Yahoo Finance Top ETF Stories of Q2 2024
Wall Street has delivered a moderate performance in the second quarter of 2024, with the S&P 500 gaining 5.1%, the Dow Jones losing 0.4%, the Nasdaq advancing 8.6% and the Russell 2000 retreating 2.3%, respectively (as of Jun 26, 2024). Key U.S. equity indexes have hit all-time highs so far in the quarter.
April became the worst month of 2024 for Wall Street due to rising rate worries, followed by a robust upswing in May and June. The ongoing artificial intelligence (AI) craze, recent signs of cooling in inflation, and the resultant Fed rate cut bets, along with strong corporate profit growth, have been fueling investors' confidence in the stock market for the past two months.
International economies have returned much less than the U.S. market. All-world ETF iShares MSCI ACWI ETF ACWI, which has a significant share invested in U.S. equities, has added 3.2% in the second quarter. Vanguard FTSE All World ex US ETF VEU is up 1.4% so far in the quarter (as of Jun 25, 2024).
Let’s delve deeper into the top ETF stories of the second quarter of 2024.
“Magnificent Seven” Drives Stock Market
Wall Street’s performance clearly indicates the broader market’s dependence on the “Magnificent Seven.” This bloc, which comprises NVIDIA, Microsoft, Apple, Amazon, Meta, Alphabet and Tesla, makes up about 30% of the S&P 500 and accounts for more than 40% of the Nasdaq-100.
Big techs have been in the race to score new market-cap highs. Amazon topped $2 trillion market cap on Jun 26. NVIDIA, too, briefly topped Microsoft MSFT as the world's most valuable company last week. Apple is currently the world's second-most valuable company, with NVIDIA taking the third position.
Fed Stays Put in June, Eyes At Least One Rate Cut in 2024
In mid-June, the Fed opted to maintain its benchmark interest rate within a range of 5.25% to 5.50%, a level it has maintained since July 2023 and has revised its rate cut prediction. While previously predicting three rate cuts for the year, the Fed scaled back its estimate to just one due to sticky inflation.
Despite the reduced rate cut expectations for 2024, Fed officials increased their collective forecast for 2025, anticipating a median of four additional rate cuts. The Fed revised its 2024 inflation forecast, expecting prices to end the year at 2.8% compared to the previous estimate of 2.6%.
Inflation Cooling, but Is the US Economy Slowing?
Inflation in the United States cooled down in May for the second consecutive month. Meanwhile, retail sales have been wobbling and U.S. manufacturing is yet to gain a strong footing. Easing inflation, along with signs of a slowing economy, boosted the bets of a sooner-than-expected Fed rate cut in some spells of the quarter.
The Fed comments and the economic data points left their impact on the treasury world. The benchmark U.S. treasury yield was 4.23% on Jun 25, 2024, versus 4.33% recorded at the start of the quarter. The yield touched a closing high of 4.70% on Apr 25, 2024, and a closing low of 4.20% on Jun 14, 2024.
ECB Rate Cut in June
The European Central Bank (ECB) has finally cut its key interest rate, marking the first reduction since September 2019. This move brought the rate down from its previous record of 4% to 3.75%, which has been maintained since September 2023. Invesco CurrencyShares Euro Trust FXE has lost 1.4% past month.
ECB’s inflation forecasts for 2024 and 2025 have been shifted upward to 2.5% and 2.2%, respectively, indicating a slight uptick from the previous estimates. However, the 2026 projection remained steady at 1.9%. "There will be bumps on the road towards the 2% inflation target," President Lagarde said on Jun 6, 2024 (read: ETFs in Focus on ECB's First Rate Cut in Five Years).
Bitcoin on Downhill Ride
Bitcoin prices slumped in Q2. iShares Bitcoin Trust IBIT has lost 11.2% so far in the second quarter, and ProShares Ether Strategy ETF EETH is off 7.3% (as of Jun 25, 2024). Cryptocurrency prices declined probably due to strong greenback and prolonged high interest rates. The U.S. dollar has jumped about 1.9% in Q2. Crypto hedge funds cut their exposure to Bitcoin to 0.37, the lowest since October 2020, per Co-Founder & CEO of Unocoin, as quoted on Economic Times.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Invesco CurrencyShares Euro Trust (FXE): ETF Research Reports
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
Vanguard FTSE All-World ex-US ETF (VEU): ETF Research Reports
iShares Bitcoin Trust (IBIT): ETF Research Reports
ProShares Ether Strategy ETF (EETH): ETF Research Reports
