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Welcome to Episode #362 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey was joined by Neena Mishra, Zacks Director of ETF Research, to discuss the surprising inflows, and outflows, in ETFs this year. In 2021’s bull market, a trillion dollars flowed into ETFs. Even in 2022, as stocks sold off, $600 billion flowed in. But in 2023, there have barely been any inflows at all.
Where’s the Money Going?
The most popular investment in 2023 has been money market funds as investors chased their sure thing 5% yield. But meanwhile, technology and growth stocks have rallied big in 2023. The NASDAQ is having its best start to a year since 1991, gaining about 30%.
Yet investors have pulled $1.8 billion out of the Invesco QQQ ETF, although they have put in $3.1 billion into the cheaper Invesco NASDAQ 100 ETF (QQQM - Free Report) , including $1 billion in the last week as the tech stock rally picked up steam. But that’s a far cry from the inflows that occurred in 2021.
Investors are also staying away from the big pandemic winners like Cathie Wood’s ARK Innovation ETF (ARKK - Free Report) .Despite gaining 40% year-to-date, the fund has seen outflows of $215 million in 2023.
Are investors missing out on the big stock rally this year by playing it safe?
Tesla shares have rallied 13 days in a row in June 2023 and are now up 108.5% year-to-date.
Analysts have been cutting Tesla’s 2023 earnings estimates in the last 60 days. Earnings are now expected to be down 12.5% to $3.56 from $4.07 last year. But they are forecast to rebound in 2024 by 32.5% to $4.72.
Tesla is not a cheap stock. It trades with a forward P/E of 72.7.
Microsoft has been one of the big winners with AI in 2023. Shares are up 41% year-to-date.
But the AI impact isn’t really reflected in the company’s earnings yet. Microsoft’s earnings are expected to rise just 4.8% in fiscal 2023 to $9.65 from $9.21 last year. In fiscal 2024, however, analysts see a jump of 11.7% to $10.78.
With a forward P/E of 34.6, Microsoft is an expensive stock.
Should investors have Microsoft on their short lists?
NVIDIA is one of the hottest stocks on Wall Street thanks to the surge in AI business. Shares are up 194.2% year-to-date.
Earnings are expected to rise 128.7% in fiscal 2024 to $7.64 from $3.34 after NVIDIA surprised the Street by guiding much higher than expected. 15 estimates have been revised higher in the last 30 days.
But you’ll pay up for those earnings, as NVIDIA is trading with a forward P/E of 53.7.
Does valuation matter on a stock like NVIDIA in 2023?
What else do you Need to Know about the Inflows, and Outflows, in ETFs this year?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of MSFT in her personal portfolio.]
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Have You Missed the 2023 Stock Rally?
Welcome to Episode #362 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey was joined by Neena Mishra, Zacks Director of ETF Research, to discuss the surprising inflows, and outflows, in ETFs this year. In 2021’s bull market, a trillion dollars flowed into ETFs. Even in 2022, as stocks sold off, $600 billion flowed in. But in 2023, there have barely been any inflows at all.
Where’s the Money Going?
The most popular investment in 2023 has been money market funds as investors chased their sure thing 5% yield. But meanwhile, technology and growth stocks have rallied big in 2023. The NASDAQ is having its best start to a year since 1991, gaining about 30%.
Yet investors have pulled $1.8 billion out of the Invesco QQQ ETF, although they have put in $3.1 billion into the cheaper Invesco NASDAQ 100 ETF (QQQM - Free Report) , including $1 billion in the last week as the tech stock rally picked up steam. But that’s a far cry from the inflows that occurred in 2021.
Investors are also staying away from the big pandemic winners like Cathie Wood’s ARK Innovation ETF (ARKK - Free Report) .Despite gaining 40% year-to-date, the fund has seen outflows of $215 million in 2023.
Are investors missing out on the big stock rally this year by playing it safe?
3 Stocks Driving the Rally
1. Tesla, Inc. (TSLA - Free Report)
Tesla shares have rallied 13 days in a row in June 2023 and are now up 108.5% year-to-date.
Analysts have been cutting Tesla’s 2023 earnings estimates in the last 60 days. Earnings are now expected to be down 12.5% to $3.56 from $4.07 last year. But they are forecast to rebound in 2024 by 32.5% to $4.72.
Tesla is not a cheap stock. It trades with a forward P/E of 72.7.
Does Tesla still have more gas left in the tank?
2. Microsoft Corp. (MSFT - Free Report)
Microsoft has been one of the big winners with AI in 2023. Shares are up 41% year-to-date.
But the AI impact isn’t really reflected in the company’s earnings yet. Microsoft’s earnings are expected to rise just 4.8% in fiscal 2023 to $9.65 from $9.21 last year. In fiscal 2024, however, analysts see a jump of 11.7% to $10.78.
With a forward P/E of 34.6, Microsoft is an expensive stock.
Should investors have Microsoft on their short lists?
3. NVIDIA Corp. (NVDA - Free Report)
NVIDIA is one of the hottest stocks on Wall Street thanks to the surge in AI business. Shares are up 194.2% year-to-date.
Earnings are expected to rise 128.7% in fiscal 2024 to $7.64 from $3.34 after NVIDIA surprised the Street by guiding much higher than expected. 15 estimates have been revised higher in the last 30 days.
But you’ll pay up for those earnings, as NVIDIA is trading with a forward P/E of 53.7.
Does valuation matter on a stock like NVIDIA in 2023?
What else do you Need to Know about the Inflows, and Outflows, in ETFs this year?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of MSFT in her personal portfolio.]