Pedestrians strolled past the New York Stock Exchange on November 6, 2024, with a giant U.S. flag draping the iconic building, capturing a typical scene in bustling New York City. This image from China News Service via Getty Images hints at the bustling financial world that lies within.
In November, U.S. exchange-traded funds, or ETFs, reached a remarkable milestone, topping $10 trillion in assets for the very first time, according to recent insights from Cerulli Associates. These funds, which are essentially collections of stocks, bonds, or other assets that trade on national exchanges, attracted a record $156 billion in flows during the month. This surge surpassed all previous monthly records, fueled by the typical end-of-year activity spikes that Cerulli Associates has noted before.
Morningstar’s research highlighted a phenomenon dubbed the "Trump bump," which contributed to U.S. funds, encompassing both ETFs and mutual funds, accumulating $115 billion in November alone. This figure marks the highest total influx since April 2021. As we reflect on the trends that characterized 2024, several themes have emerged, suggesting shifts and patterns within the ETF landscape.
S&P 500 Among 2024 Fund Winners
As of Monday, the S&P 500 index had risen nearly 24% since the start of the year. A significant part of this rally was driven by the so-called Magnificent Seven stocks: Apple, Microsoft, Alphabet (Google’s parent company), Amazon, Nvidia, Meta Platforms (formerly Facebook), and Tesla, according to analytics firm VettaFi. Four out of the top 10 ETFs for 2024 were linked to the S&P 500 index, reflecting investor confidence in these market leaders.
Among these top ETFs, the Vanguard 500 Index Fund clinched the top spot for the highest year-to-date inflows in 2024, with the iShares Core S&P 500 ETF following close behind. Other notable mentions include the iShares Bitcoin Trust, Invesco QQQ Trust, Vanguard Total Stock Market Index Fund, and others. Malcolm Ethridge, a certified financial planner and head of Capital Area Planning Group, often integrates S&P 500 ETFs into client portfolios. He notes that these ETFs provide exposure to large-cap growth without the hefty costs typically associated with actively managed funds, offering fees as low as 10 basis points compared to the 50 or 75 basis points of active funds.
The S&P 500’s impressive performance appears poised to continue its momentum, particularly as the index rebalances to feature current market frontrunners. Ethridge believes that the SPDR S&P 500 ETF Trust, known by its ticker SPY, may outperform most fund managers in the upcoming year.
Alternative ETFs See Record Growth
Alternative ETFs crossed another milestone in November, surpassing $400 billion in net assets, according to Cerulli. This sector led in asset growth with a staggering 93% increase year over year. The bulk of the alternative ETF market, around 80% or about $325 billion, comprises digital assets, leveraged equity trading, and derivative income ETFs.
Financial advisors currently allocate a modest 3.6% to alternatives, per Cerulli’s findings, though expectations suggest this will rise. Currently, 14.4% of alternative investments are executed through ETFs.
Crypto ETFs Are ‘Here to Stay’
The investment space saw significant transformations with the entrance of Bitcoin ETFs onto U.S. exchanges in January. VettaFi noted that spot Bitcoin ETFs now hold more digital currency than Bitcoin’s mysterious founder, Satoshi Nakamoto. Despite a rather lukewarm debut of spot Ethereum ETFs this year, the advent of crypto ETFs marks a lasting shift in the investment world.
As of November, the top five new ETFs in terms of assets for 2024 were all Bitcoin ETFs, according to Cerulli. Leading the pack was the iShares Bitcoin Trust ETF, with others including the Fidelity Wise Origin Bitcoin ETF, ARK 21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, and the Grayscale Bitcoin Mini Trust ETF.
