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S&P 500 ETF Sees Historic $21B Influx Amid Stock Surge
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In a remarkable turn of events in the financial world, the largest and most established ETF globally witnessed a record-breaking inflow of cash last week. SPDR S&P 500 ETF Trust (SPY - Free Report) , which tracks the S&P 500 Index, pulled in a massive $20.8 billion in a single day, Dec 15, according to Bloomberg Intelligence.
This influx was the largest since the fund's inception in 1993 and the largest-ever single-day flow for any ETF. Over the week, SPY has attracted more than $24 billion, also a record.
The large inflows came amid a significant rally in stock markets, propelled by signals from the Federal Reserve about a possible end to its rate-hiking cycle, with expectations of lower borrowing costs in 2024. In its meeting last week, the central bank kept the federal funds rate steady at 5.25%-5.50% since late 2023 and penciled in three rate cuts for 2024, compared with the previous forecast of two. The cuts are expected to bring the key policy rate down to 4.4-4.9% by the end of 2024.
Broadly, markets are placing a nearly 75% chance of a rate cut in March, per the CME FedWatch Tool. A month ago, there had been just a 28% chance of cuts by March. Bank of America sees 100 bps of interest rate cuts in 2024, starting in March (read: Rate Cuts in the Cards: Bet on Leveraged Rate-Sensitive ETFs).
Additionally, Americans are feeling more confident about the economy than they did over the past few months, heading into the New Year. Consumer sentiment rebounded sharply in early December as worries about inflation receded. Retail sales also posted surprise growth in November after declining in the prior month. The data signals that the U.S. economy can enjoy both modest growth and disinflation simultaneously.
Investors should note that the inflows into SPY coincided with various market events known to boost trading activities. Matt Bartolini, the head of SPDR Americas Research at State Street Global Advisors, highlighted the significance of these events. Friday marked the last trading day before the rebalancing of the S&P 500 and Nasdaq 100 indices, a time when funds managing trillions typically realign with the new index compositions. Additionally, approximately $5 trillion in options expired on the same day, a typical scenario for Wall Street managers to either roll over existing positions or initiate new ones.
Further, several analysts and market strategists expect the S&P 500 to touch new highs in 2024, bolstering investors’ confidence in the ETFs tracking the index. Goldman Sachs strategists raised the S&P 500 target from 4,700 to 5,100 in 2024 on increased confidence for Fed rate cuts in March. Oppenheimer sees the S&P 500 rising to 5,200 by the end of 2024.
Last month, strategists at RBC Capital Markets and Bank of America expressed their optimism by setting a year-end target of 5,000 for 2024. Their bullish stance is based on several factors — a growing positive sentiment in the stock market, a decrease in geopolitical risks, signs of cooling inflation and anticipation of the Fed’s rate-hiking cycle coming to an end. Other Wall Street forecasters are also optimistic, with Deutsche Bank and Société Générale predicting the S&P 500 to hit new highs in 2024 (read: 5 Undervalued Stocks in the S&P 500 ETF to Buy for 2024).
Further, Fundstrat Tom Lee, who has been one of the most persistently bullish forecasters on Wall Street this year, anticipates that the S&P 500 could soar to 5,200 by the end of 2024 as the Fed shifts to a less restrictive monetary policy.
SPY in Focus
SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7.3% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, financials, healthcare and consumer discretionary accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has an AUM of $459 billion and charges 9 bps in fees per year. It trades in 71 million shares per day on average and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
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S&P 500 ETF Sees Historic $21B Influx Amid Stock Surge
In a remarkable turn of events in the financial world, the largest and most established ETF globally witnessed a record-breaking inflow of cash last week. SPDR S&P 500 ETF Trust (SPY - Free Report) , which tracks the S&P 500 Index, pulled in a massive $20.8 billion in a single day, Dec 15, according to Bloomberg Intelligence.
This influx was the largest since the fund's inception in 1993 and the largest-ever single-day flow for any ETF. Over the week, SPY has attracted more than $24 billion, also a record.
The large inflows came amid a significant rally in stock markets, propelled by signals from the Federal Reserve about a possible end to its rate-hiking cycle, with expectations of lower borrowing costs in 2024. In its meeting last week, the central bank kept the federal funds rate steady at 5.25%-5.50% since late 2023 and penciled in three rate cuts for 2024, compared with the previous forecast of two. The cuts are expected to bring the key policy rate down to 4.4-4.9% by the end of 2024.
Broadly, markets are placing a nearly 75% chance of a rate cut in March, per the CME FedWatch Tool. A month ago, there had been just a 28% chance of cuts by March. Bank of America sees 100 bps of interest rate cuts in 2024, starting in March (read: Rate Cuts in the Cards: Bet on Leveraged Rate-Sensitive ETFs).
Additionally, Americans are feeling more confident about the economy than they did over the past few months, heading into the New Year. Consumer sentiment rebounded sharply in early December as worries about inflation receded. Retail sales also posted surprise growth in November after declining in the prior month. The data signals that the U.S. economy can enjoy both modest growth and disinflation simultaneously.
Investors should note that the inflows into SPY coincided with various market events known to boost trading activities. Matt Bartolini, the head of SPDR Americas Research at State Street Global Advisors, highlighted the significance of these events. Friday marked the last trading day before the rebalancing of the S&P 500 and Nasdaq 100 indices, a time when funds managing trillions typically realign with the new index compositions. Additionally, approximately $5 trillion in options expired on the same day, a typical scenario for Wall Street managers to either roll over existing positions or initiate new ones.
Further, several analysts and market strategists expect the S&P 500 to touch new highs in 2024, bolstering investors’ confidence in the ETFs tracking the index. Goldman Sachs strategists raised the S&P 500 target from 4,700 to 5,100 in 2024 on increased confidence for Fed rate cuts in March. Oppenheimer sees the S&P 500 rising to 5,200 by the end of 2024.
Last month, strategists at RBC Capital Markets and Bank of America expressed their optimism by setting a year-end target of 5,000 for 2024. Their bullish stance is based on several factors — a growing positive sentiment in the stock market, a decrease in geopolitical risks, signs of cooling inflation and anticipation of the Fed’s rate-hiking cycle coming to an end. Other Wall Street forecasters are also optimistic, with Deutsche Bank and Société Générale predicting the S&P 500 to hit new highs in 2024 (read: 5 Undervalued Stocks in the S&P 500 ETF to Buy for 2024).
Further, Fundstrat Tom Lee, who has been one of the most persistently bullish forecasters on Wall Street this year, anticipates that the S&P 500 could soar to 5,200 by the end of 2024 as the Fed shifts to a less restrictive monetary policy.
SPY in Focus
SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7.3% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, financials, healthcare and consumer discretionary accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has an AUM of $459 billion and charges 9 bps in fees per year. It trades in 71 million shares per day on average and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).