ETFs
Top ETF Stories from May to Watch in June
Wall Street saw a strong rally last month (defying the famous “Sell in May” adage), driven by renewed expectations of Federal Reserve rate cuts in the initial phase of the month, strong corporate earnings and the craze for artificial intelligence (AI). This month, all three major U.S. stock indexes hit all-time highs.
The S&P 500 surpassed the 5,300 mark, the Dow Jones Industrial Average reached 40,000 and the Nasdaq Composite Index crossed the 17,000 threshold for the first time. The S&P 500, Nasdaq and Russell 2000 gained about 3.4%, 5.7% and 2% respectively over the past month, while the Dow lost 0.3%.
Let’s dig a little deeper into the main ETF news for the month of May.
Fed Rhetoric Regarding Rate Cuts
Although expectations for a Fed rate cut strengthened in early May, fears of a rate hike resurfaced at the end of the month due to persistent inflation and hawkish rhetoric from the Fed. Uncertainty persists over the timing of rate cuts, which has dampened investor confidence recently.
The benchmark U.S. Treasury yield was 4.55% on May 30, compared to a monthly closing high of 4.63% recorded on May 1 and a low of 4.36% recorded on May 15. Around 82% of global fund managers expect the Fed to cut rates for the first time this past period. half the year.
In the 12 months to April, the PCE price index rose 2.7% after rising 2.7% in March. Economists polled by Reuters forecast an increase of 0.3% over the month and 2.7% over the year. Investors would carefully evaluate U.S. economic data and the Fed’s speech to gauge the timing of the first rate cut.
If rates stay high for longer, high-interest rate ETFs will likely do well. iShares Floating Rate Bond ETF FLOT, which performs well in a rising rate environment, rose about 0.5% last month. The fund returns 5.37% per year. BDC Putnam Income ETF The PBDC, another beneficiary of rising rates, rose 2% last month. The fund returns 9.07% per year.
The American economy on solid foundations
Recent data indicates that the U.S. economy is on track for another robust increase in GDP in the second quarter. In May, U.S. business activity reached its fastest pace in more than two years, following a few months of moderate growth, with the services sector leading the way. U.S. consumer confidence rose in May, reversing a three-month downward trend.
If the U.S. economy remains strong, domestically focused small-cap ETFs tend to do well. Avantis International Small Cap Value ETF AVDV and Invesco S&P Momentum Small Cap ETF XSMO is up 6.1% and 6.7%, respectively, over the past month.
The story continues
Will the AI rally continue?
AI euphoria, once considered a hype, has been brought to the forefront again thanks to NVIDIA’s (NVDA) stellar earnings report. The report has injected considerable optimism into the global AI wave.
Running AI requires significant energy resources. To meet this strong demand, the use of clean energy has increased. Hydrogen ETFs like Global X Hydrogen ETF HYDR (up 27.4%) and other clean ETFs like ProShares S&P Kensho Cleantech ETF CTEX (up 21.9%) skyrocketed in May.
The current AI boom, which has led to an increased need for clean, sustainable energy, has made this possible. Can the rally continue in June? Most likely, but the winning momentum could be a little slower (read: Hydrogen ETFs Soared in May: Here’s Why).
Nasdaq Hits 17,000 for First Time in May: Further Gains Likely?
The main US stock indexes hit several record highs in May. Even as concerns about higher long-term interest rates grow, sentiment on Wall Street toward stocks is increasingly positive, reflecting a brighter outlook for earnings and economic expansion .
Over the past two weeks, three equity strategists have raised their year-end forecasts for the S&P 500. With technology demand remaining strong thanks to the AI boom, we expect the S&P 500 and Nasdaq continues in June.
Semiconductors were the winning technology area in May and Invesco PHLX Semiconductor ETF SOXQ added 12.4% last month. The fund’s average P/E ratio is 38.5X, which is lower than the P/E ratio held by ETFs like SHOC and SMH. We can witness a new SOXQ rally.
Will silver continue to soar in June?
Silver has seen a notable rally in 2024, with abrdn Physical Silver Stock ETF SIVR added 14.4% in May. This rally is attributed to various factors, including chances of monetary policy easing in the United States, geopolitical tensions and increased central bank purchases, particularly from China. Industrial demand for silver is high. However, if rates remain high for longer, silver bullion could remain weak.
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abrdn Physical Silver Shares ETF (SIVR): ETF Research Reports
iShares Floating Rate Bond ETF (FLOT): ETF Research Reports
Invesco S&P SmallCap Momentum ETF (XSMO): ETF Research Reports
Avantis International Small Cap Value ETF (AVDV): ETF Research Reports
Invesco PHLX Semiconductor ETF (SOXQ): ETF Research Reports
Global X Hydrogen ETF (HYDR): ETF Research Reports
ProShares S&P Kensho Cleantech ETF (CTEX): ETF Research Reports
Putnam BDC Income ETF (PBDC): ETF Research Reports