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The year 2023 has proven to be an exceptional year for Wall Street. As the year approaches its end, with less than two weeks remaining, the Dow Jones has soared to unprecedented heights, and the S&P 500, Nasdaq Composite, Russell 2000, and S&P Mid-Cap 400 are all hovering around their highest levels in 52 weeks.
This remarkable market performance is driven by a combination of factors: the booming artificial intelligence (AI) sector and the resultant rise in the "Magnificent Seven" stocks, cooling inflation rates, and growing confidence that the Federal Reserve may halt further interest rate increases.
This positive trend is widespread across various sectors, with technology leading the charge and securing substantial gains throughout the year. Now investors are looking for ETF investment ideas for 2024. For them, we have jotted down a few predictions.
Inflation Will Cool Down Further But Will Likely Remain Above 2%
After hitting multi-year highs, inflation rates started showing signs of cooling down from late 2022 The personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis, both in line with expectations. But the rates are still higher than the Fed’s target of 2.0%.
We do not expect inflation to slip to the 2.0% range in early 2024. The Summary of Economic Projections (SEP) revealed the Fed's core inflation outlook, expecting it to peak at 2.4% next year, lower than the previous 2.6% projection. The Federal Reserve expects a further decline in inflation to 2.2% by 2025.
Amplify Inflation Fighter ETF (IWIN - Free Report) can thus be watched for gains as long as inflation remains stubborn. The fund is comprised of various inflation-sensitive stocks and commodities that are aimed to benefit directly or indirectly from inflation.
Recessionary Fears Seem Exaggerated
While the bond market still predicts a recession, the U.S. GDP growth rate seems decent The US economy expanded an annualized 5.2% in Q3 2023, higher than 4.9% in the preliminary estimate, and forecasts of 5%. It marks the strongest growth since Q4 2021. Economic growth is forecasted at 1.4% in the next year, down from the previous 1.5% projection, with slight improvements in 2025 and 2026.
This means the all-important consumer sector should be robust in 2024. Investors can keep a tab on Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) and iShares U.S. Consumer Focused ETF (IEDI - Free Report) .
Earnings projections for the fourth quarter of 2023 have been consistently decreasing since the start of the quarter. This decline is more significant than what we observed in the same periods of the two previous quarters, marking a departure from the positive revision trend we have highlighted in our reports since April 2023.
On the positive side, Q4 estimates have been raised since the quarter got underway for 5 sectors, with the most significant upward adjustments to estimates for the Utilities, Industrial Products, Autos, Finance, and Energy sectors.
So on earnings front, investors should watch Utilities Select Sector SPDR ETF (XLU - Free Report) , Industrial Select Sector SPDR ETF (XLI - Free Report) , First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) , Financial Select Sector SPDR ETF (XLF - Free Report) and Vanguard Energy ETF (VDE - Free Report) for gains.
Gold to Regain Some Strength
Gold prices are up 9.9% this year, lagging the S&P 500 (up 23%) (as of Dec 20, 2023). But a rebound is likely to be in the cards for gold. As the Fed will slower the rate hike momentum, the U.S. dollar will lose strength and favor the non-yielding gold prices. Moreover, after a downbeat 2022 and a moderate 2023, gold’s valuation is a little lower currently. This will offer the yellow metal a leeway to gain strength. Plus, the global growth slowdown should benefit the safe-haven asset, gold. SPDR Gold Shares (GLD - Free Report) should thus be watched for gains.
More Mutual-Fund-to-ETF Conversions in the Cards
Since early 2021, there have been about 70 mutual fund (MF) to exchange-traded fund (ETF) conversions, including nearly three dozen in 2023, according to Morningstar Direct, as quoted on CNBC. Recently converted ETFs include Dimensional U.S. Core Equity 2 (DFAC - Free Report) , which has more than $20 billion in assets; JPMorgan International Research Enhanced Equity (JIRE - Free Report) , with more than $5 billion; Fidelity Enhanced Large Cap Value ETFFELV with $1.8 billion, and Fidelity Disruptive Automation (FBOT - Free Report) , with more than $100 million, FBOT Quick QuoteFBOT - Free Report) %2C%20with%20more%20than" target="_blank">per Kiplinger.
A greater tax efficiency for investors as ETFs generally don’t have capital gains distributions led to the rise in such conversions, per experts. The move is steadily rising, said Daniel Sotiroff, senior manager research analyst for Morningstar Research Services, quoted on CNBC.
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5 ETF Predictions for 2024
The year 2023 has proven to be an exceptional year for Wall Street. As the year approaches its end, with less than two weeks remaining, the Dow Jones has soared to unprecedented heights, and the S&P 500, Nasdaq Composite, Russell 2000, and S&P Mid-Cap 400 are all hovering around their highest levels in 52 weeks.
This remarkable market performance is driven by a combination of factors: the booming artificial intelligence (AI) sector and the resultant rise in the "Magnificent Seven" stocks, cooling inflation rates, and growing confidence that the Federal Reserve may halt further interest rate increases.
This positive trend is widespread across various sectors, with technology leading the charge and securing substantial gains throughout the year. Now investors are looking for ETF investment ideas for 2024. For them, we have jotted down a few predictions.
Inflation Will Cool Down Further But Will Likely Remain Above 2%
After hitting multi-year highs, inflation rates started showing signs of cooling down from late 2022 The personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis, both in line with expectations. But the rates are still higher than the Fed’s target of 2.0%.
We do not expect inflation to slip to the 2.0% range in early 2024. The Summary of Economic Projections (SEP) revealed the Fed's core inflation outlook, expecting it to peak at 2.4% next year, lower than the previous 2.6% projection. The Federal Reserve expects a further decline in inflation to 2.2% by 2025.
Amplify Inflation Fighter ETF (IWIN - Free Report) can thus be watched for gains as long as inflation remains stubborn. The fund is comprised of various inflation-sensitive stocks and commodities that are aimed to benefit directly or indirectly from inflation.
Recessionary Fears Seem Exaggerated
While the bond market still predicts a recession, the U.S. GDP growth rate seems decent The US economy expanded an annualized 5.2% in Q3 2023, higher than 4.9% in the preliminary estimate, and forecasts of 5%. It marks the strongest growth since Q4 2021. Economic growth is forecasted at 1.4% in the next year, down from the previous 1.5% projection, with slight improvements in 2025 and 2026.
This means the all-important consumer sector should be robust in 2024. Investors can keep a tab on Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) and iShares U.S. Consumer Focused ETF (IEDI - Free Report) .
Corporate Earnings to Remain Under Pressure?
For Q4 of 2023, total S&P 500 earnings are currently expected to be -0.2% below the year-earlier period on +2.3% higher revenues. This would follow the +3.5% increase in index earnings in 2023 Q3 on +2% higher revenues.
Earnings projections for the fourth quarter of 2023 have been consistently decreasing since the start of the quarter. This decline is more significant than what we observed in the same periods of the two previous quarters, marking a departure from the positive revision trend we have highlighted in our reports since April 2023.
On the positive side, Q4 estimates have been raised since the quarter got underway for 5 sectors, with the most significant upward adjustments to estimates for the Utilities, Industrial Products, Autos, Finance, and Energy sectors.
So on earnings front, investors should watch Utilities Select Sector SPDR ETF (XLU - Free Report) , Industrial Select Sector SPDR ETF (XLI - Free Report) , First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) , Financial Select Sector SPDR ETF (XLF - Free Report) and Vanguard Energy ETF (VDE - Free Report) for gains.
Gold to Regain Some Strength
Gold prices are up 9.9% this year, lagging the S&P 500 (up 23%) (as of Dec 20, 2023). But a rebound is likely to be in the cards for gold. As the Fed will slower the rate hike momentum, the U.S. dollar will lose strength and favor the non-yielding gold prices. Moreover, after a downbeat 2022 and a moderate 2023, gold’s valuation is a little lower currently. This will offer the yellow metal a leeway to gain strength. Plus, the global growth slowdown should benefit the safe-haven asset, gold. SPDR Gold Shares (GLD - Free Report) should thus be watched for gains.
More Mutual-Fund-to-ETF Conversions in the Cards
Since early 2021, there have been about 70 mutual fund (MF) to exchange-traded fund (ETF) conversions, including nearly three dozen in 2023, according to Morningstar Direct, as quoted on CNBC. Recently converted ETFs include Dimensional U.S. Core Equity 2 (DFAC - Free Report) , which has more than $20 billion in assets; JPMorgan International Research Enhanced Equity (JIRE - Free Report) , with more than $5 billion; Fidelity Enhanced Large Cap Value ETF FELV with $1.8 billion, and Fidelity Disruptive Automation (FBOT - Free Report) , with more than $100 million, FBOT Quick QuoteFBOT - Free Report) %2C%20with%20more%20than" target="_blank">per Kiplinger.
A greater tax efficiency for investors as ETFs generally don’t have capital gains distributions led to the rise in such conversions, per experts. The move is steadily rising, said Daniel Sotiroff, senior manager research analyst for Morningstar Research Services, quoted on CNBC.