 bps in annual fees. It trades in an average daily volume of 39,000 shares.
Sprott Lithium Miners ETF (LITP - Free Report) ) – Down 35.1%
Lithium prices have plunged this year as a slowdown in the China economy took a toll on sales of electric vehicles in the country. Sprott Lithium Miners ETF is a pure-play U.S.-listed ETF focused on lithium mining companies that are providing the critical minerals necessary for the clean energy transition. It follows the Nasdaq Sprott Lithium Miners Index, holding 44 stocks in its basket. Sprott Lithium Miners ETF has gathered $5.9 million in its asset base and charges 65 bps in annual fees. It trades in an average daily volume of 11,000 shares.
Invesco WilderHill Clean Energy ETF (PBW - Free Report) ) – Down 31.1%
Invesco WilderHill Clean Energy ETF offers exposure to companies that are publicly traded in the United States and are engaged in the business of advancement of cleaner energy and conservation. It follows the WilderHill Clean Energy Index and holds 70 stocks in its basket.
Invesco WilderHill Clean Energy ETF has amassed $285.6 million in its asset base and trades in a solid volume of around 237,000 shares a day. It charges investors 66 bps in fees per year.