ETFs
5 Multi-Billion Dollar ETFs Beating the S&P 500 Year-To-Date – May 24, 2024
The S&P 500 index has seen a remarkable rebound this year, crossing the 5,300 mark for the first time, reflecting strong confidence. Strong corporate earnings and bets on rate cuts sent stocks higher. The renewed enthusiasm for AI has also contributed to this strong dynamic. The benchmark index is up 10.4% so far this year.
The recovery has been broad-based, with most sectors of the investment world enjoying huge gains. Although the list is very long, we have highlighted five ETFs that are beating the S&P 500 index year to date and are popular with large assets under management, say over $20 billion. These include Grayscale Bitcoin Trust (GBTC – Free report) , iShares S&P 500 Growth ETF (IVW – Free report) , SPDR Gold Trust ETF (GLD – Free report) , iShares MSCI USA Quality Factor ETF (QUALITY – Free report) And Vanguard Information Technology ETF (VGT – Free report) .
All of these funds are passively managed, meaning they aim to track the performance of a specific index. By tracking a particular index, liquidity is high for these funds. Unlike actively managed funds, they do not involve frequent trading or active decision-making by fund managers. Instead, they simply reflect the holdings and performance of the target index. Because these funds require fewer transactions and research, their fees are lower than actively managed ETFs.
The bulls are here
According to the latest Bank of America survey, expectations of lower interest rates coupled with earnings optimism have made investors the “most optimistic” since November 2021. Around 82% of global fund managers expect a first rate cut by the Fed in the second half of the year. , while 78% say a recession is unlikely in the next 12 months.
Wall Street analysts were also more bullish on the S&P 500 on rate cut expectations. One of Wall Street’s most prominent bears, Morgan Stanley, turned positive on the outlook for US stocks by raising the price target for the S&P 500 from 4,500 to 5,400 (read: ETFs Bet on Analysts’ Bullish Forecasts for the S&P 500).
Below we have presented the profile of the ETFs mentioned above:
Focus on ETFs
Grayscale Bitcoin Trust (GBTC – Free report) – Up 72.4%
The world’s largest cryptocurrency was surging in the first quarter, hitting a new record high of $73,000 amid growing optimism about the tokens following the launch of Bitcoin ETFs. Another contributor to the digital currency’s rise is its “halving” event, which reduces the reward for mining new blocks, in April. Now, growing optimism surrounding the approval of a US Ethereum spot ETF is driving the rally in recent weeks.
Grayscale Bitcoin Trust is the world’s largest Bitcoin ETF that allows investors to gain exposure to Bitcoin as a security while avoiding the challenges of purchasing, storing, and directly holding Bitcoin. It passively owns and holds real Bitcoins through the custodian, Coinbase Custody. Grayscale Bitcoin Trust has $20 billion in assets under management and charges 1.50% annual fees to investors. It trades an average of 10 million shares per day.
iShares S&P 500 Growth ETF (IVW – Free report) – Up 15.6%
Low rates are generally favorable for growth stocks because they reduce the cost of borrowing, often necessary to finance business expansion. Lower rates generally reduce the attractiveness of fixed-income investments like bonds, prompting investors to seek higher returns in stock markets. Growth stocks, with their high return potential, become more attractive to investors in this environment, driving up demand and, therefore, their prices (read: Growth ETFs to Buy as Falling Inflation Fuels Rate Cut Bets).
The iShares S&P 500 Growth ETF targets the growth segment of the S&P 500 Index by tracking the S&P 500 Growth Index. It holds 228 stocks in its basket, with key holdings in information technology, consumer discretionary and communications. The iShares S&P 500 Growth ETF charges 18 basis points in annual fees and has amassed $45.7 billion in its asset base. The fund trades an average daily volume of 2 million shares and has a Zacks Rank #2 (Buy).
SPDR Gold Trust ETF (GLD – Free report) – Up 12.8%
Gold, which has gained momentum this year on increased central bank buying and safe-haven demand due to rising geopolitical tensions, will also continue to shine as lower gold rates interest would increase the attractiveness of the metal (read: Gold Bull Run Set to Continue: ETFs to Add More Shine).
The SPDR Gold Trust ETF tracks the price of gold bullion measured in US dollars and held in London under the custody of HSBC Bank USA. This is an ultra-popular gold ETF with $64.5 billion in assets under management and heavy volume of around 9 million shares per day. The SPDR Gold Trust ETF charges 40 basis points in fees per year to investors and has a Zacks ETF Rank #3 (Hold).
iShares MSCI USA Quality Factor ETF (QUALITY – Free report) – Up 12.6%
Given market uncertainty, investors have turned to high-quality companies. Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, high margins, and a stable or increasing sales and earnings growth trajectory. These products thus reduce volatility compared to simple funds and are relatively resistant to market fluctuations.
With $44.3 billion in assets under management, the iShares MSCI USA Quality Factor ETF provides exposure to large and mid-cap stocks with positive fundamentals (high return on equity, stable year-over-year earnings growth on the other and low financial leverage) by following the MSCI USA Sector Neutral index. Quality Index and holds 126 stocks in its basket. The ETF charges 15 basis points in annual fees and trades an average daily volume of 1.2 million shares.
Vanguard Information Technology ETF (VGT – Free report) – Up 11.8%
The technology sector has been one of the best performing sectors of 2024, supported by the craze for artificial intelligence (AI) and the prospect of lower rates. NVIDIA’s strong performance also supported growth in this area (read: AI boom bolsters NVIDIA’s Q1 growth: ETFs to exploit).
The Vanguard Information Technology ETF has $68.4 billion in assets under management and provides exposure to 313 technology stocks. It tracks the MSCI US Investable Market Information Technology 25/50 index. Semiconductors, system software, hardware storage and technology peripherals, and application software are the four major sectors. The Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 397,000 shares. It has a Zacks ETF Rank #1 (Strong Buy).
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