Wall Street has been enjoying a strong rally this year, defying slowdown fears. The S&P 500 and the Dow Jones hit a series of new all-time highs and topped 5,700 and 42,000 milestones, respectively, for the first time last week. The Nasdaq Composite Index is hovering near the 18,000 level. Most of the optimism is driven by rate cuts.

The winners are broad-based across sectors, building up massive gains this year. We have presented a bunch of top-performing ETFs from various corners of the market that have gained more than 35% in the first nine months of 2024. These are Reaves Utilities ETF UTES, Themes Gold Miners ETF AUMI, Roundhill Magnificent Seven ETF MAGS, Invesco S&P 500 Momentum ETF SPMO and VanEck Vectors Semiconductor ETF SMH. These funds could also be winners in the remainder of 2024 if the current trends continue.

The Federal Reserve last week slashed key interest rates by 50 bps to 4.75%-5% after holding it at a 23-year high for 14 consecutive months since July 2023. This marked the first rate cut since 2020 to address slowing economic growth and showed greater confidence in the fact that inflation is moving sustainably toward the 2% target level (read: Fed Initiates Rate Cuts: Top-Ranked Growth ETFs to Buy).

The central bank projects two more rate cuts of another 50 bps in its final two meetings this year, due in November and December. It indicates another 100-bps rate cut next year and 50-bps in 2026, which means four rate cuts in 2025 and two in 2026.

Lower rates lead to reduced borrowing costs for mortgages, credit cards and other consumer and business loans. These help businesses expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.

As the Fed has started cutting rates, cyclical sectors like consumer discretionary, industrials and financials will receive a boost. Reduced borrowing costs can lead to increased consumer and business spending. It will encourage lending at banks and potentially lead to increased consumer and business loan activity. High-yield sectors like utilities and real estate will also benefit significantly from rate cuts, given their sensitivity to interest rates (read: 5 Sector ETFs Scaling New Highs on Fed Rate Cuts).

Technology is also not behind. As the tech sector relies on borrowing for superior growth, borrowing more money for further initiatives is cheaper when interest rates are low. Additionally, securities in capital-intensive sectors like telecom will benefit from lower rates as businesses will face lower loan rates over time. Further, gold becomes more appealing when interest rates fall compared to fixed-income assets such as bonds, which would yield weaker returns in a low-interest-rate environment.

ETFs in Focus

Reaves Utilities ETF (UTES) – Up 43.9%

Reaves Utilities ETF is the only actively managed ETF that seeks to provide returns through a combination of capital appreciation and income, primarily through investments in utility stocks. It holds 20 stocks with a heavy concentration on the top three firms.

UTES has AUM of $170 million and an average daily volume of 33,000 shares. It charges 49 bps in annual fees.

Themes Gold Miners ETF (AUMI) – Up 40.3%

Themes Gold Miners ETF seeks to track the Solactive Global Pure Gold Miners Index, which identifies the largest 30 companies by market capitalization that derive their revenues from gold mining. It holds 29 stocks in its basket, with Canadian firms accounting for 51.4%, followed by Australian firms with a 29.6% share.

Themes Gold Miners ETF has accumulated $2.3 million in its asset base while trading in an average daily volume of 1,000 shares. It charges 35 bps in fees per year.

Roundhill Magnificent Seven ETF (MAGS) – Up 40.1%

Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $749.7 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 672,000 shares (read: 5 Tech ETFs at the Forefront of the Fed-Induced Rally).

Invesco S&P 500 Momentum ETF (SPMO) – Up 39.2%

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 119 securities in its basket and charges 13 bps in fees per year. Financials is the top sector with a 23.5% share, while information technology, consumer discretionary, and healthcare round off the next three spots.

Invesco S&P 500 Momentum ETF has an AUM of $2.4 billion and trades in an average daily volume of 1 million shares.

VanEck Vectors Semiconductor ETF (SMH) – Up 36.6%

VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index, which tracks the most liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket.  

VanEck Vectors Semiconductor ETF has managed assets worth $22.8 billion and charges 35 bps in annual fees and expenses. It trades in an average daily volume of 9.3 million shares and has a Zacks ETF Rank #1 (Strong Buy).

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

VanEck Semiconductor ETF (SMH): ETF Research Reports

Virtus Reaves Utilities ETF (UTES): ETF Research Reports

Invesco S&P 500 Momentum ETF (SPMO): ETF Research Reports

Themes Gold Miners ETF (AUMI): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research