Yahoo Finance 5 Top-Performing ETFs of Q2
Wall Street has delivered a moderate performance in the second quarter of 2024 with the S&P 500 gaining 4.4%, the Dow Jones losing 0.8%, the Nasdaq advancing 7.7%, and the Russell 2000 retreating 2.4%, respectively (as of Jun 21, 2024). Key equity indexes have hit all-time highs in the quarter.
April became the worst month of 2024 for Wall Street due to rising rate worries, followed by a robust upswing in May and June. The S&P 500 has advanced 3% so far in June (as of Jun 21, 2024) while the Nasdaq is up 4.5% (read: April Emerges as Worst Month of 2024: Best ETF Areas).
“Magnificent Seven” Drives Stock Market
This variance in performance clearly points to the broader market’s dependence on the “Magnificent Seven.” This bloc, which comprises NVIDIA, Microsoft, Apple, Amazon, Meta, Alphabet, and Tesla, makes up about 30% of the S&P 500 and accounts for more than 40% of the Nasdaq-100.
The ongoing artificial intelligence (AI) craze,recent signs of cooling in inflation, and the resultant Fed rate cut bets, along with strong corporate profit growth, have been fueling investors' confidence in the stock market for the past two months (read: Top ETF Areas of May).
Inside U.S. Economic Datapoints
Inflation in the United States cooled down in May for the second consecutive month. Meanwhile, retail sales have been wobbling and U.S. manufacturing is yet to gain a strong footing. Easing inflation, along with signs of a slowing economy, boosted the bets of a sooner-than-expected Fed rate cut in some spells of the quarter.
Fed Stays Put in June, Eyes At Least One Rate Cut in 2024
In mid-June, the Fed opted to maintain its benchmark interest rate within a range of 5.25% to 5.50%, a level it has maintained since July 2023 and has revised its rate cut prediction. While previously predicting three rate cuts for the year, the Fed scaled back its estimate to just one due to sticky inflation (read: Buy 5 Growth ETFs as Fed Stays Put, Eyes Rate Cut).
Despite the reduced rate cut expectations for 2024, Fed officials increased their collective forecast for 2025, anticipating a median of four additional rate cuts. The Fed revised its 2024 inflation forecast, expecting prices to end the year at 2.8% compared to the previous estimate of 2.6%.
The Fed comments and the economic data points left their impact on the treasury world. The benchmark U.S. treasury yield was 4.25% on Jun 21, 2024, versus 4.33% recorded at the start of the quarter. The yield touched a closing high of 4.70% on Apr 25, 2024, and a closing low of 4.20% on Jun 14, 2024.
Winning ETF Areas of Q2
Against this backdrop, below we highlight a few top-performing ETF areas of the second quarter of 2024.
Natural Gas
United States Natural Gas ETF UNG – Up 23.8%
Natural gas prices have surged over the past three months thanks to increased energy demands for AI-driven data centers. Big tech companies have been investing billions in AI and cloud infrastructure. An IEA report published in January highlighted that, on average, a typical Google search uses 0.3 watt-hours of electricity versus 2.9 watt-hours for a ChatGPT request.
This demand is reflected in the stock market, where energy utilities and natural gas prices have been gaining traction. Since mid-April, the U.S. natural gas futures prices have jumped about 62% due to intense geopolitical tensions in the Middle East, reduced U.S. production, and supply disruptions in Norway (read: Bet on AI Ecosphere With These ETFs).
Shipping
SonicShares Global Shipping ETF BOAT – Up 22%
U.S. Global Sea to Sky Cargo ETF SEA – Up 18.2%
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. Overall, international container shipping rates rose 70% year over year and are up over 11% from the pre-pandemic level.
NVIDIA-Heavy ETFs
Valkyrie Bitcoin Miners ETF WGMI – Up 21.3%
VanEck Semiconductor ETF SMH – Up 17.1%
NVIDIA has significant weight in these ETFs. The NVIDIA stock, which is red-hot this year, has advanced about 40% in the past three months (as of Jun 21, 2024). In fact, last week, NVIDIA briefly became the world's most valuable company but couldn’t hold onto that height till the end of the week.
Its success is largely attributed to its leadership in developing advanced graphics processing units (GPUs), which are unmatched in producing processors that power artificial intelligence systems. NVIDIA has also announced upcoming launches of upgraded versions of its chips.
Silver Miners
Global X Silver Miners ETF SIL – Up 20.9%
Amplify Junior Silver Miners ETF SILJ – Up 20.5%
Silver is a safe-haven asset and also acts as an industrial metal. Most industrial metal prices are rising due to concerns over supply disruptions. Silver bullion ETF iShares Silver Trust SLV has gained more than 18% so far in the second quarter.
An almost flat greenback and hopes of Fed rate by the year-end probably have boosted precious metals in Q2. The ECB also cut rates in June. These developments set the stage for a rally in industrial metals. Investors should note that since mining stocks act as leveraged plays of the underlying metal, shares of silver mining companies and related ETFs have had every reason to rally.
Gold Miners
iShares MSCI Global Gold Miners ETF RING – Up 14%
U.S. Global GO GOLD and Precious Metal Miners ETF GOAU – Up 13.7%
Like silver, gold’s pricing has also historically shown an inverse relationship with U.S. interest rates. When interest rates fall, gold becomes a more attractive investment compared to bonds and other interest-yielding assets. Plus, uncertainties related to the potential Fed rate cut and the economic wellbeing as well as overvaluation concerns about Wall Street have probably the boosted appeal for the safe metal gold. No wonder, gold mining stocks, too, have rallied in the quarter.
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VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Silver Trust (SLV): ETF Research Reports
Global X Silver Miners ETF (SIL): ETF Research Reports
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
Amplify Junior Silver Miners ETF (SILJ): ETF Research Reports
U.S. Global Sea to Sky Cargo ETF (SEA): ETF Research Reports
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU): ETF Research Reports
United States Natural Gas ETF (UNG): ETF Research Reports
SonicShares Global Shipping ETF (BOAT): ETF Research Reports
Valkyrie Bitcoin Miners ETF (WGMI): ETF Research Reports
