ETFs
The best performing and most flopped ETFs of the first half
Wall Street saw a remarkable recovery in the first half, driven by enthusiasm for artificial intelligence (AI), strong corporate profits, bets on lower rates and optimism about the resilience of the economy . The Magnificent Seven are the biggest growth engine, with NVIDIA NVDA leading the way in the AI revolution.
At the last FOMC meeting, U.S. policymakers forecast one rate cut this year and four cuts by 2025. The Fed changed the wording of its statement, noting “modest additional progress toward the goal of inflation of 2% of the committee”. Lower interest rates generally lead to lower borrowing costs, which helps businesses easily expand their operations and results in increased profitability. This, in turn, will boost economic growth and provide a boost to the stock market.
Some interesting facts from the first half of the year:
The S&P 500 index broke several records and gained at least 500 points in the first six months. The index surpassed the 5,500-point mark for the first time last week after reaching the 5,400-point threshold earlier this month and the 5,300-point mark last month, underscoring strong sentiment. It crossed the thresholds of 5,100 points and 5,200 points in February.
The Nasdaq Composite Index has performed exceptionally well this year, with the expansion of AI applications promising growth opportunities.
The three stocks – NVIDIA NVDA, Apple AAPL and Microsoft MSFT – of the “Magnificent Seven” group are in a race to become the world’s most valuable company and have reached a market capitalization of $4 trillion thanks to growing enthusiasm for AI capabilities. Technology has remained the best-performing sector (read: ETFs to play as NVIDIA becomes the most valuable company).
E-commerce giant Amazon.com Inc. AMZN joined the Dow Jones Index, replacing drugstore operator Walgreens Boots Alliance WBA on Feb. 26 (read: ETFs in the spotlight as Amazon joins the 2,000 club billion dollars for the first time).
Uranium stocks have increased due to growing demand for uranium driven by AI’s insatiable energy needs and supply disruptions.
The utilities sector got a boost as increased demand for chips and AI software accelerated demand for electricity.
The world’s largest cryptocurrency hit a record high in the first quarter, thanks to the launch of new Bitcoin spot ETFs and growing optimism around these tokens. However, the craze has faded in recent months.
On the commodities side, precious metals like gold and silver and base metals like copper performed well in the first half of the year. These metals recently hit multi-year highs. Bets on lower rates and geopolitical tensions are driving up the prices of these two precious metals, seen as a store of wealth for investors. Copper prices have advanced on the back of long-term bullish 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 of the best and worst performing areas in the first half of 2024.
The story continues
Best ETFs
Grayscale Bitcoin Trust (GBTC) – Up 57.5%
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 directly purchasing, storing, and custodiing Bitcoin. It owns and passively holds real Bitcoin through the custodian, Coinbase Custody. Grayscale Bitcoin Trust has $17 billion in assets under management and charges investors a 1.50% annual fee. It trades an average of 6 million shares per day.
VanEck Vectors Semiconductor ETF (SMH) – Up 48%
The VanEck Vectors Semiconductor ETF provides exposure to companies involved in semiconductor manufacturing and equipment. It tracks the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. NVIDIA is the top company, with a 20.4% share. VanEck Vectors Semiconductor ETF has $24 billion in assets under management and charges 35 basis points in annual fees and expenses. SMH trades an average daily volume of 7.2 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a high risk outlook (read: top performing stocks in the best ETF of the first half).
Invesco S&P 500 Momentum ETF (SPMO) – Up 34.6%
The Invesco S&P 500 Momentum ETF tracks the S&P 500 Momentum Index, which measures the performance of stocks in the S&P 500 Index that have a high “momentum score.” It holds 101 stocks in its basket and charges 13 basis points in fees per year. Information technology is the leading sector with a 50.2% share, while consumer discretionary, communication services and healthcare round out the next three spots. Assets under management of $2 billion and trades an average daily volume of 353,000 shares.
The worst ETFs
Sprott Lithium Miners ETF (LITP) – Down 36.1%
Lithium prices have fallen this year as a general slowdown in the Chinese economy has impacted electric vehicle sales in China. Sprott Lithium Miners ETF is a pure-play US-listed ETF focused on lithium mining companies that provide the critical mineral needed for the clean energy transition. It tracks the Nasdaq Sprott Lithium Miners Index, holding 44 stocks in its basket. Sprott Lithium Miners ETF has amassed $5.5 million in its asset base and charges 65bps in annual fees. It trades on an average daily volume of 9,000 shares.
ProShares VIX Short Term Futures ETF (VIXY) – Down 31.1%
Volatility products have been a laggard this year, as they underperform when the stock market soars. The ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month up to ‘expiry. The ProShares VIX Short-Term Futures ETF has accumulated $149 million in assets under management and charges 85 bps in fees per year. It trades on average a volume of 4 million shares per day.
ETF AdvisorShares Psychedelics (PSIL) – Down 30.4%
The AdvisorShares Psychedelics ETF invests in the emerging psychedelic drug sector, providing exposure to biotechnology, pharmaceutical and life sciences companies that AdvisorShares believes are leading the way in this nascent industry. This is an actively managed fund and holds 26 stocks in its basket with a strong focus on the largest company. The AdvisorShares Psychedelics ETF has accumulated $5.7 million in its asset base and charges 99 basis points in annual fees. It trades an average daily volume of 49,000 shares (read: Best and Worst ETF Areas of Q2).
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
ProShares VIX Short-Term Futures ETF (VIXY): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
Walgreens Boots Alliance, Inc. (WBA): Free Stock Analysis Report
Grayscale Bitcoin Trust ETF (GBTC): ETF Research Reports
Invesco S&P 500 Momentum ETF (SPMO): ETF Research Reports
AdvisorShares Psychedelics ETF (PSIL): ETF Research Reports
Sprott Lithium Miners ETF (LITP): ETF Research Reports