Top and Flop ETFs of the First Half
Wall Street enjoyed a remarkable rally in the first half of the year, buoyed by an artificial intelligence (AI) craze, strong corporate earnings, rate cut bets and optimism over a resilient economy. The "Magnificent Seven" is the biggest engine of growth, with NVIDIA NVDA leading the way in the AI revolution.
In the latest FOMC meeting, U.S. policymakers penciled in one rate cut for this year and foresee four cuts for 2025. The Fed altered language in its statement, noting “modest further progress toward the committee’s 2% inflation objective.” Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand operations easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
Some interesting facts from the first half:
The S&P 500 achieved multiple records and gained at least 500 points in the first six months. The index topped the 5,500 level for the first time last week after hitting the 5,400 threshold earlier this month and 5,300 last month, underscoring strong confidence. It broke the milestones of 5,100 and 5,200 in February.
The Nasdaq Composite Index has been an outperformer this year, with the expansion of AI applications promising growth opportunities.
The three stocks — NVIDIA NVDA, Apple AAPL, and Microsoft MSFT — in the "Magnificent Seven" group are in a race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities. Technology remained the best-performing sector (read: ETFs to Tap 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 Focus as Amazon Joins $2T Club for the First Time).
Uranium stocks have been rising on increasing demand for uranium buoyed by AI's insatiable energy needs and supply disruptions.
The utility sector got a boost as higher demand for AI chips and software accelerated electricity demand.
The world's largest cryptocurrency soared to a record high in the first quarter amid the launch of new spot Bitcoin ETFs and growing optimism about the tokens. However, the craze has faded in recent months.
On the commodity side, precious metals like gold and silver and base metals like copper performed well during the first half. These metals recently reached a multi-year high. Rate cut bets and geopolitical tension drive up the price for both the precious metals, which are considered a store of wealth for investors. Copper prices rallied on bullish long-term 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 from the best and worst-performing zones in the first half of 2024.
Best ETFs
Grayscale Bitcoin Trust (GBTC) – Up 57.5%
Grayscale Bitcoin Trust is the world’s largest Bitcoin ETF that enables investors to gain exposure to Bitcoin in the form of security while avoiding the challenges of buying, storing, and safekeeping Bitcoin directly. It owns and passively holds actual Bitcoins through the Custodian, Coinbase Custody. Grayscale Bitcoin Trust has an AUM of $17 billion and charges 1.50% in annual fees from investors. It trades in a volume of 6 million shares a day on average.
VanEck Vectors Semiconductor ETF (SMH) – Up 48%
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. NVIDIA is the top firm, accounting for a 20.4% share. VanEck Vectors Semiconductor ETF has managed assets worth $24 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 7.2 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook (read: Best-Performing Stocks of the Top ETF of the First Half).
Invesco S&P 500 Momentum ETF (SPMO) – Up 34.6%
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 securities in its basket and charges 13 bps in fees per year. Information technology is the top sector with a 50.2% share, while consumer discretionary, communication services and healthcare round off the next three spots. Invesco S&P 500 Momentum ETF has an AUM of $2 billion and trades in an average daily volume of 353,000 shares.
Worst ETFs
Sprott Lithium Miners ETF (LITP) – Down 36.1%
Lithium prices have plunged this year as a broader slowdown in the China economy took a toll on sales of electric vehicles in China. Sprott Lithium Miners ETF is a pure-play U.S.-listed ETF focused on lithium mining companies that are providing the critical mineral necessary for the clean energy transition. It follows the Nasdaq Sprott Lithium Miners Index, holding 44 stocks in its basket. Sprott Lithium Miners ETF has gathered $5.5 million in its asset base and charges 65 bps in annual fees. It trades in an average daily volume of 9,000 shares.
ProShares VIX Short-Term Futures ETF (VIXY) – Down 31.1%
Volatility products have been lagging this year as they underperform when the stock market surges. 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 to expiration. ProShares VIX Short-Term Futures ETF has amassed $149 million in AUM and charges 85 bps in fees per year. It trades in a volume of 4 million shares per day on average.
AdvisorShares Psychedelics ETF (PSIL) – Down 30.4%
AdvisorShares Psychedelics ETF invests in the emerging psychedelic drugs sector, offering exposure to those biotechnology, pharmaceutical and life sciences companies, which AdvisorShares sees as leading the way in this nascent industry. It is an actively managed fund and holds 26 stocks in its basket with a heavy concentration on the top firm. AdvisorShares Psychedelics ETF has accumulated $5.7 million in its asset base and charges 99 bps in annual fees. It trades in an average daily volume of 49,000 shares (read: Best and Worst ETF Zones 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