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Wall Street witnessed an upbeat Q4 due to moderation in inflationary pressures, the likelihood of Fed rate cuts in 2024 and decent corporate earnings. All key U.S. equity gauges – the S&P 500, the Dow Jones, the Nasdaq and the Russell 2000 – gained by 10.1%, 10.4%, 13.6% and 15.4%, respectively in the past three months (as of Dec 26, 2023).
As far as rates are concerned, the benchmark treasury yield started the quarter with 4.69%, hit a high of 4.98% on Oct 19 and was at 3.89% at the end of Dec 26, 2023. Against this backdrop, below we highlight a few ETFs that fetched sizable assets in the fourth quarter of 2023.
S&P 500 ETFs Win
SPDR S&P 500 ETF Trust (SPY - Free Report) , Vanguard 500 Index Fund ETF (VOO - Free Report) and iShares Core S&P 500 ETF (IVV - Free Report) amassed about $53.33 billion, $11.84 billion and $7.59 billion in the fourth quarter, respectively. Solid rally in the S&P 500 in November and December probably lured investors to focus on the S&P 500 ETFs as risk-on sentiments returned to the market. Vanguard Total Stock Market ETF (VTI - Free Report) also fetched in about $8.17 billion in assets in the quarter.
Inflows to Bonds Jump Too
iShares 20 Plus Year Treasury Bond ETF (TLT - Free Report) , Vanguard Total Bond Market Index Fund ETF (BND - Free Report) , iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and iShares Core US Aggregate Bond ETF (AGG) hauled in about $8.62 billion, $4.94 billion, $4.65 billion and $4.30 billion, respectively. As the Fed rate cut hopes strengthened for 2024, bond yields slumped and revived investors’ interest in long-term bond ETFs all over again.
Interest in Small-Caps Bounce Back
The small-cap ETF, iShares Russell 2000 ETF (IWM - Free Report) , has attracted approximately $6.99 billion in assets. This renewed interest can be attributed to several factors, including the likelihood of a dovish Fed, strong consumer confidence, positive jobs data, and attractive valuations, all of which have bolstered the small-cap segment. As a result, the fund, IWM, has seen a significant increase in assets.
TIPs Lost Assets
iShares TIPS Bond ETF (TIP - Free Report) has attracted $2.9 million in assets in the quarter. Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed. Fed's favorite inflation gauge shows prices rose at 3.2% annual rate in November, less than expected. The core personal consumption expenditures price index rose just 0.1% in November and was up 3.2% from a year ago, both close to expectations.
Short-Term Bond ETFs Fell Out of Favor
The federal funds rate is currently 5.25% to 5.50%. The monetary policymakers forecast that their key short-term rate will reach 3.9% to 5.4% by the end of 2024, down from September projections of 4.4% to 6.1%. That suggests that the Fed is prepared to cut its benchmark rates by additional three-quarters of a point until the end of 2024.
This has probably cut demand for short-term bond ETFs like Vanguard Short-Term Corporate Bond Index Fund ETF (VCSH - Free Report) has lost about $2.2 billionandiShares 1-5 Year Investment Grade Corporate Bd ETF (IGSB - Free Report) . The funds VCSH and IGSB lost assets worth $2.20 billion and $1.99 billion, respectively.
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ETF Asset Report of Q4
Wall Street witnessed an upbeat Q4 due to moderation in inflationary pressures, the likelihood of Fed rate cuts in 2024 and decent corporate earnings. All key U.S. equity gauges – the S&P 500, the Dow Jones, the Nasdaq and the Russell 2000 – gained by 10.1%, 10.4%, 13.6% and 15.4%, respectively in the past three months (as of Dec 26, 2023).
As far as rates are concerned, the benchmark treasury yield started the quarter with 4.69%, hit a high of 4.98% on Oct 19 and was at 3.89% at the end of Dec 26, 2023. Against this backdrop, below we highlight a few ETFs that fetched sizable assets in the fourth quarter of 2023.
S&P 500 ETFs Win
SPDR S&P 500 ETF Trust (SPY - Free Report) , Vanguard 500 Index Fund ETF (VOO - Free Report) and iShares Core S&P 500 ETF (IVV - Free Report) amassed about $53.33 billion, $11.84 billion and $7.59 billion in the fourth quarter, respectively. Solid rally in the S&P 500 in November and December probably lured investors to focus on the S&P 500 ETFs as risk-on sentiments returned to the market. Vanguard Total Stock Market ETF (VTI - Free Report) also fetched in about $8.17 billion in assets in the quarter.
Inflows to Bonds Jump Too
iShares 20 Plus Year Treasury Bond ETF (TLT - Free Report) , Vanguard Total Bond Market Index Fund ETF (BND - Free Report) , iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and iShares Core US Aggregate Bond ETF (AGG) hauled in about $8.62 billion, $4.94 billion, $4.65 billion and $4.30 billion, respectively. As the Fed rate cut hopes strengthened for 2024, bond yields slumped and revived investors’ interest in long-term bond ETFs all over again.
Interest in Small-Caps Bounce Back
The small-cap ETF, iShares Russell 2000 ETF (IWM - Free Report) , has attracted approximately $6.99 billion in assets. This renewed interest can be attributed to several factors, including the likelihood of a dovish Fed, strong consumer confidence, positive jobs data, and attractive valuations, all of which have bolstered the small-cap segment. As a result, the fund, IWM, has seen a significant increase in assets.
TIPs Lost Assets
iShares TIPS Bond ETF (TIP - Free Report) has attracted $2.9 million in assets in the quarter. Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed. Fed's favorite inflation gauge shows prices rose at 3.2% annual rate in November, less than expected. The core personal consumption expenditures price index rose just 0.1% in November and was up 3.2% from a year ago, both close to expectations.
Short-Term Bond ETFs Fell Out of Favor
The federal funds rate is currently 5.25% to 5.50%. The monetary policymakers forecast that their key short-term rate will reach 3.9% to 5.4% by the end of 2024, down from September projections of 4.4% to 6.1%. That suggests that the Fed is prepared to cut its benchmark rates by additional three-quarters of a point until the end of 2024.
This has probably cut demand for short-term bond ETFs like Vanguard Short-Term Corporate Bond Index Fund ETF (VCSH - Free Report) has lost about $2.2 billionandiShares 1-5 Year Investment Grade Corporate Bd ETF (IGSB - Free Report) . The funds VCSH and IGSB lost assets worth $2.20 billion and $1.99 billion, respectively.