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Wall Street sizzled in December, with all three major indices touching a series of new highs. The Dow Jones reached an all-time high, gaining about 5%. The S&P 500 touched a series of 52-week highs, with an increase of 4.7%, and is just 0.3% away from its January 2022 record. The Nasdaq Composite Index has advanced nearly 6%. The small-cap index — the Russell 2000 — is on track to record its best monthly performance since November 2020, rising 13.8%.
The rally came on the back of optimism that the Fed would cut its interest rates sooner than expected and that the U.S. economy would avoid a recession.
The gains were broad-based and well spread out across various segments. Some of the top performers in the ETF space from different corners of the market are Valkyrie Bitcoin Miners ETF (WGMI - Free Report) , ALPS Medical Breakthroughs ETF (SBIO - Free Report) , VanEck Office and Commercial REIT ETF (DESK - Free Report) , S&P Kensho Cleantech ETF (CTEX - Free Report) and SPDR S&P Regional Banking ETF (KRE - Free Report) .
Broad market sentiments have turned extremely bullish following the Fed’s dovish tone. In the latest meeting, Federal Reserve Chair Jerome Powell hinted at a major policy shift as inflation is easing and the economy is holding up better. The central bank kept interest rates steady for the third time and penciled in three rate cuts of 75 bps for 2024. Lower interest rates generally lead to reduced borrowing costs, which can stimulate economic growth (read: Rate Cuts in the Cards: Bet on Leveraged Rate-Sensitive ETFs).
Recent indicators suggest that economic activity has been expanding at a moderate pace, buoyed by robust consumer spending, strong job gains and a low unemployment rate. Americans are now feeling more confident about the economy than they did over the past few months. U.S. consumer confidence jumped to a five-month high in December and retail sales posted surprise growth in November after declining in the prior month.
Further, the strength in the Santa rally has added to the strong momentum in stocks this week. Year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing and the “January effect” are driving stocks higher.
ETFs in Focus
Let’s dig into the details of the abovementioned ETFs:
Bitcoin climbed to a 12-month high of $45,000 in early December, driven by broad enthusiasm about U.S. interest rate cuts and the imminent regulatory approval for Bitcoin ETFs, before retreating to near $42,000. Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining.
Valkyrie Bitcoin Miners ETF holds 22 stocks in its basket with a double-digit concentration on the top five firms. It has amassed $71.1 million in its asset base while trading in an average daily volume of 296,000 shares. WGMI charges 75 bps in annual fees (read: Bitcoin ETFs Set to Explode in 2024 After a Marvelous 2023).
ALPS Medical Breakthroughs ETF (SBIO - Free Report) – Up 31%
Being high beta and high growth sectors, biotech stocks and ETFs rally on the returns of a strong appetite for riskier assets. ALPS Medical Breakthroughs ETF provides exposure to small- and mid-cap stocks of biotechnology companies that have one or more drugs in either Phase II or Phase III of the FDA clinical trials by tracking S-Network Medical Breakthroughs Index. It holds 96 securities in its basket.
ALPS Medical Breakthroughs ETF charges 50 bps in fees per year from its investors and trades in a moderate average daily volume of about 11,000 shares. It has AUM of $102.2 million in its asset base and carries a Zacks ETF Rank #3 (Hold).
VanEck Office and Commercial REIT ETF (DESK - Free Report) – Up 25.5%
The real estate sector got a boost from the Fed rate cut talks as lower rates will boost housing market activity by making mortgages more affordable. VanEck Office and Commercial REIT ETF offers concentrated exposure to the U.S. office property segment and follows the MarketVector US Listed Office and Commercial REITs Index. It holds 27 stocks in its basket and charges 50 bps in annual fees.
VanEck Office and Commercial REIT ETF has accumulated $1.2 million in its asset base since its inception in mid-September (read: Most Interesting New ETFs).
The clean energy space got a boost from the historic COP28 agreement, which pledged to move away from fossil fuels and raise renewable energy capacity. S&P Kensho Cleantech ETF invests in companies involved in developing and building green technologies that could power the future in areas like hydro, solar, wind, and geothermal by tracking the S&P Kensho Cleantech Index. It holds 32 stocks in its basket, with each making up for no more than 5% share. S&P Kensho Cleantech ETF has the largest allocations in capital goods and semiconductors sectors (read: What Does COP 28 Mean for Renewable Energy ETFs?).
S&P Kensho Cleantech ETF has accumulated $5.5 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 2,000 shares and has a Zacks ETF Rank #4 (Sell).
Regional bank indices erased all the losses made this year and have recovered from one of the most challenging years since the 2008 financial crisis. This is especially thanks to the Fed’s dovish tone, which will probably make the yield curve steeper. SPDR S&P Regional Banking ETF provides exposure to the regional banks segment by tracking the S&P Regional Banks Select Industry Index. It holds 140 stocks in its basket, with each accounting for no more than 4.2% of the assets (read: 4 Reasons Why Bank ETFs Can Rebound in 2024).
SPDR S&P Regional Banking ETF has AUM of $4.1 billion and charges 35 bps in annual fees. It trades in an average daily volume of 16 million shares and has a Zacks Rank #4 (Sell).
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5 Market-Beating Sector ETFs of December
Wall Street sizzled in December, with all three major indices touching a series of new highs. The Dow Jones reached an all-time high, gaining about 5%. The S&P 500 touched a series of 52-week highs, with an increase of 4.7%, and is just 0.3% away from its January 2022 record. The Nasdaq Composite Index has advanced nearly 6%. The small-cap index — the Russell 2000 — is on track to record its best monthly performance since November 2020, rising 13.8%.
The rally came on the back of optimism that the Fed would cut its interest rates sooner than expected and that the U.S. economy would avoid a recession.
The gains were broad-based and well spread out across various segments. Some of the top performers in the ETF space from different corners of the market are Valkyrie Bitcoin Miners ETF (WGMI - Free Report) , ALPS Medical Breakthroughs ETF (SBIO - Free Report) , VanEck Office and Commercial REIT ETF (DESK - Free Report) , S&P Kensho Cleantech ETF (CTEX - Free Report) and SPDR S&P Regional Banking ETF (KRE - Free Report) .
Broad market sentiments have turned extremely bullish following the Fed’s dovish tone. In the latest meeting, Federal Reserve Chair Jerome Powell hinted at a major policy shift as inflation is easing and the economy is holding up better. The central bank kept interest rates steady for the third time and penciled in three rate cuts of 75 bps for 2024. Lower interest rates generally lead to reduced borrowing costs, which can stimulate economic growth (read: Rate Cuts in the Cards: Bet on Leveraged Rate-Sensitive ETFs).
Recent indicators suggest that economic activity has been expanding at a moderate pace, buoyed by robust consumer spending, strong job gains and a low unemployment rate. Americans are now feeling more confident about the economy than they did over the past few months. U.S. consumer confidence jumped to a five-month high in December and retail sales posted surprise growth in November after declining in the prior month.
Further, the strength in the Santa rally has added to the strong momentum in stocks this week. Year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing and the “January effect” are driving stocks higher.
ETFs in Focus
Let’s dig into the details of the abovementioned ETFs:
Valkyrie Bitcoin Miners ETF (WGMI - Free Report) – Up 104.6%
Bitcoin climbed to a 12-month high of $45,000 in early December, driven by broad enthusiasm about U.S. interest rate cuts and the imminent regulatory approval for Bitcoin ETFs, before retreating to near $42,000. Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining.
Valkyrie Bitcoin Miners ETF holds 22 stocks in its basket with a double-digit concentration on the top five firms. It has amassed $71.1 million in its asset base while trading in an average daily volume of 296,000 shares. WGMI charges 75 bps in annual fees (read: Bitcoin ETFs Set to Explode in 2024 After a Marvelous 2023).
ALPS Medical Breakthroughs ETF (SBIO - Free Report) – Up 31%
Being high beta and high growth sectors, biotech stocks and ETFs rally on the returns of a strong appetite for riskier assets. ALPS Medical Breakthroughs ETF provides exposure to small- and mid-cap stocks of biotechnology companies that have one or more drugs in either Phase II or Phase III of the FDA clinical trials by tracking S-Network Medical Breakthroughs Index. It holds 96 securities in its basket.
ALPS Medical Breakthroughs ETF charges 50 bps in fees per year from its investors and trades in a moderate average daily volume of about 11,000 shares. It has AUM of $102.2 million in its asset base and carries a Zacks ETF Rank #3 (Hold).
VanEck Office and Commercial REIT ETF (DESK - Free Report) – Up 25.5%
The real estate sector got a boost from the Fed rate cut talks as lower rates will boost housing market activity by making mortgages more affordable. VanEck Office and Commercial REIT ETF offers concentrated exposure to the U.S. office property segment and follows the MarketVector US Listed Office and Commercial REITs Index. It holds 27 stocks in its basket and charges 50 bps in annual fees.
VanEck Office and Commercial REIT ETF has accumulated $1.2 million in its asset base since its inception in mid-September (read: Most Interesting New ETFs).
S&P Kensho Cleantech ETF (CTEX - Free Report) – Up 25.4%
The clean energy space got a boost from the historic COP28 agreement, which pledged to move away from fossil fuels and raise renewable energy capacity. S&P Kensho Cleantech ETF invests in companies involved in developing and building green technologies that could power the future in areas like hydro, solar, wind, and geothermal by tracking the S&P Kensho Cleantech Index. It holds 32 stocks in its basket, with each making up for no more than 5% share. S&P Kensho Cleantech ETF has the largest allocations in capital goods and semiconductors sectors (read: What Does COP 28 Mean for Renewable Energy ETFs?).
S&P Kensho Cleantech ETF has accumulated $5.5 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 2,000 shares and has a Zacks ETF Rank #4 (Sell).
SPDR S&P Regional Banking ETF (KRE - Free Report) - Up 21.7%
Regional bank indices erased all the losses made this year and have recovered from one of the most challenging years since the 2008 financial crisis. This is especially thanks to the Fed’s dovish tone, which will probably make the yield curve steeper. SPDR S&P Regional Banking ETF provides exposure to the regional banks segment by tracking the S&P Regional Banks Select Industry Index. It holds 140 stocks in its basket, with each accounting for no more than 4.2% of the assets (read: 4 Reasons Why Bank ETFs Can Rebound in 2024).
SPDR S&P Regional Banking ETF has AUM of $4.1 billion and charges 35 bps in annual fees. It trades in an average daily volume of 16 million shares and has a Zacks Rank #4 (Sell).