ETFs
5 best performing ETFs of the second quarter
Wall Street performed moderately in the second quarter of 2024, with the S&P 500 gaining 4.4%, the Dow Jones losing 0.8%, the Nasdaq gaining 7.7% and the Russell 2000 falling 2.4%, respectively. (as of June 21, 2024). ). Major stock indexes reached all-time highs during the quarter.
April became the worst month of 2024 for Wall Street on concerns over rising rates, followed by a sharp rise in May and June. The S&P 500 is up 3% so far in June (as of June 21, 2024) while the Nasdaq is up 4.5% (read: April Emerges as Worst Month of 2024: Best ETF Zones).
The Magnificent Seven boost the stock market
This performance gap clearly indicates the broader market’s reliance on the Magnificent Seven. This bloc, which includes NVIDIA, Microsoft, Apple, Amazon, Meta, Alphabet and Tesla, represents about 30% of the S&P 500 and more than 40% of the Nasdaq-100.
The current craze for artificial intelligence (AI), recent signs of slowing inflation and resulting Fed rate cut bets, as well as strong corporate profit growth, have fueled the investor confidence in the stock market over the past two months (read: Top ETF Zones for May).
Inside US economic data
Inflation in the United States slowed in May for the second consecutive month. Meanwhile, retail sales are faltering and the U.S. manufacturing industry has yet to gain a solid footing. Declining inflation, along with signs of a slowing economy, have bolstered bets that the Fed will cut rates earlier than expected during parts of the quarter.
The Fed remains on its positions in June and considers at least one rate cut in 2024
In mid-June, the Fed chose to maintain its benchmark interest rate in a range of 5.25% to 5.50%, a level it has maintained since July 2023, and revised its forecast to decline by rate. While previously forecasting three rate cuts for the year, the Fed reduced its estimate to just one due to persistent inflation (read: Buy 5 Growth ETFs as Fed Stays Put and Considers Cut rates).
Despite reduced rate cut expectations for 2024, Fed officials increased their collective forecasts for 2025, anticipating a median of four additional rate cuts. The Fed revised its inflation forecast for 2024, expecting prices to end the year at 2.8%, up from a previous estimate of 2.6%.
The Fed’s comments and economic data have had an impact on the financial world. The benchmark U.S. Treasury yield was 4.25% on June 21, 2024, compared to 4.33% at the start of the quarter. The yield reached a closing high of 4.70% on April 25, 2024 and a closing low of 4.20% on June 14, 2024.
The story continues
Q2 Winning ETF Domains
Against this backdrop, we highlight some top-performing ETF areas in Q2 2024 below.
Natural gas
UNG U.S. Natural Gas ETF – Up 23.8%
Natural gas prices have surged over the past three months thanks to increased energy demand from AI-driven data centers. Big tech companies have invested billions in AI and cloud infrastructure. An IEA report released in January highlighted that on average, a typical Google search uses 0.3 watt-hours of electricity compared to 2.9 watt-hours for a ChatGPT query.
This demand is reflected in the stock market, where prices for energy utilities and natural gas are gaining ground. Since mid-April, U.S. natural gas futures prices have jumped about 62% due to intense geopolitical tensions in the Middle East, reduced U.S. production and supply disruptions in Norway (read: Bet on the AI ecosphere with these ETFs).
Shipping
SonicShares Global Shipping ETF BOAT – Up 22%
US SEA to Sky Cargo ETF – Up 18.2%
Geopolitical tensions in the Red Sea, a crucial area for international trade, have triggered a significant shift in the global shipping industry, driven rising ocean freight rates and offered an optimistic case for global shipping stocks . Overall, international container shipping rates have increased 70% year-over-year and are up more than 11% from pre-pandemic levels.
NVIDIA Intensive ETF
Valkyrie Bitcoin Miners ETF WGMI – Up 21.3%
VanEck Semiconductor ETF SMH – Up 17.1%
NVIDIA has significant weight in these ETFs. NVIDIA stock, which has been on a roll this year, is up about 40% over the past three months (as of June 21, 2024). In fact, last week NVIDIA briefly became the most valuable company in the world, but was unable to maintain that height until the end of the week.
Its success is largely attributed to its leadership in the development of advanced graphics processing units (GPUs), unrivaled in the production of processors powering artificial intelligence systems. NVIDIA also announced the upcoming launch of improved versions of its chips.
Silver miners
Global X Silver Miners SIL ETF – Up 20.9%
Amplify Junior Silver Miners ETF SILJ – Up 20.5%
Silver is a safe haven and also acts as an industrial metal. Most industrial metal prices are rising due to concerns about supply disruptions. Silver bullion ETF iShares Money Trust SLV has gained more than 18% so far in the second quarter.
A near-stable greenback and hopes of a Fed rate by the end of the year likely boosted precious metals in the second quarter. The ECB also cut rates in June. These developments have paved the way for a rally in industrial metals. Investors should note that because mining stocks act as leveraged securities on the underlying metal, shares of silver mining companies and associated ETFs have had every reason to rally.
Gold miners
iShares MSCI Global Gold Miners ETF RING – Up 14%
U.S. Global GO GOLD ETF and Precious Metals Miners GOAU – Up 13.7%
As with silver, the price of gold has historically shown an inverse relationship with US interest rates. When interest rates fall, gold becomes a more attractive investment than bonds and other interest-producing assets. Additionally, uncertainties over the Fed’s possible rate cut and economic health, as well as overvaluation fears on Wall Street, have likely increased the appeal of gold, a safe metal. Not surprisingly, gold mining stocks also recovered during the quarter.
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VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Silver Trust (SLV): ETF Research Reports
Global X Silver Miners ETF (SIL): ETF Research Reports
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
Amplify Junior Silver Miners ETF (SILJ): ETF Research Reports
US Global Sea to Sky Cargo ETF (SEA): ETF Research Reports
US Global GO GOLD and Precious Metal Miners ETF (GOAU): ETF Research Reports
US Natural Gas ETF (UNG): ETF Research Reports
SonicShares Global Shipping ETF (BOAT): ETF Research Reports
Valkyrie Bitcoin Miners ETF (WGMI): ETF Research Reports