Wall Street has experienced a robust upswing in May, driven by fresh expectations of Federal Reserve rate reductions at the initial phase of the month, strong corporate profits, and the artificial intelligence (AI) craze. This month, all three principal indexes soared to unprecedented heights.

The S&P 500 surpassed the 5,300-mark, the Dow Jones Industrial Average reached 40,000, and the Nasdaq Composite Index broke through the 17,000-threshold for the first time. The S&P 500, the Nasdaq and the Russell 2000 have gained about 3.4%, 5.7% and 2%, respectively in the past one month while the Dow Jones has lost 0.3%.

Recent data indicates that the U.S. economy is on track for another robust GDP increase in the second quarter. In May, U.S. business activity surged to its quickest rate in over two years following a couple of months of moderated growth, with the service sector leading the charge. The US consumer confidence climbed in May, reversing a three-month downward trend.

In the first quarter of 2024, earnings rose by 6%, marking the most significant growth rate in almost two years. The AI euphoria, which was started to be deemed overhyped, once again took the spotlight thanks to NVIDIA's (NVDA) exceptional earnings report. The report has infused considerable optimism into the global AI wave.

The sentiment on Wall Street toward stocks is increasingly positive, reflecting a brighter outlook for both earnings and economic expansion. In the last two weeks, three equity strategists have raised their end-of-year forecasts for the S&P 500. According to Bloomberg data, the median projection for the index on Wall Street is now 5,250, an increase from the 4,850 median target set on December 30.

Bank of America's most recent survey reveals that investor sentiment is at its most optimistic since November 2021, with rate cut expectations, rather than profit forecasts, fueling this bullishness. However, rising rate worries resurfaced at the end of the month due to sticky inflation and hawkish Fed minutes.

There is the lingering uncertainty over the timing of the rate cuts, which has recently cast a shadow over investor confidence. The benchmark US treasury yield was 4.55% on May 30, versus the monthly closing high of 4.63% recorded on May 1 and a low of 4.36% recorded on May 15. Approximately 82% of global fund managers anticipate the Fed's initial rate cut in the latter half of the year.

Against this backdrop, below we highlight a few winning ETF areas of May. 

ETF Areas in Focus

Hydrogen

Global X Hydrogen ETF (HYDR Quick QuoteHYDR - Free Report) – Up 22.9% Past Month

Defiance Next Gen H2 ETF – Up 22.2% Past Month

Amid the clamor for cleaner fuel sources, hydrogen has emerged as a key player. As this sector continues to develop, investors are becoming increasingly interested in hydrogen stocks and ETFs. Hydrogen fuel cell vehicles are powered by converting hydrogen gas into electricity through a fuel cell.

Hydrogen is supposedly cheaper than electric vehicles. Plus, steelmaking, aviation and shipping are among the sectors likely to intensively utilize green hydrogen. The increased energy demand for AI operations is likely contributing to the rally in hydrogen stocks.

Natural Gas

United States Natural Gas ETF (UNG Quick QuoteUNG - Free Report) – Up 22.2% Past Month

Global gas demand is set for stronger growth in 2024 despite heightened geopolitical uncertainty. Although gas production in the Lower 48 U.S. states dipped slightly in May compared to April, recent weeks have shown an increase, suggesting that the recent rise in futures prices has encouraged some drillers to boost output. Solid summer demand and exports probably have fueled the natural gas prices.

Ethereum

Bitwise Ethereum Strategy ETF (AETH Quick QuoteAETH - Free Report) – Up 17.5% Past Month

ProShares Ether Strategy ETF (EETH Quick QuoteEETH - Free Report) – Up 17.3% Past Month

In a landmark move, the US Securities and Exchange Commission (SEC) has given the green signal in late-May for the potential launch of eight exchange-traded funds (ETFs) linked to ether, the second-largest cryptocurrency globally. However, further approvals are necessary before these products can officially debut. This decision follows the earlier approval of bitcoin ETFs, marking a pivotal shift in the regulatory environment for digital assets (read: Bitcoin ETFs to Gain as SEC Approves Ether ETFs).

Silver Bullion

abrdn Physical Silver Shares ETF (SIVR Quick QuoteSIVR - Free Report) – Up 17.5% Past Month

iShares Silver Trust (SLV Quick QuoteSLV - Free Report) – Up 17.5% Past Month

Silver has outpaced gold, experiencing about a 35% increase this year. Its industrial applications, such as in solar panel cells, have contributed to its demand, reaching a new high in 2023 for the third successive year. Plus, it is a precious metal and performs well in the economic downturns.

Shipping

SonicShares Global Shipping ETF (BOAT Quick QuoteBOAT - Free Report) – Up 17.1%

Geopolitical tensions in the Red Sea, a crucial area for international trade, have sparked a significant shift in the global shipping industry, drove ocean freight rates higher and offered a bullish case for global shipping stocks.