1.
ETFs Brace for Nvidia's Big Earnings Report
2024-11-19 14:00:00 by Sumit Roy from etf.com
The last of the Magnificent Seven is set to report earnings this week, and there is a lot riding on the outcome.
Nvidia, the AI chip giant that has powered tech stocks to enormous gains this year, is set to report its latest earnings results after the bell on Wednesday.
The company is expected to announce that it earned $0.74 per share on $33.2 billion of revenue during Q3, according to Bloomberg’s consensus of analyst estimates.
However, investors will likely be looking for Nvidia to handily exceed those numbers. During the last five quarters, Nvidia earnings have topped analyst revenue estimates by anywhere from $1.2 billion to $2.5 billion.
For a stock that’s nearly tripled this year, a beat of a similar magnitude is likely a requirement if investors are to be rewarded with even larger gains.
Guidance for Q4 is also crucial; analysts currently expect revenues of $37.1 billion for the final quarter of the year, but investors are likely betting that Nvidia will forecast a figure that’s well above that.
Nvidia Earnings & Big Weightings in ETFs
Given that pretty much everyone is a big investor in Nvidia these days—the stock has a 7% weighting in the S&P 500 and is the world’s largest publicly traded company by market cap—there is a lot riding on this week’s earnings report.
For investors who hold more concentrated positions in the stock, the stakes are even higher. Nvidia has a 9% weighting in the Invesco QQQ Trust (QQQ) and a 24% weighting in the VanEck Semiconductor ETF (SMH).
And of course, investors in the GraniteShares 2x Long NVDA Daily ETF (NVDL)—which has nearly $6 billion in assets under management—are the most levered to the stock of all.
In addition to Nvidia’s earnings results and guidance, investors will key in on the company management’s commentary on the ramp-up in sales of its newest Blackwell line of AI chips.
Companies including OpenAI, Meta, and others are counting on the chips to power their next generation of powerful AI models.
2.
Wall Street strategists aren't relying on AI to drive the stock market rally anymore: Morning Brief
2024-11-19 11:00:48 by Josh Schafer from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
The early results are in and Wall Street strategists issuing 2025 forecasts see the S&P 500 (^GSPC) rally chugging along over the next 12 months.
But missing from their baseline calls is one of the most popular themes of the past 18 months in markets: artificial intelligence.
AI driving the market higher has been a hallmark of market calls dating back to the spring of 2023 when Nvidia's first blowout earnings report of the cycle kickstarted a roaring bull market rally.
On Monday, BMO Capital Markets chief investment strategist Brian Belski initiated a 2025 year-end target of 6,700 for the S&P 500. Meanwhile, Morgan Stanley chief investment officer Mike Wilson issued a 12-month target of 6,500.
Neither leaned too far into the impact of AI driving stocks higher — perhaps a sign of a maturing bull market — and instead, both discussed further broadening of the rally away from the tech-concentrated stock market of the past two years.
"We expect this broadening in earnings growth to continue as the Fed cuts rates into next year and business cycle indicators continue to improve," Wilson wrote.
Belski's work shows the market has already broadened, with 276 stocks outperforming the S&P 500 in the second half of 2024 — better than the 10-year average of 238 and above the number seen since the start of 2023.
At the surface this can lead to weaker gains for the index, as smaller gains in small companies make for smaller overall gains. Dating back to 1990, Belski found that when the top 100 stocks in the S&P 500 outperform, the index delivers an average annual return of 11.8% compared to the average return of 8% when those stocks underperform the index.
In other words, the returns aren't bad; they're just not as great as the ones investors have enjoyed for two years now.
To be clear, the idea that an AI-related fever could keep driving stock prices higher hasn't been forgotten among Wall Street strategists. Just two weeks ago, Evercore ISI's Julian Emanuel wrote that he sees the S&P 500 reaching 6,600 by June 2025 as "exuberance lies ahead" amid a "public reengaged in speculation."
Wilson did offer a bull case in which wide AI adoption juices margins — and pushes the flagship index near 7,400.
For any investor in the S&P 500, that of course sounds like an appealing scenario. But perhaps even more appealing is that strategists no longer need to rely on AI to explain why the market will keep moving higher. Even if AI doesn't show up to the party, Wall Street expects a good time.
It's a stark contrast from where things stood in 2023, when AI mentions first started littering S&P 500 target changes across Wall Street and the macro backdrop was much more bleak. Recession fears were still common among economists. The other 493 S&P 500 stocks were still in an earnings recession. And speculation around the Fed centered on how much more they'd hike interest rates, not cut them.
While those debates could resurface at any moment, we've made it to the other side of all those rungs on the wall of worry. And for now, Wilson's base case is driven by a backdrop where the broadening of earnings rolls on as the Fed cuts rates and business cycle indicators continue to improve.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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3.
Wall Street forecasts 'normal' year for stocks in 2025 after historic rally
2024-11-18 18:21:24 by Josh Schafer from Yahoo FinanceAfter two years of annual gains north of 20% for the S&P 500 (^GSPC), Wall Street strategists think 2025 will see a more measured year for stocks.
On Monday, BMO Capital Markets chief investment strategist Brian Belski initiated a 2025 year-end target of 6,700 for the S&P 500. On Sunday, Morgan Stanley chief investment officer Mike Wilson issued a 12-month target of 6,500 for the S&P 500.
Belski's target reflects about 14% upside from Friday's close; the strategist already has a 6,100 year-end target for 2024. This puts Belski's forecast for returns in 2025 at 9.8%, right in line with the index's average historical gain. Wilson's 12-month target represents a nearly 11% increase for the benchmark index over the next year.
Should the S&P 500 finish 2024 with a gain above 20%, it would mark the first time the benchmark index has posted consecutive years with gains of 20% or more since the tech bubble of 1998-1999.
Any way you slice it, then, these outlooks say the outsized returns the S&P 500 has enjoyed for each of the past two years will come to an end in 2025.
"It is clearly time for markets to take a somewhat of a breather," Belski wrote.
"Bull markets can, will and should slow their pace from time-to-time, a period of digestion that in turn only accentuates the health of the underlying secular bull. So we believe 2025 will likely [be] defined by a more normalized return environment with more balanced performance across sectors, sizes, and styles."
Belski points out that the historical pattern for bull markets sees returns in year three come in below gains for the first two years and below the index's typical average return.
"Now that inflation, interest rates (zero percent is NOT normal) and employment are showing signs of stabilizing (volatility diminishing), US stock fundamentals have their best chance to normalize," Belski wrote.
"According to our work, an environment of high single digit annual price gains coupled with at or near double digit earnings growth and price to earnings ratios in the high teens to low twenties over the next few years would be a good start on the path to normalization."
With the Federal Reserve cutting interest rates while US economic growth remains strong, both Belski and Wilson believe in a continued broadening of the stock market rally, where more than just a few high-flying tech names are driving the market action.
"We expect this broadening in earnings growth to continue as the Fed cuts rates into next year and business cycle indicators continue to improve," Wilson wrote. "A potential rise in corporate animal spirits post the election could catalyze a more balanced earnings profile across the market in 2025."
Wilson and Belski agree that this likely creates stock-picking opportunities beneath the surface of the S&P 500.
But it could also be part of what leads to lower returns at the index level, with smaller stocks by definition having less of an impact on the movement of the overall index.
"We believe the slight [second half of 2024] rotation out of technology+ mega cap stocks is a trend that will likely continue and if so, the sheer size of the stocks within the index will make big market gains more difficult (but not impossible) to achieve as the rest of the S&P 500 plays the catch-up game," Belski wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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4.
ETFs Investors Have Been Buying Since the Election
2024-11-18 14:00:00 by Sumit Roy from etf.com
It’s been a little over a week since investors found out that Donald Trump would be the next president of the United States. Since then, stocks have rocketed higher, while bonds have retreated.
In general (Friday’s pullback notwithstanding), investors have been feeling good about their investments and the prospects for the economy and financial markets going forward.
That enthusiasm is reflected in ETF inflows, which surged to a new annual record last week thanks to $46 billion of inflows just over the past five trading sessions.
It raises the question, though: where have investors been putting money to work in ETFs since the election?
ETF Giants Have Earned Billions Post-Election
The answer to that question probably won’t surprise you. Familiar ETF giants, like the Invesco QQQ Trust (QQQ), the SPDR S&P 500 ETF Trust (SPY), and the Vanguard S&P 500 ETF (VOO) have gathered billions of dollars of new assets over the past week.
The iShares Russell 2000 ETF (IWM), which surged 6% the day after the election, has also been a big flows winner.
Small cap ETFs like IWM, along with financials ETFs like the Financial Select Sector SPDR Fund (XLF)—another top asset-gatherer—are expected to benefit from the Trump administration’s deregulation agenda.
So, too, is the cryptocurrency industry: bitcoin has skyrocketed since the election and the iShares Bitcoin Trust ETF (IBIT) has seen enormous inflows in that period.
One of the lesser-known ETFs to see strong demand in the wake of the election is the JPMorgan Global Select Equity ETF (JGLO), an active ETF that focuses on global companies with high-quality earnings growth and lower valuations.
The Invesco S&P 500 Low Volatility ETF (SPLV) is another lower-profile ETF to sneak into the top inflows group.
Finally, some investors are just happy to ride the wave. Two momentum ETFs, the iShares MSCI USA Momentum Factor ETF (MTUM) and the Invesco S&P 500 Momentum ETF (SPMO), were among the top flows winners since the election.
5.
Stock rally stumbles with Nvidia earnings on tap: What to know this week
2024-11-17 12:38:51 by Josh Schafer from Yahoo FinanceThe feverish post-election stock market rally came to a screeching halt last week.
For the week, the S&P 500 (^GSPC) fell more than 2%, while the Dow Jones Industrial Average (^DJI) shed more than 500 points or nearly 1.3%. The tech-heavy Nasdaq Composite (^IXIC) sank over 3%.
Two firm inflation readings and commentary from Federal Reserve Chair Jerome Powell weighed on markets last week, with growing uncertainty over the Fed's rate path outweighing previous investor excitement over Trump's potential policy agenda.
In the week ahead, a few economic data releases are expected to add to that narrative, with activity in the services and manufacturing sector and a consumer sentiment reading headlining the schedule.
Earnings, however, will bring attention back to some of the biggest names in the corporate world after a few weeks of macro and political events dominating investor mindshare.
Key among these reports will be earnings from AI leader Nvidia (NVDA), which is set to report results after the bell on Wednesday. Quarterly results from Walmart (WMT), Target (TGT), BJ's (BJ), and Deere & Company (DE) will also be in focus.
A pause in the rally
Since the Federal Reserve slashed its benchmark interest rate by half a percentage point on Sept. 18, bond yields have ripped higher. The 10-year Treasury (^TNX) yield rose by 80 basis points between that date and the days following the election to trade near 4.5%.
That move in rates hadn't been an issue for the stock market rally until last week.
While strategists have pointed out that a move higher in rates supported by stronger-than-expected economic growth could be welcome news for stocks, recent inflation data has thrown a wrench in that thesis.
On Wednesday, the "core" Consumer Price Index (CPI), which strips out the more volatile costs of food and gas, showed prices increased 3.3% annually for the third consecutive month during October. On Thursday, the "core" Producer Price Index (PPI) revealed prices increased by 3.1% over last year in October, up from 2.8% the month prior and above economist expectations for a 3% increase.
Later on Thursday, Powell said in a speech the Fed doesn't need to be "in a hurry" to lower interest rates given the strength of the US economy. Markets moved lower on the comments, and the selling continued on Friday, with the Nasdaq Composite sliding more than 2.2% for the session.
"Slower progress on inflation in recent months may prompt the Fed to reevaluate its pace of easing moving forward," Wells Fargo's economics team led by Jay Bryson wrote in a weekly note to clients on Friday.
As of Friday afternoon, investors were pricing in a 58% chance the Fed cuts interest rates by 25 basis points at its December meeting, down from the nearly 86% chance seen a month ago, per the CME FedWatch Tool.
Schwab Asset Management CEO and chief investment officer Omar Aguilar told Yahoo Finance Powell's comments and the Fed debate add uncertainty and "additional volatility and, therefore, the opportunity for investors to take something off the table and take some profits."
All eyes on Nvidia
Amid all the macro headlines influencing the stock market in November, S&P 500 companies have posted solid third quarter earnings.
The S&P 500 has grown earnings by 5.4% compared to the same quarter a year prior, marking the fifth straight quarter of earnings growth, per FactSet data. And one of the index's largest contributors to that expected growth is slated to report earnings this week.
Nvidia is expected to report earnings per share of $0.74 on revenue of $33.21 billion, according to Bloomberg consensus data. Both metrics would represent more than 80% growth compared to the same period a year prior.
"We expect a similar story to the last several quarters with a beat and raise in the $2B range [for current quarter revenue guidance]," Jefferies analyst Blayne Curtis wrote in a research note previewing the release.
Curtis noted that expectations have continued to "creep higher" as Nvidia shares have rallied more than 7% in the past month and are up more than 180% this year. But Curtis believes the stock "continues to work" as Nvidia continues with the release of its latest AI chip, Blackwell.
Given Nvidia's large weighting in the S&P 500, its earnings for the past couple of quarters have been viewed as a key catalyst for the market's overall direction.
And while investors will be listening for any clues about which Big Tech companies continue to spend with the AI chip leader, the actual price action of Nvidia's stock after earnings hasn't been a barometer for broader market performance in the near term.
For example, Nvidia's (NVDA) August earnings release did little to impress investors and the stock fell about 6% the day after its earnings release.
But that sour sentiment didn't permeate through the market as the S&P 500 closed flat on that same day. This marked the second straight quarter that the broader S&P 500 didn't move with Nvidia following its earnings release.
The other side of the Trump trade
Some of the biggest winners in the market since Donald Trump won the presidential election on Nov. 5 have reversed course.
The Nasdaq 100 (^NDX) has given back nearly all of its gains. The S&P 500 closed Friday below where it opened the day after the election. And the small-cap Russell 2000 (^RUT) index, which soared more than 9% following Trump's victory, has now given back about half of those gains.
For small caps, the story isn't much different than a week ago, when we noted Piper Sandler chief investment strategist Michael Kantrowitz's concern about earnings momentum for companies in the index.
"In the last 20 days ... we've definitely seen small cap estimates at the margin move pretty sharply lower," Kantrowitz said. He added that investors would want to see earnings accelerating to signal the start of a recovery.
"[It's] not something we're seeing quite yet," Kantrowitz said. "So something we'll be monitoring."
The move in small caps is emblematic of the uneven trading action in the two weeks following the election, as any impact from the Trump administration's policies largely remains to be seen.
"Key economic positions have not been announced, and we remain in a policy uncertainty backdrop," Citi US equity strategist Scott Chronert wrote in a note to clients when explaining the recent drawdown in the market rally.
"We are working from euphoric sentiment levels and implicit growth expectations at post-2008 highs," he added. "Overall, there is a lot of pressure on macros and fundamentals to deliver, which may explain some recent profit taking after a rapid post-election run."
Weekly calendar
Monday
Economic data: NAHB housing market index, November (42 expected, 43 previously)
Earnings: Trip.com (TCOM)
Tuesday
Economic data: Housing starts month-over-month, October (-1.4% expected, -0.5% previously); Building permits, month-over-month, October (1.2% expected, -3.1% previously)
Earnings: Lowe's (LOW), Walmart (WMT), XPeng (XPEV)
Wednesday
Economic data: MBA mortgage applications, Nov. 15 (0.5% prior)
Earnings: Nvidia (NVDA), Jack In The Box (JACK), NIO (NIO), Palo Alto Network (PANW), Snowflake (SNOW), Target (TGT), TJX (TJX), Williams-Sonoma (WSM)
Thursday
Economic data: Initial jobless claims, week ending Nov. 16 (217,000 previously); Leading index, October (-0.3% expected, -0.5% previously); Existing home sales month-over-month, October (+2.3% expected, -1% previously); Kansas City Fed manufacturing activity, November (-4 previously)
Earnings: Baidu (BIDU), BJ's (BJ), Deere & Company (DE), Gap (GAP), Intuit (INTU), Ross Stores (ROST), Warner Music Group (WMG)
Friday
Economic data: S&P Global US manufacturing PMI, November preliminary (48 expected, 48.5 previously); S&P Global US services PMI, November preliminary (55 expected, 55 previously); S&P Global US Composite PMI, November preliminary (54.1 previously); University of Michigan consumer sentiment, November final (73 expected, 73 previously)
Earnings: No notable earnings releases.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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6.
2024 ETF Inflows Reach New Record High
2024-11-15 00:18:49 by Sumit Roy from etf.com
It took three years, but annual ETF inflows are back at record levels. On Tuesday, year-to-date inflows for U.S.-listed ETFs topped $902 billion—and then on Wednesday, they breached $909 billion.
That means that, with a month-and-a-half left in the year, 2024 inflows are tracking to end up comfortably ahead of the previous annual record of $900 billion set in 2021.
Of course, it’s still possible that ETFs could register outflows from now through December, putting inflows below $900 billion at the end of the year—but it seems very unlikely.
Inflows have been robust all year long, and recent enthusiasm in the stock market following the U.S. presidential election suggests that December will be a strong month for inflows.
ETF Inflows Could Top $1T in 2024
In fact, if trends persist, an annual inflows record of more than $1 trillion seems to be in the cards, with an outside shot at $1.1 trillion.
In addition to being a new record, such a haul would be a sharp acceleration compared to the roughly $600 billion of inflows seen in both 2022 and 2023.
A buoyant stock market, a plethora of new product launches, and the rise of active ETFs have all contributed to the surge of interest in exchange-traded funds this year.
VOO Record
Another inflows milestone that etf.com has been watching is the $100 billion mark for the Vanguard S&P 500 ETF (VOO).
Earlier this year, the ETF broke the calendar-year inflows record for an individual ETF when it surpassed $47 billion in inflows. It’s since almost doubled that haul, bringing year-to-date inflows up to $93 billion, according to etf.com’s Fund Flows tool.
The ETF has pulled in about $17 billion of new money over the past month, a pace that if maintained, means that VOO will easily crack $100 billion by year end.
In other words, 2024 could be the first trillion-dollar year for ETFs as a whole and the first $100 billion year for a single ETF.
7.
2 firm inflation prints just made the Fed's 2025 rate cut path a lot 'murkier'
2024-11-14 16:00:13 by Josh Schafer from Yahoo FinanceOctober inflation readings out this week have shown little progress toward the Fed's 2% inflation target, putting into question how deeply the Federal Reserve will cut interest rates in 2025.
On Wednesday, the "core" Consumer Price Index (CPI), which strips out the more volatile costs of food and gas, showed prices increased 3.3% for the third consecutive month during October. Then, on Thursday, the "core" Producer Price Index (PPI) revealed prices increased by 3.1% in October, up from 2.8% the month prior and above economist expectations for a 3% increase.
Taken together, the readings are adding to an overall picture of persistent, sticky inflation within the economy. Economists don't see the data changing the Fed's outlook come December. And markets agree with the CME FedWatch Tool currently placing a nearly 80% chance the Fed cuts rates by 25 basis points at its December meeting.
But the lack of recent progress on the inflation front could prompt the Fed to adjust its Summary of Economic Projections (SEP), which had forecast the central bank would cut interest rates four times, or by one percentage point in total, throughout 2025.
"PPI won’t decisively alter the Fed’s easing bias, but it makes charting the policy outlook murkier," Nationwide financial market economist Oren Klachkin wrote in a note to clients today. "We anticipate 75 [basis points] of cumulative Fed easing in 2025, but risks seem to be tilting toward a more gradual pace of easing."
"Their bias is toward cutting, but they'll probably have to have to go at a slower pace next year," Wolfe Research chief economist Stephanie Roth told Yahoo Finance (video above).
Markets have quickly shifted over the past two months to reflect this sentiment. On Sept. 18, when the Fed slashed rates by half a percentage point, markets had projected the Fed would finish 2025 with a federal funds rate around 3%. Now, the market is pricing in about 80 fewer basis points of easing next year.
This speculation has also prompted a large increase in bond yields over the past month. The 10-year Treasury yield (^TNX) has added about 80 basis points since the Fed's first rate cut in September. But that in itself hasn't proven to be a headwind for the stock market rally, as all three indexes are within striking distance of new record highs. Investors have attributed the market's resilience to stronger-than-expected economic data flowing in as bond yields rise.
"The reason it hasn't hit the stock market is very simply because if the yield is rising, partly because growth is going to be stronger, that effect is going to be stronger on the stock market," Bridgewater Associates co-chief investment officer Karen Karniol-Tambour said at the Yahoo Finance Invest conference.
At his most recent press conference on Nov. 7, Fed Chair Jerome Powell said inflation continues to come down on a "bumpy path" but declined to provide forward guidance on the Fed's path.
"We don't know the right pace, and we don't know exactly where the destination [of rates] is," Powell said. "So the point is to find that, to find the right pace and the right destination as we go. And I think there's a fair amount of uncertainty about that. "
But economists are taking hints from recent trends within the inflation prints. The three-month annualized rate of core inflation moved from 3.1% last month to 3.6% after the October CPI release. This underscores the recent lack of progress toward the Fed's 2% goal. Add the potential inflationary economic policies expected from President-elect Donald Trump, and the picture becomes even more uncertain.
"The inflation data over the past few months have not shown much additional progress, and the election outcome has raised new questions about the path ahead for price growth," Wells Fargo senior economist Sarah House wrote in a note to clients. "We think the time is fast approaching when the FOMC will signal that the pace of rate cuts will slow further, perhaps to an every-other-meeting pace starting in 2025."
Economists use the data from CPI and PPI to project a reading from the "core" Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge. Bank of America US economist Stephen Juneau believes that release, due out at the end of November, will show core prices rose 2.8% in October, up from 2.7% in September.
"If our forecast proves correct, it will mark two consecutive uncomfortably high prints as the Fed seeks to return inflation to its 2% target," Juneau wrote in a note to clients on Thursday.
He added this doesn't mean markets should "panic." Some of the factors driving inflation higher in October, like financial services and airfares, aren't expected to last. Additionally, inflation expectations remain low, and the labor market no longer appears to be a cause of concern on the inflation front.
Still, Juneau, like other economists, argues the recent data shows "the risk appears to be tilting toward a shallower cutting cycle given resilient [economic] activity and stubborn inflation."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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8.
ETF Inflows on Cusp of Annual Record
2024-11-12 23:56:27 by Sumit Roy from etf.com
Exchange-traded fund inflows are on the cusp of breaking their annual record after investors piled into ETFs following Trump’s election victory.
Year-to-date inflows for U.S.-listed ETFs stood at $892 billion as of Monday, Nov. 11, just a tad short of the $900 billion mark reached in 2021.
With over a month-and-a-half left in the year, the record is almost certain to fall—possibly as soon as this week.
After that, attention will shift to the symbolic $1 trillion level, which suddenly looks achievable by year's end.
Last December, inflows for U.S.-listed ETFs were well over $100 billion; this year, with investor sentiment surging in the wake of the election, it’s conceivable that Dec. 2024 inflows could be just as strong, or even stronger.
ETF Inflows Could Soon Hit $1T Mark
Meanwhile, another milestone that could be reached by year's end is the $100 billion flows mark for an individual ETF.
Since the start of the year, the Vanguard S&P 500 ETF (VOO) has gathered $90 billion of new assets, the largest haul by far for a single ETF in a calendar year. Over the past month, inflows of VOO have totaled $13 billion, suggesting that the fund has a good shot to hit $100 billion of inflows by the end of 2024.
VOO’s inflows are significantly higher than the $56 billion that’s been invested in the iShares Core S&P 500 ETF (IVV) since the start of the year.
New Global Record
Speaking of records, while we tend to focus on the U.S. ETF industry here at etf.com, the ETF structure remains popular around the world. Data from BlackRock shows that worldwide ETF inflows hit an annual record at the end of October— $1.4 trillion versus the previous $1.33 trillion record from 2021.
While the U.S. drove much of those inflows, strong demand for exchange-traded funds in Europe has also contributed.
9.
Trump Presidency Puts Markets on Bullish Path
2024-11-11 22:57:20 by Jeff Benjamin from etf.com
The post-election stock market rally that has been dubbed the “Trump trade” has the potential to extend well into next year, according to some market watchers.
Beyond the initial market pop driven by investors interpreting the election of Republican Donald Trump as bullish for markets, Aniket Ullal, head of ETF research at CFRA, anticipates a more business-friendly environment under Trump.
“This is generally bullish for ETFs,” Ullal said. “One of the factors driving the initial rally is the expectation of less regulations around financials and energy, but there are also expectations that the strength of the stock market could broaden into small- and mid-cap stocks.”
Jay Hatfield, chief investment officer at Infrastructure Capital in New York City, also sees a Trump presidency as bullish for smaller U.S. companies.
Small Caps Could See Bullish Path Ahead
“This is definitely bullish for small caps, but it is really more about specific sectors than market capitalization,” he said.
Hatfield noted that it is a common misconception that smaller companies in general are more leveraged and therefore more interest rate-sensitive.
“Smaller companies are de facto interest rate sensitive because the sectors of the index tend to be lower in technology and higher in financials and real estate and other companies that do better when we’re not in Fed tightening cycle,” he said. “But right now, we’re in a Fed loosening cycle, and we’re more optimistic about rates than the market because we think most of Trump’s policies are disinflationary.”
One of the shifts Hatfield expects under Trump is a Federal Trade Commission that will encourage consolidation.
“The most important thing to think about is that small companies are acquisition targets, but the FTC has been putting a lid on consolidation,” Hatfield said.
Then, there is the potential for a reduced corporate tax rate, down to 15% from the current 21%.
“There will be a new tax bill, and a corporate tax reduction will be in that bill,” said Hatfield, who expects the S&P 500 Index to gain 25% next year.
“And we think small caps will beat that 25%,” he added.
Ullal said the initial rally of financial sector stocks following last week’s election was in response to a more relaxed regulatory environment, considering the Republican track record of being “less hawkish on antitrust action.”
Another factor supporting small-cap stocks is the valuation levels of large-cap stocks, illustrated by the S&P 500’s forward price-to-earnings ratio of 22.3, compared to a historical average of 16.
Small- and mid-cap stocks, meanwhile, have forward p/es of around 17, which is in line with their historical averages.
“Large caps are already richly valued,” Ullal said. “That can continue for some time, but at some point, we may hit a ceiling.”
10.
S&P 500 seen reaching 10,000 by end of decade, spurred by 'animal spirits'
2024-11-11 21:23:41 by Josh Schafer from Yahoo FinanceThe S&P 500's (^GSPC) surge to record highs since Donald Trump won the 2024 presidential election is showing no signs of stopping.
And Wall Street strategists have been quick to update their outlooks on where stocks may be headed next.
On Monday, Yardeni Research president Ed Yardeni wrote in a note to clients that he expects the S&P 500 to hit 6,100 by the end of 2024, about 2% above current levels.
Yardeni then sees the index reaching 7,000 by the end of 2025, 8,000 by the end of 2026, and 10,000 by the end of the decade. Previously, Yardeni told Yahoo Finance he'd seen the S&P 500 hitting 8,000 by the end of the decade.
"We're just seeing a more pro-business administration coming in that undoubtedly will cut taxes," Yardeni told Yahoo Finance. "And not only for corporations but also for individuals. Lots of various kinds of tax cuts have been discussed. And in addition to that, a lot of deregulation."
In his note, Yardeni wrote the market is showing early signs of "animal spirits" coming into play.
Key to Yardeni's call is a boost to his earnings estimates and margin projections for the S&P 500 due to Trump's policies. The earnings estimates assume Trump will "quickly lower the corporate tax rate from 21% to 15%."
Yardeni's decade-end forecast would mark a return of about 66% from current levels, or about 11% annually, roughly in line with the long-term average annual return of the S&P 500.
There are concerns, like sticky inflation readings, which may prompt investors to question whether the Federal Reserve will stop cutting interest rates.
And others, like the team at Goldman Sachs — which recently called for a 3% annual return for the S&P 500 over the next decade — have reasoned that, eventually, the bull market will turn into a bear.
"We aren't saying that a recession can't occur over the rest of the decade," Yardeni wrote in his note to clients. "However, we note that despite the significant tightening of monetary policy during 2022 through 2024, there has been no recession. Why should there be one over the remainder of the Roaring 2020s?"
Research from FactSet on Friday, showed the S&P 500 is already trading at 22.2 times 2025 earnings estimates. This is above the five-year average of 19.6 and the 20-year average of 15.8.
High valuations and frothy sentiment are among the reasons some have argued the market could be due for a correction, or at least more modest returns going forward.
But strategists often point out that high valuations on their own aren't often a reason to sell. "Multiples are likely to be elevated when investors believe that earnings can grow faster for longer because a recession is less likely in the foreseeable future," Yardeni wrote.
And as Evercore's Julian Emanuel wrote recently when making the case for the S&P 500 to hit 6,600 by June 2025, "Expensive has a history of getting more expensive and lasting longer with greater gains."
He added, "Exuberance lies ahead. President-Elect Trump will move fast on policy initiatives, and stocks will move fast in response."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
11.
Inflation and retail sales data greet a roaring stock market rally: What to know this week
2024-11-10 12:45:52 by Josh Schafer from Yahoo FinanceStocks just had their best week of 2024.
All three major indexes pressed to record highs after Donald Trump won the 2024 presidential election.
For the week, the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) rose more than 4.5%, while the Nasdaq Composite (^IXIC) rose nearly 6%.
In the week ahead, a fresh reading on inflation and retail sales will lead the economic calendar.
In corporate news, quarterly results from Home Depot (HD), Cisco (CSCO), and Disney (DIS) will highlight another week of earnings reports.
Price check
In a widely anticipated move, the Federal Reserve cut interest rates by 25 basis points last Thursday. In a press conference following the announcement, Fed Chair Jerome Powell declined to comment on the central bank's plans for future rate cuts.
"We don’t think it’s a good time to be doing a lot of forward guidance," Powell said. He later noted that Fed officials will need to gauge the economic data released between now and December before knowing if the central bank will cut interest rates again this year.
The first data the Fed will consider ahead of its next meeting will come out on Wednesday with the release of the October Consumer Price Index (CPI). Wall Street economists expect headline inflation rose just 2.6% annually in October, an increase from the 2.4% rise in September. Prices are set to rise 0.2% on a month-over-month basis, per economist projections, in line with the increase seen in September.
On a "core" basis, which strips out food and energy prices, CPI is forecast to have risen 3.3% over last year in October, unchanged from September's increase. Monthly core price increases are expected to clock in at 0.3%, also in line with the September gain.
"The October CPI report will likely support the notion that the last mile of inflation's journey back to target will be the hardest," Wells Fargo's economics team led by Jay Bryson wrote in a weekly note to clients on Friday.
Retail reading
The final monthly retail sales report before the start of the holiday shopping season is set for release on Thursday. Economists estimate retail sales increased 0.3% over the prior month during October. The control group of retail sales — which excludes several volatile categories like gasoline and feeds directly into gross domestic product (GDP) — is also expected to have risen by 0.3%.
Entering the release, several trackers point to the fourth quarter being off to a solid start for economic growth. The Atlanta Fed GDPNow tracker currently projects the US economy growing at 2.5%.
Disney on the big screen
Disney is set to report quarterly results before the bell on Thursday as the media giant looks to continue to improve its streaming business amid further declines in linear television. Investors will also be focused on results within the company's theme park business after the segment fell short in its most recent quarter.
Streaming profitability should be a bright spot after the company reported its first quarter of profits for that business in August. The segment should get a boost from recent price hikes along with the continued rollout of Disney's password-sharing crackdown across its various platforms.
Shares are up about 9% this year.
Trump trade lifts Big Tech
In a roaring rally over the final three trading sessions of the week, much has been made about trades like financials that could benefit from President-elect Donald Trump's policy.
Big Tech also saw significant upside. Roundhill's Magnificent Seven ETF (MAGS) — which tracks Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) — hit a fresh record highs on both Thursday and Friday.
Three of the Magnificent Seven stocks, Tesla, Nvidia, and Amazon, outpaced the S&P 500 on the week, with Alphabet also coming close. Tesla had a unique Trump-related catalyst, with investors banking on CEO Elon Musk's big bet on the president-elect's campaign paying off.
Broadly, markets seemed to be pricing in the potential for less government regulation over Big Tech in a second Trump term. Perhaps indicative of the tech industry's high hopes, Amazon founder Jeff Bezos, Microsoft’s Satya Nadella, Meta’s Mark Zuckerberg, and Alphabet CEO Sundar Pichai all rushed to congratulate Trump on his victory.
The week's stock moves also coincided with a surge in Treasury yields, with the 10-year Treasury yield (^TNX) nearly hitting 4.5%. Strategists have often cited a "flight to quality" environment when yields rise, where money flows to large corporations with solid earnings growth and healthy balance sheets. Big Tech fits this mold and saw a rally when yields rose back in the spring.
Small-cap resurgence
Small caps were one of the beneficiaries of the post-Trump election rally. The Russell 2000 (^RUT) small-cap index jumped more than 5% on Wednesday for its best day in nearly two years. It closed the week up more than 8% for its best week since April 2020 and is now closing in on its all-time high.
This leaves investors with a question that's been prompted throughout 2024: With the Fed set to keep lowering interest rates, is now the time to pile into small caps? In a Friday webinar, Piper Sandler chief investment strategist Michael Kantrowitz said not yet.
The index has more short-term debt than the S&P 500 and would be a clear beneficiary of lower interest rates. But it also has another key difference from large-cap indexes right now: Earnings estimates aren't rising.
While Kantrowitz's research shows 2024 full-year earnings estimates for the S&P 500 have increased over the last 90 days, earnings estimates for the small-cap S&P 600 (^SP600) index have been falling.
"In the last 20 days ... we've definitely seen small cap estimates at the margin move pretty sharply lower," Kantrowitz said.
He added that investors would want to see earnings accelerating to signal the start of a recovery.
"[It's] not something we're seeing quite yet," Kantrowitz said. "So something we'll be monitoring."
Weekly calendar
Monday
Economic data: No notable economic releases.
Earnings: Live Nation (LYV), Monday.com (MNDY)
Tuesday
Economic data: New York Fed one-year inflation expectations, October (3.0% previously)
Earnings: Cava (CAVA), Hertz (HTZ), Home Depot (HD), Instacart (CART), Novavax (NVAX), Occidental Petroleum (OXY), On Holding (ONON), Plug (PLUG), Shopify (SHOP), SoundHound (SOUN), Spotify (SPOT)
Wednesday
Economic data: MBA Mortgage Applications, week ending Nov. 8 (-10.8% previously) Consumer Price Index, month-over-month, October (+0.2% expected, +0.2% previously); Core CPI, month-over-month, October (+0.3% expected, +0.3% previously); CPI, year-over-year, October (+2.6% expected, +2.4% previously); Core CPI, year-over-year, October (+3.3% expected, +3.3% previously); Real average hourly earnings, year-over-year, October (+1.5% previously)
Earnings: Cisco (CSCO)
Thursday
Economic data: Initial jobless claims, week ending Nov. 9 (225,000 expected, 221,000 previously); Producer Price Index, month-over-month, October (+0.2% expected, 0% previously); PPI, year-over-year, October (+2.3% expected, 1.8% previously)
Import prices, month-over-month, January (-0.1% expected, +0.0% previously); Export prices, month-over-month, January (-3.2% previously); Industrial production, month-over-month, January (+0.4% expected, +0.1% previously); NAHB housing market index, February (44 prior)
Earnings: Advance Auto Parts (AAP), Applied Materials (AMAT), Disney (DIS), JD.com (JD), Oklo (OKLO)
Friday
Economic data: Retail sales, month-over-month, October (+0.3% expected, +0.4% previously); Retail sales ex-auto and gas, October (+0.3% expected, +0.7% previously); Import price index, month-over-month, October (-0.1% expected, -0.4% prior); Industrial production month-over-month, October (-0.2% expected, -0.3% prior)
Earnings: Alibaba (BABA), Spectrum Brands (SPB)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
12.
Invesco to Pay $17.5M Penalty to Settle SEC ESG Charges
2024-11-08 22:17:12 by James Rubin from etf.com
Invesco Advisors has agreed to pay a $17.5 million civil penalty to settle Securities and Exchange Commission charges that it had misled investors about the percentage of company assets under management that included environmental, social, and governance elements in investing decisions, the regulator said in a press release Friday.
According to the SEC, from 2020 to 2022, the Atlanta-based asset management giant said that between 70% and 94% of its parent company's AUM were "ESG integrated," but that the information was deceptive because the totals encompassed passively managed ETFs such as the Invesco QQQ Trust (QQQ) and Invesco S&P 500 Equal Weight ETF (RSP), which did not consider ESG in its investing decisions. The regulator noted that Invesco did not have a written policy that detailed ESG integration.
"Invesco saw commercial value in claiming that a high percentage of company-wide assets were ESG integrated. But saying it doesn’t make it so,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.”
SEC Increased ESG Vigilance
The SEC has grown increasingly vigilant about ESG claims in recent years as regulators try to tamp down on greenwashing and other misleading marketing meant to entice investors for whom these principles are important. Last month, the agency fined WisdomTree Asset Management $4 million for failing to follow its own investment criteria for three now defunct ETFs that were marketed under the banner of ESG.
Read More: SEC Fines WisdomTree $4M for ETF Greenwashing
In its order regarding Invesco, the SEC said that Invesco had violated the Investment Advisers Act of 1940, which regulates the activities of investment advisors. The regulator said that Invesco did not admit or deny wrongdoing and "agreed to cease and desist from violations of the charged provisions."
In an emailed statement, Invesco said it was "pleased to resolve this matter," and that it "has not issued public reports of firmwide ESG integration levels since 2022."
Invesco noted that it had "cooperated fully with the investigation."
13.
Stock market 'exuberance' looms ahead with Trump win
2024-11-07 16:21:39 by Josh Schafer from Yahoo FinanceThe stock market's feverish rally following Donald Trump's presidential election victory may have just been an early appetizer for a strong few months of gains.
"Exuberance lies ahead," Julian Emanuel, who leads the equity, derivatives, and quantitative strategy team at Evercore ISI, wrote in a note to clients Wednesday night. "President-Elect Trump will move fast on policy initiatives, and stocks will move fast in response."
Emanuel, who already had a 6,000 call on the S&P 500 for 2024, now sees the S&P 500 hitting 6,600 by the end of June 2025, about an 11% increase from its current level. A "public reengaged in speculation," as evidenced by Wednesday's market action with bitcoin (BTC-USD) hitting 76,000 for the first time and Tesla (TSLA) stock soaring 14%, could help drive the benchmark index higher, per Emanuel.
Market tops are often hallmarked by "exuberance," Emanuel wrote. But with subdued activity in the IPO market and a lack of meme-like action in stocks where equities are surging without the fundamentals to back them, the true signs of an overstretched market rally aren't flashing red.
Emanuel admits when considering the S&P 500 is selling at more than 24 times the past 12 months' earnings, stocks look expensive from a valuation perspective. But as strategists often point out, high valuations aren't typically a great market-timing tool.
"Expensive has a history of getting more expensive and lasting longer with greater gains," Emanuel wrote. "This market will be driven higher by the policy prospect of deregulation in DC driving a capital market cycle largely absent since the [October 2022] trough."
Additionally, Emanuel cites the history of a bull markets. The current bull market is 25 months old and boasts a return of 65%. This is well short of the average 50-month-long bull market that returns 152%.
The case for stocks to run higher is also supported by the Fed's cutting cycle, Emanuel argues. Since the Fed cut rates by half a percentage point on Sept. 18, the 10-year Treasury yield has soared about 80 basis points to about 4.42%.
Typically, this would be considered a headwind for stocks. Instead, the S&P 500 has risen more than 5%. Emanuel points out the only other time this happened during a Fed rate-cutting cycle was the 1995 "soft landing," where the economy remained on solid footing and "the start of a glorious stock market epoch" began, per Emanuel.
In a client note on Tuesday night, Stifel chief equity strategist Barry Bannister offered similar sentiment to Emanuel, writing that the" S&P 500 has entered a mania." Bannister, who's been bearish on stocks amid the rally, admits the index could keep pushing higher to the low 6,000s in the coming months. This would come as the S&P 500 reaches an 80-year-high valuation, Bannister wrote. But he also still sees a downside scenario where the index falls from those levels to 5,250 a year later.
The key risk is a resurgence in inflation that prompts the Fed to keep interest rates higher for longer than markets are currently expecting.
"If inflation proves resurgent ... we suspect Chairman Powell’s last 12 months in office (May 2025 to May 2026) are a significant investor risk," Bannister wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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14.
Trump Win Fuels Market Rally
2024-11-06 21:03:03 by Jeff Benjamin from etf.com
The financial markets exhaled on Wednesday morning in the form of strong rallies across most risk assets.
With Donald Trump declared the winner of the presidential election in a surprisingly lopsided victory over Kamala Harris, the SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF (SPY) opened with gains of more than 3% and more than 2%, respectively.
The tech-heavy Invesco QQQ Trust (QQQ) wasn’t far behind with an opening gain of 1.9%.
For financial advisors and market-watchers, the stock market rally boiled down to the kind of certainty Wall Street is known to appreciate.
Strong Market Rally Occurs Across Risk Assets
“I wonder if some of the pop has to do with the decisiveness of the win, because so many Americans, and I think the stock market, were worried about a contested election,” said Tim Holland, chief investment officer at Orion.
In terms of any kind of “Trump trade,” Holland said, “it seems to be reflationary in nature.”
“This is good for the U.S. dollar and U.S. small cap stocks, and not so good for traditional fixed income and emerging markets,” he noted.
Paul Schatz, president of Heritage Capital, attributed the market’s reactionary rally to the prospects of a Republican sweep of the White House and both houses of Congress, which has not yet been determined.
“For short-term money, this is a good selling opportunity,” he said. “Stocks may rally for a day or three, but let’s not forget the Fed meets today and tomorrow.”
Tom Graff, chief investment officer at Facet, put the post-election rally in a longer-term context by considering such factors as the future of the tax cuts that Trump passed in 2017 and are scheduled to expire next year.
“A big part of why stocks are jumping is Wall Street hoping that those tax cuts remain in place or even taxes get cut further,” he said.
In regards to a Trump trade, Graff said, “the markets believe that Trump’s tariff plans will cause more inflation.”
“The TIPS market is pricing in about 0.15% higher inflation over the next couple of years based strictly on today’s move,” he added. “Rates are also moving because markets believe Trump will run a larger deficit, which means the government will have to sell more Treasury bonds and that pushes interest rates higher.”
15.
The one word that's popping up everywhere this earnings season: Morning Brief
2024-11-06 11:00:48 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
Around 80% of S&P 500 (^GSPC) constituents have reported quarterly results so far, and a better picture of the economy has emerged.
As well as a whole lot of one word: "bottom."
The US economy has evolved along two distinct tracks over the last two years, with the services sector — just over 70% of the economy — booming. It registered a multiyear high Tuesday, according to the Institute for Supply Management.
On the other hand, the manufacturing sector has been languishing in contraction territory for two years. In fact, the last time the gap between these two parts of the economy was greater was the beginning of this century, in December 2000.
The bifurcation of the economy has been part of the reason this bull market feels "weird."
In a note this week, Bank of America's US Equity and Quant team wrote that some of this dour outlook got worse — but more optimistic.
So far, the continued problems that have plagued cyclical sectors for almost two years have ticked up this earnings season: weak demand, flat sales growth, and high inventories. It's still very hard to be in the goods and manufacturing business.
"Mentions of weak demand jumped," the analysts wrote, "[and are] now tracking the highest level since COVID's 2Q20 slump."
But the team, led by Savita Subramanian, also tracks mentions of the word "bottom" in earnings calls, and they noted that mentions have surged 42% over last year.
"This jump in 'bottom' mentions has usually marked an inflection in [earnings per share]," noted BofA. It says that companies have largely finished reducing their inventory levels and may soon start to rebuild their stock of goods. "Our data suggests that the worst in de-stocking is behind us."
A key factor, of course, is the election, and Subramanian and co. noted that much of the poor corporate sentiment is "malaise ... typical of pre-election uncertainty." But the flip side is that with the election out of the way — regardless of who wins — corporates will have the cloud of uncertainty lifted.
"History suggests that investment activity typically accelerates post-election," the analysts wrote. "We believe the election could be a clearing event for companies to unleash capex."
Throw in a new cyclical recovery backed by a friendly Federal Reserve delivering a long-awaited easing cycle, and even small-cap investors can get excited about the potential for a broad-based rally in stocks.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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16.
The Best Technology ETF to Invest $1,000 in Right Now
2024-11-04 13:30:00 by Neil Patel, The Motley Fool from Motley Fool
The S&P 500 has generated a total return of 253% in the past decade. That's a fantastic gain for a passive investment vehicle that provides access to a large group of companies in different industries.
But some investors might want exposure to specific areas of the economy, such as technology-related businesses. If this sounds like you, then you should consider buying $1,000 worth of Invesco QQQ Trust (NASDAQ: QQQ). Here's why.
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Owning dominant tech companies
The Invesco QQQ Trust is an exchange-traded fund (ETF) that tracks the performance of the 100 largest non-financial stocks on the Nasdaq exchange. This is much different than the S&P 500 which follows the movements of the 500 biggest U.S.-based companies.
Investors need to understand the composition of the Invesco QQQ Trust. It has high exposure to the information technology sector, constituting 51% of assets. And the so-called "Magnificent Seven" combined makes up 43% of the ETF.
Historically, this has worked out well. These businesses have generally registered strong growth. That's because they benefit from numerous tailwinds, like artificial intelligence, digital payments, digital advertising, electric vehicles, e-commerce, and cloud computing. Today, these seven companies are some of the most valuable in the world.
Stellar performance
The S&P 500 has put up impressive returns in recent years, but the Invesco QQQ Trust has done a lot better. In the past decade, it has generated a total return of 443%, translating to a yearly gain of 18.4%. A $1,000 investment in October 2014 would be worth more than $5,400 today.
It has helped that the economy was mostly in a low-interest-rate environment during much of this time. This favorable backdrop fueled the rise of the top stocks in the QQQ.
Investors might think that owning this ETF is expensive. However, that couldn't be further from the truth. The Invesco QQQ Trust's expense ratio of 0.2% means that for every $1,000 invested, only $2 goes toward the fee per year. Investors get to keep more of their money over time.
In the past few years, the Ark Innovation ETF, the flagship fund of Cathie Wood's Ark Invest, has gotten a lot of attention. Like the QQQ, it also focuses on companies that are innovative and disruptive, but its performance has been abysmal. In the past five years, the Ark Innovation ETF has generated a total return of 12.8%, much lower than the Invesco QQQ Trust's 164%. And the Ark Innovation ETF carries an expense ratio of 0.75%, almost four-times the QQQ.
Keep this in mind
The Invesco QQQ Trust has had a wonderful year thus far, rising 21.5% (as of Oct. 30). Because it trades near its all-time high, some hesitant investors might be contemplating if now is still a good time to put money to work. After all, isn't it a better idea to simply wait for a sizable pullback before investing?
In theory, trying to time the market sounds like the right move, buying at the lows and selling at the highs, repeating this process over and over again. But this is a losing proposition, as no one can do it accurately consistently. In fact, you'll cause more harm to your portfolio by doing this.
The best course of action, then, is to perhaps consider investing that $1,000 right now into the Invesco QQQ Trust and adopting a long-term mindset. If you want to spread that investment out, then utilize a dollar-cost averaging strategy, investing a small sum of capital on a monthly or quarterly basis. This lets you take advantage of multiple price points, without having to correctly time the market.
Should you invest $1,000 in Invesco QQQ Trust right now?
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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The Best Technology ETF to Invest $1,000 in Right Now was originally published by The Motley Fool
17.
Dividend Investor Earning $9,495 Per Month Regrets Not Focusing on Dividends Sooner, Shares His 10 Stock, ETF Picks
2024-11-03 16:00:13 by Deidre Woollard from BenzingaBenzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
Major technology stocks like Meta Platforms and Microsoft fell after their latest earnings as Wall Street was spooked by their mounting expenses and AI spending. With election-related uncertainties and the need for portfolio diversification, dividend stocks remain in focus. Data shows dividend growth stocks have outpaced inflation over the past 23 years. However, choosing the right dividend stocks and ETFs in today's market remains a key question for beginner investors.
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About a year ago, a dividend investor shared his detailed income report and story on r/Dividends – a discussion board for income investors with over 600,000 members. The investor said his investing account was started with $60,000, which he saved in his 403(b) retirement plan while working at his first job for eight years. He then rolled over this money into an IRA.
The investor said this $60,000 rose to $1.2 million in 27 years from 1996 "without putting any new money."
"During that time, I have experienced tremendous market ups/downs like the internet (tech) bubble/burst, housing bubble/burst, Great Recession and recent Covid-19 crash and recovery. During all these times, my focus was the growth of company stocks, mutual funds and ETFs. My core holdings were always SPY and QQQ about 50-70% and occasionally some speculative stocks about 20-30%," the investor said.
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He highlighted that he stayed invested in the market during all these ups and downs. The investor said he is now retired and switched his focus to dividend investing in 2022.
"My only regret is that I should have switched to dividend focus a little sooner when I had $1.5m, but I guess it's life. Its projected dividend yield is ~9%, but I will be content with ~8% dividend yield."
The investor clarified that most of his portfolio gains came from when he focused on growth.
"The only dividend I have received during my accumulation phase was from SPY & QQQ. I heavily focused on growth," he said.
The investor’s portfolio screenshots showed his monthly dividend income of about $9,495 or $113,949 per year. Most of his holdings were dividend ETFs. Let's take a look at the portfolio.
JPMorgan Equity Premium Income ETF
JPMorgan Equity Premium Income ETF (NYSE:JEPI) was the biggest position in the portfolio of the investor earning $9,495 per month in dividend income. The portfolio screenshots showed he owned 5,323 shares of JEPI, worth about $288,187 at the time. The investor raked in about $32,933 in annual dividend income from the ETF.
JPMorgan Nasdaq Equity Premium Income ETF
JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) was the second-biggest position of the Redditor, earning $9,495 per month in dividends, as his position in the covered call ETF was valued at about $268,275. JEPQ distributes monthly dividends, invests in Nasdaq companies and generates extra income by selling call options. The ETF yields about 9.2%.
Trending: If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it?
The Invesco QQQ Trust Series 1
The Invesco QQQ Trust, Series 1 (NASDAQ:QQQ) is one of the best ways to enjoy dividend income and capital gains through stock price appreciation as the ETF exposes some of the top tech stocks in the NASDAQ-100 index. The fund pays quarterly dividends and yields about 0.6%. The investor owned 544 shares of the fund, according to the screenshots he publicly shared on Reddit.
During the discussion on his post, the investor commented about his conviction in the QQQ:
"Since I am much younger than Buffett, I also have faith in QQQ. I have faith in American entrepreneurship and technological creativity. So, my core holdings are always SPY and QQQ."
The SPDR S&P 500 ETF Trust
One of the key perks of investing in The SPDR S&P 500 ETF Trust (NYSE:SPY) is that it allows you to see your capital grow and get quarterly dividend payments. The fund has a dividend yield of about 1.2%. The Redditor earning $9,495 per month in dividends had 433 SPY shares in his portfolio, valued at about $181,868. The investment brought in $2,792 in annual dividend income for the investor.
Ares Capital
Ares Capital Corporation (NASDAQ:ARCC) is a business development company with a dividend yield of about 9%. The investor had 5,820 shares of Ares Capital in his portfolio, worth about $109,532 at the time. The investment earned about $11,174 in income.
Global X Russell 2000 Covered Call ETF
The investor earning $9,495 monthly dividends had an $82,000 position in Global X Russell 2000 Covered Call ETF (NYSE:RYLD). The fund generates income by selling call options on the small-cap-heavy Russell 2000 Index. The ETF yields about 12%. Being a covered call ETF, RYLD can incur losses during down markets.
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iShares iBoxx $ High Yield Corporate Bond ETF
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) provides investors with exposure to U.S. dollar-denominated high-yield corporate bonds. It tracks the Markit iBoxx USD Liquid High Yield Index, which comprises a broad range of below-investment-grade bonds. The fund has a dividend yield of about 6%.
YieldMax TSLA Option Income Strategy ETF
YieldMax TSLA Option Income Strategy ETF (NYSE:TSLY) is a popular YieldMax dividend ETF for high-yield seekers. With a distribution rate of over 60%, TSLY generates income by selling call options on Tesla shares. Over the past year, TSLY has been down about 42%, while Tesla is up 28%.
Guggenheim Strategic Opportunities Fund
Guggenheim Strategic Opportunities Fund (NYSE:GOF) exposes investors to fixed-income and other debt securities. It invests in various credit instruments, including corporate bonds, asset-backed securities, mortgage-backed securities and other high-yield debt. However, it's a risky investment because it invests in ungraded bonds, also known as junk bonds.
The investor, who earned $9,495 per month, had 776 shares of GOF in his portfolio. This investment generated $1,695 in annual income.
iShares 20+ Year Treasury Bond BuyWrite Strat ETF
iShares 20+ Year Treasury Bond BuyWrite Strat ETF (BATS:TLTW) invests in U.S. Treasury bonds with 20 years or more maturities. It also generates income by selling call options on the U.S. Immigration and Customs Enforcement 20+ Year U.S. Treasury Index.
Better Yields Than Some REITs?
The current interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.
Arrived Homes, the Jeff Bezos-backed investment platform, has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in August. The best part? Due to high demand the maximum investment amount is currently $5,000 with a minimum investment of ONLY $100.
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This article Dividend Investor Earning $9,495 Per Month Regrets Not Focusing on Dividends Sooner, Shares His 10 Stock, ETF Picks originally appeared on Benzinga.com
18.
Markets brace for presidential election, Fed meeting: What to know this week
2024-11-03 12:38:44 by Josh Schafer from Yahoo FinanceElection Day is almost here. The looming question remains how a Donald Trump or Kamala Harris victory will shape the market narrative for the rest of the year and beyond.
Investors should soon learn the answer, with Americans heading to the polls on Tuesday. In the week before the election, the S&P 500 (^GSPC) fell about 1.37% while the tech-heavy Nasdaq Composite (^IXIC) shed 1.5% despite hitting its first record close since June during the week. Meanwhile, the Dow Jones Industrial Average (^DJI) dropped just over 0.1%.
It's not the only big event of the week. On Thursday, the Federal Reserve will announce its latest policy decision, with markets largely anticipating that the central bank will cut interest rates by a quarter percentage point.
Earnings season rolls on with a week headlined by reports from Palantir (PLTR), Super Micro Computer (SMCI), Arm (ARM), Qualcomm (QCOM), and Moderna (MRNA).
Election risk?
One of the top potentially market-moving events that strategists have discussed throughout the year has finally arrived with the 2024 presidential election slated for Tuesday, Nov. 5.
But it's been an abnormal election year for markets. When analyzing the S&P 500's average intraday trading range, Carson Group chief markets strategist Ryan Detrick found that this past October was the second-least volatile month leading into an election in the past 50 years.
Zooming out further, research from Bespoke Investment Group shows the S&P 500 had its best start to an election year since 1932, with a 20% year-to-date return for the benchmark index through the end of October.
Still, Election Day itself is considered a risk event for markets. Speculation has built that a "Trump Trade" has been forming in markets as the betting odds of the former president winning the election have risen. But some market strategists aren't convinced there's a clear read on what outcome investors will be rooting for come Tuesday.
"I think the market would do fine with Harris," Yardeni Research chief markets strategist Eric Wallerstein told Yahoo Finance. "I think the market would do fine with Trump. I don't think the stock market is really pricing any presidential odds."
Franklin Templeton chief markets strategist Stephen Dover told Yahoo Finance that the key for markets could simply be getting past the event itself.
"Just having those elections settled, whichever way it goes, would be positive," Dover said.
Baird market strategist Michael Antonelli agreed, telling Yahoo Finance that the riskiest scenario from the election is "one where we just don't know the winner."
Then comes the Fed
Markets are widely expecting the Federal Reserve to cut interest rates by 25 basis points when it announces its next policy decision on Nov. 7.
The key question entering the meeting is what the Federal Reserve will (or won't) signal about its plans for future meetings. Given that data has continued to show an economy pacing for solid growth while inflation's path down to the Fed's 2% goal remains bumpy, markets have moved to price in fewer interest rate cuts over the next year than initially thought when the Fed cut rates by half a percentage point on Sept. 18. As of Friday, markets see about three less rate cuts through the end of next year than previously thought.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
Morgan Stanley chief global economist Seth Carpenter doesn't think markets will get much more clarity on the Fed's path in the coming week.
"The strength in growth gives the Fed patience as it allows policy easing to be gradual," Carpenter wrote in a note to clients on Friday. "Neither inflation nor unemployment is forcing the Fed's hand. We do not expect Powell to give specific guidance on the size or cadence of future cuts. Policy remains data-dependent, and neither the September 50 [basis point] cut nor the November 25 [basis point] cut indicates the future pace."
Earnings appear solid
The market's debate over how much easing the Fed will enact over the next year has sent the 10-year Treasury yield (^TNX) soaring since the last Fed meeting in September. The 10-year added about 7 basis points on Friday to close near 4.36%, its highest level since early July.
Baird investment strategist Ross Mayfield told Yahoo Finance that the move in rates, and the overall focus on the economic data driving them higher, is overshadowing what's shaping up to be another solid quarter of corporate results.
With 70% of the S&P 500 having reported quarterly results, the benchmark index is pacing for year-over-year earnings growth of 5.1%. This would mark the fifth straight quarter of earnings growth as the index continues to rebound from the earnings recession seen in 2023.
"We went through a two-year period where earnings were flat," Mayfield said. "They were volatile. Now we have earnings on the rise again. They're beating analyst expectations at a pretty solid clip. Profit margins are expanding. So the big picture is things look pretty good."
And that story appears to be staying intact for the fourth quarter too. Since the period began at the start of October, analysts have cut estimates by 1.8%, according to FactSet data. This is in line with the average cut to earnings seen over the past 10 years.
"At a certain point, earnings have to take the baton," Mayfield said. "I think we're in a good position for earnings to do that."
Weekly Calendar
Monday
Economic data: Factory orders, September (-0.5% expected, -0.2% prior), Durable goods orders, September (-0.8% expected, -0.8% prior)
Earnings: Berkshire Hathaway (BRK-A, BRK-B), Cleveland-Cliffs (CLF), Constellation Energy (CEG), Goodyear (GT), Hims & Hers (HIMS), Marriott International (MAR), Palantir (PLTR), Wynn (WYNN)
Tuesday (Election Day)
Economic data: ISM services index, October (53.8 expected, 54.9 prior)
Earnings: Apollo Global Management (APO), Devon Energy (DVN), Ferrari (RACE), Super Micro Computer (SMCI)
Wednesday
Economic data: MBA Mortgage Applications, the week ended Nov. 1 (-0.1% prior); S&P Global US services PMI, October final (55.3 expected, 55.3 prior); S&P Global US composite PMI, October final (54.3 prior)
Earnings: Arm Holdings (ARM), AMC (AMC), Aurora Cannabis (ACB), Celsius Holdings (CELH), CVS (CVS), Elf (ELF), Novo Nordisk (NVO), Qualcomm (QCOM), Toyota (TM)
Thursday
Economic data: Federal Reserve interest rate decision (0.25% interest rate cut expected) Initial jobless claims, week ending Nov. 2 (221,000 expected, 216,00 prior)
Earnings: Affirm (AFRM), Airbnb (ABNB) Block (SQ), Datadog (DDOG), DraftKings (DKNG), Halliburton (HAL), Hershey (HSY), Moderna (MRNA), Pinterest (PINS), Rivian (RIVN), The Trade Desk (TTD)
Friday
Economic calendar: University of Michigan consumer sentiment, November preliminary (71 expected, 70.5 prior)
Earnings: Canopy Growth (CGC), Icahn Enterprises (IEP), Sony (SONY)
19.
QQQ Volatile on Mixed Mag 7 Earnings, SMCI
2024-11-01 12:00:00 by Kent Thune from etf.com
Equity investors were hoping for a grand slam on tech earnings this week but fell short like the New York Yankees as Mag 7 heavy hitters struck out.
The tech-heavy growth stock proxy, Invesco QQQ Trust ETF (QQQ), touched its all-time high Tuesday on hopes for a big earnings week before falling 3% through midday Thursday after Microsoft and Meta reported mixed results.
Although both mega-gap tech companies showed strong revenue growth in key areas, softness in Microsoft’s cloud division and Meta’s increased spending on metaverse projects raised concerns about tech’s high valuations and the sustainability of recent gains.
Investors were already cautious after Mag 7 stocks rallied throughout 2023 and 2024, so any suggestion of slower growth or higher costs can trigger profit-taking and market recalibrations.
With concerns over higher-for-longer inflation and interest rates continuing to create headwinds for high-growth sectors like tech, the reports led to some pullback as investors weighed future earnings potential against elevated price levels.
Tech’s last hope for a winning week will depend on how investors interpret Apple’s earnings, which were reported after Thursday’s close.
Super Micro Computer (SMCI) Stock Crash Drags on Tech
Compounding the tech sector’s problems in the past week, Super Micro Computer's stock (SMCI) price plummeted due to the resignation of its auditor, Ernst & Young (EY). EY cited concerns about the company's financial statements, raising doubts among investors about the accuracy of Super Micro's financial reporting.
This sudden development eroded investor confidence and triggered a sell-off, as SMCI dropped more than 40% in the past week, raising red flags about the broader semiconductor industry and tech sector.
Super Micro has announced it will provide a first quarter business update on Tuesday, Nov. 5, which is Election Day in the U.S.
20.
Active Funds Struggle to Beat H1 2024 Benchmarks
2024-10-31 20:19:19 by DJ Shaw from etf.com
Active fund managers showed varied results against their benchmarks in the first half of 2024, with 57% of large-cap managers failing to beat the S&P 500, according to S&P Dow Jones Indices’ latest SPIVA report.
The results underscore the ongoing challenge facing active management as investors increasingly weigh their options between active and passive strategies in a market dominated by mega-cap stocks, the report revealed.
Mid-cap managers had an even tougher time, with 71% falling short of their benchmark, while small-cap managers showed surprising strength with only 15% underperforming the S&P SmallCap 600, the SPIVA data showed.
The S&P 500 Top 50 outpaced the broader S&P 500 by 5% through September 2024, creating a challenging environment for managers trying to match market returns, the report found.
Active Funds Find Fixed Income Success
Fixed income managers found more success in the current market, with 80% of general investment-grade funds and 61% of high-yield funds beating their benchmarks, benefiting from tightening credit spreads, according to the data.
Government bond categories faced steeper challenges, with 75% of general government funds underperforming their benchmark, the iBoxx $ Domestic Sovereign & Sub-Sovereigns index, the report noted.
The data showed larger funds significantly outpacing smaller ones in performance. The gap between asset-weighted and equal-weighted average returns for large-cap core funds hit 2.5% in the first half of 2024, exceeding the 2.4% differential seen in 2023.
Value managers across market caps demonstrated particular strength, with only 28% of large-cap value funds underperforming their benchmarks, the report stated.
Mid-cap and small-cap value managers performed even better, according to the data. Only 12% of mid-cap value funds and 6% of small-cap value funds fell short of their respective benchmarks.
The dispersion within active fund categories narrowed compared to 2023, the report found. The first half of 2024 interquartile range for all large-cap funds declined by more than half, coinciding with lower market volatility.
21.
October jobs report: US economy adds just 12,000 jobs as Boeing strike, hurricanes weigh on labor market
2024-10-31 17:54:08 by Josh Schafer from Yahoo FinanceThe US labor market added far fewer jobs than expected in October as weather disruptions and worker strikes weighed on the labor market.
Data from the Bureau of Labor Statistics released Friday showed the labor market added 12,000 payrolls in October, less than the 100,000 expected by economists.
Meanwhile, the unemployment rate held steady at 4.1%, partly due to a difference in how the BLS collects data for that metric versus monthly job additions. Workers who were employed but earned no money wouldn't be counted as unemployed in the household survey, which is where the unemployment rate comes from. They would not be considered employed in the payroll survey, which is how job additions are tabulated.
October job additions came in far lower than the revised 223,000 added in September. Monthly job additions for August and September were also revised lower by a combined 112,000.
"Ignore that top line [job additions], look at that 4.1%, and just get on with it," Joe Brusuelas, chief economist for RSM, told Yahoo Finance. He added, "This is all noise."
Economists warned ahead of Friday's release that recent hurricanes and a strike by Boeing (BA) workers weigh on the labor market data for October. The BLS confirmed that was the case in Friday's release.
"It is likely that payroll employment estimates in some industries were affected by the hurricanes," the BLS wrote in the release. "However, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events. There was no discernible effect on the national unemployment rate from the household survey."
The BLS added that manufacturing jobs declined by 46,000 in October "largely due to strike activity."
Elsewhere in Friday's report, wage growth, an important measure for gauging inflation pressures, rose to 4.1% year-over-year from a 4% annual gain in September. On a monthly basis, wages increased 0.4%, compared to a 0.3% gain in September. Additionally, labor force participation fell to 62.6% from 62.7%.
The report is the last major economic release before the Federal Reserve's next policy decision on Nov. 7. Market expectations for that meeting moved little after the jobs report. As of Friday morning, markets were pricing in a roughly 99% chance that the Federal Reserve cuts interest rates by 25 basis points next week, up from a 95% chance seen a week ago, per the CME FedWatch Tool.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
Broadly, recent data outside the monthly employment report has shown a labor market that's gradually cooling. Data out Tuesday from the Bureau of Labor Statistics showed job openings fell to their lowest level since January 2021 during the month of September. Meanwhile, the quits rate, a sign of confidence among workers, fell to 1.9% in September, down from a revised 2% in August. This marked the lowest quits rate since June 2020.
“The big picture is that the labor market continues to cool down (even beyond hurricane effects), and this should keep the Fed on pace for rate cuts in November and December," Carson Group global macro strategist Sonu Varghese wrote in a note on Friday.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
22.
Why this bull market feels 'weird': Morning Brief
2024-10-30 10:00:24 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
The economy continues to chug along, and this week's batch of economic data — GDP, JOLTs, the Fed's preferred inflation gauge, and a jobs report — is expected to provide evidence that the soft landing is here.
But it hardly feels like a landing. There's too much going on, from Big Tech earnings and crazy weather effects on data to an impending election. Meanwhile, the Nasdaq Composite (^IXIC) just closed at its 28th record high of the year Tuesday.
But that's not just it.
Schwab senior investment strategist Kevin Gordon, who recently appeared on Yahoo Finance's Stocks in Translation, described a certain cognitive dissonance investors face.
"We're living through the soft landing now," he said, adding, "It's not a destination in my mind. It's a process." In that regard, Gordon agrees with San Francisco Federal Reserve president Mary Daly. She recently penned an article, "Landing Softly is Just the Beginning," in which she liberally uses the preferred term "sustained expansion."
To their point, all the talk about landings might have been putting the cart before the horse.
It's worth remembering that until we get a nationwide recession, we'll still be living in the midst of the pandemic expansion that began with the restart of the US economy following a historic lockdown.
We can see this clearly by analyzing the GDP metric that will be updated this week.
After the historic drop and surge of 2020, US growth has remained robust except for the first couple of quarters in 2022. And the recent revision to Q2 2022 GDP, which flipped it to positive from negative, only strengthens the arguments for continuous expansion.
While this cycle expansion is now in its fourth year, astute investors will recall that we only recently celebrated the two-year anniversary of this bull market. Digging into this mismatch helps explain why this bull market has bucked most of the norms of the prior four decades.
"It is a weird bull market," Callie Cox, chief market strategist at Ritholtz Wealth Management, said in another episode of Stocks in Translation. "I'm scratching my head too," she added.
"[We thought that] small caps [were] going lead us to the races," Cox said. Small-cap indexes like the Russell 2000 (^RUT) continued to make new lows as the megacaps were off to the races in 2023.
But Cox raised the other key insight that distinguishes the current bull market from others over the last 40 years. "[The weird market] was a product of the rate environment," Cox said. And it's here that the Fed has perhaps surprised investors and business owners the most.
Despite the most aggressive rate-hiking cycle in 40 years that was designed to choke off the easy-money spigot for businesses — non-bank corporations in the US have actually seen the burden of their interest payments trend down continuously since the pandemic, as highlighted by Apollo's chief economist and partner Torsten Sløk. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
"To be sure, firms with weak earnings, weak revenue, and weak cash flows have been hit by Fed hikes," Slok wrote. "[But] the negative effects of Fed hikes on corporates have been small."
Gordon reflected on the positives for investors.
"If you're in a sustained expansion where the labor market is intact, inflation expectations are well anchored, and you've got the economy growing at a pretty respectable pace, then you're in a relatively good spot," Gordon said.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
23.
A 'lot rides' on Big Tech earnings amid two busy weeks for markets
2024-10-30 08:00:13 by Josh Schafer from Yahoo FinanceAmid a chaotic stretch of news, Wall Street strategists are reminding investors that corporate profits remain paramount to the stock market rally.
Yardeni Research chief markets strategist Eric Wallerstein told Yahoo Finance that earnings will likely "be in the driver's seat," barring any unexpected changes to the economic narrative.
Several Big Tech companies are set to report earnings in the coming days that, in total, will feature reports from 169 S&P 500 (^GSPC) companies. Updates on inflation and the labor market also loom ahead.
These releases front-run another large week, with both the presidential election and the Federal Reserve's next interest rate decision also slated to greet investors over the coming trading sessions.
Barclays head of US equity strategy Venu Krishna, echoing Wallerstein, noted that a "lot rides" on how upcoming Big Tech earnings fare.
While the incoming economic data — and how the Fed responds to it next week — will help shape how investors are viewing the interest rate environment over the next year, the incoming earnings will provide a clear read on the S&P 500 as a whole.
Krishna highlighted that while many have discussed the broadening of earnings growth beyond Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Nvidia (NVDA), analysts have been cutting estimates for the other 494 companies in the S&P 500. This comes as Big Tech earnings estimates haven't been reduced as much, putting further pressure on the market's largest companies to deliver earnings growth.
FactSet recently pointed out that the "Magnificent Seven" stocks, which include the Big Tech names and Tesla (TSLA), were set to grow earnings year over year by 18.1% this quarter, while the other 493 companies in the S&P 500 are expected to see just 0.1% growth.
So far, Tesla has done its part by topping analysts' earnings per share estimates by nearly 21%. On Tuesday night, Alphabet also reported better-than-expected EPS, topping Wall Street’s estimates by nearly 16%. Results from Microsoft and Meta are slated for Wednesday followed by Alphabet and Apple on Thursday.
But "if they just meet expectations, that's not good," Krishna said. "The scale of surprises in the 5% to 6% range is reasonable. Anything less than that, I would be disappointed. Anything above that is phenomenal. They will be back in complete control compared to the rest of the market."
Broadly, this earnings season has brought outsized rewards to companies that top analysts' estimates for both revenue and earnings. In a note to clients on Monday, Bank of America's equity and quant strategy team wrote that companies that have beaten Wall Street's projections for both revenue and earnings have experienced a 2.48% increase on average in their stock price the next day, far outpacing the average 1.48% move.
But since Big Tech stocks have already seen large gains over the past 18 months amid the artificial intelligence-fueled stock market rally, the bar is likely higher. Baird Investment strategist Ross Mayfield admitted the earnings numbers for Big Tech remain important. But at this point, the AI narrative is becoming a "show-me story."
"It's about companies in the consumer staples space and the utility space ... are they [Big Tech's customers] spending on your products?" Mayfield told Yahoo Finance. "Those updates from leaders are going to be really important because we know that these are great businesses with a lot of cash [and] low debt. But at this point, they're trading on AI. Their lofty valuations are AI-linked. And so the investors are going to want to hear positive updates. Otherwise, it could be a bit choppy as it has been for the last three to six months in that space."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
24.
Westwood Makes ETF Push With New Platform, Filings
2024-10-28 20:45:39 by Jeff Benjamin from etf.com
Westwood Holdings Group, an $18 billion asset manager that tested the ETF waters earlier this year with two strategies, is ramping up plans to become a competitive player in the ETF space.
The Dallas-based manager of separate accounts and 13 mutual funds has developed a standalone entity, WEBs Investments, which will be run by ETF industry veteran Ben Fulton as chief executive and chief product officer.
In addition to the Westwood Salient Enhanced Midstream Income ETF (MDST) and the Westwood Salient Enhanced Energy Income ETF (WEEI), the development of which Fulton consulted on, Westwood has filed for two more ETFs that could be available by year end.
“When we look at industry and see what’s happening, ETFs without question represent one of the fastest growing products,” said Brian Casey, Westwood chief executive officer.
Westwood Expands ETF Efforts With Standalone Platform
Casey declined to talk about the ETFs still in registration but said Westwood’s expansion into the ETF space will not be about trying to compete on price or distribution against larger and more established companies.
“We will continue to look for white space in the ETF world,” he said.
The two ETFs in registration are the WEBs Defined Volatility SPY ETF and the WEBs Defined Volatility QQQ ETF, which Fulton described as “maybe one of the most innovative ideas I’ve had.”
Fulton, who has nearly three decades of experience in the ETF space, is credited with leading the Invesco PowerShares ETF business to the $80 billion mark in 2013, up from $200 million when he took over in 2006.
Through the WEBs Investment joint venture, Fulton said he will focus on strategies that address the kinds of issues that are keeping financial advisors up at night.
“What is the problem RIAs can’t address,” he said. “Of the few hundred ETFs I’ve built; I don’t think any were me-too products.”
In addition to rolling out new ETFs, Casey said Westwood is looking into possible ETF share classes for its existing mutual funds and potentially converting some of the mutual funds into ETFs.
25.
NYSE Arca Plans 22-Hour Trading Day for ETFs
2024-10-28 19:29:35 by DJ Shaw from etf.com
NYSE Arca, which lists nearly 75% of all U.S. exchange-traded fund assets, plans to extend its trading day to 22 hours for all U.S.-listed stocks, ETFs, and closed-end funds, according to an announcement from the New York Stock Exchange.
The move would enable trading from 1:30 a.m. to 11:30 p.m. Eastern Time on weekdays, excluding holidays, subject to regulatory approval, the NYSE’s announcement stated.
The extended hours affect the largest exchange-traded fund trading venue in the U.S., as NYSE Arca currently ranks as the top U.S. exchange for listing and trading exchange-traded funds, with $5.9 trillion in assets in U.S. markets as of Sept. 30, according to the NYSE’s third quarter report.
Global ETF Growth Drives Change
The extension aims to meet growing international demand for U.S.-listed securities, said Kevin Tyrrell, head of markets at the New York Stock Exchange.
“The NYSE’s initiative to extend U.S. equity trading to 22 hours a day, [five] days a week underscores the strength of our U.S. capital markets and growing demand for our listed securities around the world,” Tyrrell stated in the announcement.
The exchange currently handles an average daily value of $149.4 billion in U.S. exchange-traded fund transactions, according to NYSE data.
Trades during the extended hours will continue to be cleared by the Depository Trust & Clearing Corporation, which recently announced plans to extend its operational hours, the NYSE stated.
The move comes as NYSE Arca continued to dominate ETF trading, with 59 new ETFs listed in the third quarter alone and eight issuers debuting new products on the exchange, according to NYSE’s quarterly report.
The exchange also welcomed two ETFs from other exchanges in the third quarter: The JPMorgan Ultra-Short Income ETF (JPST) and the Global X Russell 2000 Covered Call ETF (RYLD).
The exchange will need to file updated rules with the Securities and Exchange Commission for the extended trading hours.
26.
This 1 Simple ETF Could Turn $250 a Month Into $1 Million
2024-10-28 09:37:00 by Jeremy Bowman, The Motley Fool from Motley FoolBy now, most investors know that the tech sector has come to dominate the stock market.
Currently, the seven most valuable companies traded on U.S. exchanges all hail from the tech sector. Those are Apple, Nvidia, Microsoft, Alphabet, Amazon, Meta Platforms, and Taiwan Semiconductor Manufacturing, and those stocks combined have a market cap of roughly $17 trillion, which is more than a third of the entire S&P 500.
The sector has come to lead the stock market because this group of stocks represents the emerging technologies that have become some of the biggest drivers of the economy, including consumer electronics, semiconductors, software and cloud infrastructure, digital advertising, e-commerce, social media, and chip manufacturing.
If you wanted to capitalize on that tech boom, the easiest way to do so would be by buying the Invesco QQQ Trust (NASDAQ: QQQ), the largest ETF that tracks the Nasdaq-100 index, which is made up of the 100 largest companies on the Nasdaq Composite, and that would have grown handsomely over the last 10 years.
As you can see from the chart, if you had invested $10,000 in the Invesco QQQ Trust a decade ago, you'd now have more than $50,000.
Based on those gains, the Nasdaq-100 grew at a compound annual rate of 18% over the last decade.
It's far from guaranteed that the Nasdaq 100 will continue to deliver a CAGR of 18%, but if it does, that kind of growth would allow you to invest $250 a month and grow that investment to $1 million after 25 years.
Will the QQQ trust grow that fast?
An 18% CAGR over 25 years might seem unlikely, especially as the Nasdaq-100 is now trading at a price-to-earnings ratio of 32, meaning that gains from here aren't likely to come from multiple expansion.
Still, tech stocks are at a unique point, as the artificial intelligence (AI) revolution could arguably be as transformative as the internet, and that could drive accelerated growth, especially from some of the larger tech stocks. For instance, analysts expect Nvidia's earnings per share to double in the current quarter, and in fiscal 2026, which begins in February 2025, the consensus calls for earnings per share to grow 43% to $4.06.
Taiwan Semiconductor just reported a 54% increase in earnings per share, showing that the AI growth boom could have a lot of room to run.
Additionally, the push to artificial general intelligence, which some tech CEOs expect to be achieved within the next five years, is also likely to drive a boom in the tech sector, as that technology could unlock further gains for the biggest tech stocks.
There's also the potential for autonomous vehicle technology to unleash massive gains in stocks like Alphabet, which owns Waymo, and Tesla, as Cathie Wood has speculated that its valuation could reach $5 trillion if its robotaxis take off.
Why the QQQ Trust could continue to be a winner
It's impossible to predict the compound annual growth rate of the Invesco QQQ Trust, especially over a length of time as long as 25 years.
However, the tech-heavy index looks like a good bet to deliver strong returns and outperform the S&P 500 as the tech industry takes more market share from other industries. Like the S&P 500, the Nasdaq-100 also benefits from refreshing its holdings as companies enter or fall out of the 100 most valuable Nasdaq companies.
That formula has been a big winner since the dot-com bubble burst, and it looks poised to continue delivering strong results in the AI era.
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This 1 Simple ETF Could Turn $250 a Month Into $1 Million was originally published by The Motley Fool
27.
One chart shows how AI will drive another decade of US stock market dominance
2024-10-27 14:30:42 by Josh Schafer from Yahoo FinanceUS companies already dominate the global stock market when it comes to size. A new chart from JPMorgan Asset Management shows that's largely expected to continue. The firm attributes the boom to artificial intelligence.
In JPM's 2025 Long-Term Capital Market Assumptions released on Monday, the team projected that US companies' market cap share of the total global equity market will fall from 64% currently to 60% in 2037. Still, as seen in the chart below, the US (in green) would maintain a large lead over the estimated second-largest share of the global equity market, China (in red).
JPMorgan Asset Management's global head of multi-asset and portfolio solutions Monica Issar told Yahoo Finance during a media roundtable on Monday that the US will continue to lead by market cap share as artificial intelligence benefits expand beyond a few large tech names that have dominated the market rally over the past year to companies in various industries.
Issar gave two reasons for the prediction: revenue production and margin improvement. The first will come from the money pouring into AI benefiting companies outside of Big Tech. This plays out as tech companies buy AI chips from the likes of Nvidia (NVDA), and, as they need more power, these AI operators are forced to spend with companies in the Utilities (XLU) and Energy (XLE) sectors.
As AI makes companies more efficient and eliminates the most simple work, eventually cutting down costs, US corporates should get a boost to profit margins.
"It's going to be the US predominantly, and then obviously Europe will follow, because you're starting to see some adoption there," Issar said.
To put the current US dominance in perspective, just Nvidia's (NVDA) market cap alone is larger than most other G7 countries, Apollo chief global economist Torsten Sløk wrote in a research note on Thursday. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
To be sure, Sløk noted that this could be a risk to the market overall.
"Global equity markets, including retirement allocations to equities, are basically leveraged to Nvidia," Sløk wrote. "Let’s hope the value of Nvidia doesn’t decline significantly."
Others have a more sanguine view of the AI superpower's dominance, though. In a recent research note detailing why the S&P 500 (^GSPC) could average more than 10% annual returns over the next decade, DataTrek Research co-founder Nicholas Colas pointed to the US being at the forefront of AI adoption and well positioned to dominate amid the technology's "global adoption."
Colas wrote the odds that a non-US tech company will rise over the next decade and unseat the large tech companies currently driving the US market share like Apple (AAPL), Nvidia, Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL, GOOG), and Meta (META) are "almost zero."
"The US continues to dominate global venture capital," Colas wrote. "If a new US business does eventually threaten their preeminence, then it will certainly go public, be in the S&P 500, and drive future returns."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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28.
The Smartest Index ETF to Buy With $1,000 Right Now
2024-10-27 09:10:00 by Jake Lerch, The Motley Fool from Motley FoolIndex exchange-traded funds (ETFs) are a great way to invest. Most combine diversification, low fees, and solid performance -- making them an ideal choice for investors who want to set it and forget it.
So today, I'll reveal my top choice among all index ETFs, and examine why it's likely to remain a great choice well into the future.
Which index ETF is the best?
For me, there's a clear choice when it comes to which index ETF I want to own for the long term. It's the Invesco QQQ Trust Series I ETF (NASDAQ: QQQ).
This fund is linked to the Nasdaq-100 index, which tracks 100 stocks listed on the Nasdaq exchange. Top holdings include all of the "Magnificent Seven:" Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta Platforms, and Tesla.
In addition, many other prominent tech stocks like Broadcom, Netflix, and Advanced Micro Devices are included among its holdings.
What you won't find are financial stocks. By rule, the Nasdaq-100 excludes any stocks from the financial sector.
Because of its heavy allocation of tech stocks, the index, and by extension, the fund, has been the top-performing benchmark index over the last 10 years -- hands down.
For example, when comparing the fund against others that track the S&P 500, the Dow Jones Industrial Index, and the Russell 2000, the Invesco fund's superior performance shines through.
Over the last decade, the fund has generated a compound annual growth rate (CAGR) of 19%, meaning a $10,000 investment made at the start of the period would have grown to almost $57,000 today.
By contrast, the SPDR S&P 500 ETF Trust, an ETF that tracks the S&P 500 index, generated a CAGR of 13.9%. The SPDR Dow Jones Industrial Average ETF ranked third with a CAGR of 12.6%, and the iShares Russell 2000 ETF came in last with a CAGR of 9%.
What's more, those are total returns, meaning that dividend payments have been included in the annual return calculation. On a strictly price return basis, the Nasdaq-linked fund performs even better compared to other benchmark indexes.
Why this fund is likely to outperform well into the future
So, it's clear the Invesco fund has been the best choice over the last decade -- but what about the future? Why should investors still view the fund as the best choice?
The main reason why the fund is a solid investment is its focus on innovative, growth-oriented companies. Consider one of the fund's top holdings, Nvidia.
Nvidia has grown its annual revenue from $26 billion in 2022 to close to $100 billion today. Over the next two years, analysts expect the company's annual revenue to skyrocket to nearly $180 billion.
Few companies in the world can match that type of growth, but some of them are found within the Nasdaq-100.
Moreover, the Nasdaq-100 isn't just full of tech stocks. There are well-run companies from other sectors, too.
Take Costco Wholesale, for example. It's one of the top holdings of the fund. The company generates over $250 billion in sales each year, and it has grown revenue at a yearly pace of around 9% for a decade.
In summary, the Invesco fund's focus on growth-oriented companies bodes well for its future prospects and makes it a smart choice for investors.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jake Lerch has positions in Alphabet, Amazon, Invesco QQQ Trust, Nvidia, and Tesla and has the following options: long November 2024 $610 calls on SPDR S&P 500 ETF Trust and short November 2024 $600 calls on SPDR S&P 500 ETF Trust. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The Smartest Index ETF to Buy With $1,000 Right Now was originally published by The Motley Fool
29.
Billionaire Ken Griffin Just Increased His Position in This Unstoppable ETF by 584%
2024-10-25 10:00:00 by Adam Spatacco, The Motley Fool from Motley FoolKen Griffin is a billionaire investor best known for founding the hedge fund Citadel Advisors. While it owns a number of individual stocks across all industry sectors, the fund takes positions in more-passive vehicles as well. Last quarter, Citadel bought 2,822,010 shares of the Invesco QQQ Trust (NASDAQ: QQQ) exchange-traded fund (ETF) -- increasing its stake by 584%.
Below, I'll explore what makes the Invesco QQQ Trust such a compelling opportunity for long-run investors, and I'll detail some tailwinds that could bring even further gains for the fund.
Invesco QQQ Trust at a glance
One of the biggest benefits of owning ETFs is that they provide access to a broad basket of stocks, helping investors build a diversified portfolio. Moreover, ETFs often follow specific themes or market indexes, giving exposure to emerging opportunities without requiring positions in individual companies.
The Invesco QQQ Trust is modeled off the Nasdaq-100 index. The fund owns shares in many of the world's largest businesses, including Apple, Microsoft, Nvidia, Broadcom, Meta Platforms, Costco, Tesla, Amazon, and Alphabet.
How has the ETF performed in the long run?
Nearly 60% of Invesco QQQ's holdings are technology stocks, with another 18% concentrated among consumer discretionary companies. The remaining positions are spread across other sectors such as healthcare, telecommunications, utilities, industrials, real estate, energy, and consumer staples.
In the chart below, I have benchmarked Invesco QQQ against a set of other leading ETFs -- particularly those that track the S&P 500.
Over the past 10 years, Invesco QQQ has been a multibagger for patient investors and has handily topped the broader market.
Of course, much of these gains stem from the fact that Invesco QQQ is a much more concentrated vehicle than the S&P 500. The Nasdaq-100 is made up mostly of growth stocks in emerging market trends such as artificial intelligence (AI), e-commerce, semiconductors, cybersecurity, and enterprise software.
Is now a good time to buy the Invesco QQQ Trust?
One thing to remember about ETFs is that you have to pay a management fee known as an expense ratio. According to Invesco QQQ's fact sheet, the fund has a modest expense ratio of 0.20%.
I think what makes Invesco QQQ so attractive is its exposure to many high-growth industries while simultaneously owning some of the most influential players among these sectors. In other words, I don't see the Nasdaq-100 as an index featuring many (if any) speculative companies. Rather, the index has some of the largest and most established companies operating across several markets.
Moreover, the fund has a proven track record of success over a long time horizon. Right now, I see two tailwinds that could help position Invesco QQQ for a new wave of growth as it looks to continue outperforming the broader market.
First, as the macroeconomic picture continues to show signs of improvement, I think consumer discretionary stocks will begin to witness some new life. And second, the Nasdaq-100 looks particularly lucrative considering AI should continue making waves within and beyond the technology sector for years to come.
For these reasons, I think Invesco QQQ is well-positioned for even further gains, and I see now as a great time to follow Citadel's lead and invest in the ETF.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Billionaire Ken Griffin Just Increased His Position in This Unstoppable ETF by 584% was originally published by The Motley Fool
30.
New data shows US economy on track to grow at 'encouragingly solid pace'
2024-10-24 16:21:05 by Josh Schafer from Yahoo FinanceFresh data out Thursday showed the US economy remains on track to grow at a solid pace through the end of 2024.
S&P Global's flash US composite PMI, which captures activity in both the services and manufacturing sectors, came in at 54.4 in September, down from 54.6 in August. Economists had expected the index to tick down to 54.3.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the data shows the US economy's growth is chugging along to start the fourth quarter.
“October saw business activity continue to grow at an encouragingly solid pace, sustaining the economic upturn that has been recorded in the year to date into the fourth quarter," Williamson said in the release. "The October flash PMI is consistent with GDP growing at an annualized rate of around 2.5%."
Williamson added that sales are being stimulated by "competitive pricing," which led the selling price inflation for goods and services down to the lowest level since May 2020.
"These weaker price pressures are consistent with inflation running below the Fed’s 2% target," Williamson said.
This upbeat outlook falls in line with the strong projections market participants currently have for the third quarter gross domestic product (GDP) print. After a strong September jobs report and several better-than-expected retail sales prints, the economics team at Goldman Sachs is currently projecting the US economy grew at an annualized pace of 3.1% in the third quarter.
Meanwhile, the Atlanta Fed's GDPNow model projects the US economy grew at an annualized pace of 3.4% in the third quarter.
The above-expected growth projections have helped quell recession fears that percolated in early August after the unemployment rate unexpectedly rose to 4.3%, triggering a commonly followed recession indicator.
"Our probability of recession models showed marked improvement in September, reversing much of the recent rise," Oxford Economics senior US economist Matthew Martin wrote in a note to clients on Thursday. "Against this backdrop, our conviction in our above-consensus GDP growth forecast for 2025 increased."
Overall, the economic growth data over the past month hasn't swayed markets on what the Fed will do in November, with traders currently pricing in a 95% chance the central bank lowers interest rates by 25 basis points at its next meeting, per the CME FedWatch Tool.
However, markets have moved to price in fewer Fed rate cuts over the next year. Markets see the Fed likely making one fewer cut than was priced in on Oct. 4 and two fewer cuts than markets were projecting on Sept. 18, the day the Fed slashed rates by half a percentage point.
This has coincided with an increase in the 10-year Treasury yield (^TNX), which has added about 50 basis points over the past month to hover near 4.2%. In some instances, a push higher in yields can be a headwind for stocks. But equity strategists have argued that if the increase in yields comes alongside solid economic growth, it will likely be a welcome sign for stocks.
"A gradual move higher [in yields] ... for the right reasons, with the expectation of higher growth, historically has tended to be good for those earnings growers," Gargi Chaudhuri, BlackRock Americas chief investment and portfolio strategist, told Yahoo Finance. "So keeping quality at the core of your portfolio remains really important."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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31.
2 ETFs That Billionaire Ken Griffin Is Buying Hand Over Fist
2024-10-21 08:49:00 by Keith Speights, The Motley Fool from Motley FoolKen Griffin has made big bucks primarily from picking stocks for his Citadel Advisors hedge fund. His net worth stands at roughly $43 billion. Big bucks indeed.
However, Griffin's fortune doesn't stem exclusively from investing in individual stocks. The billionaire has also poured money into exchange-traded funds (ETFs). Here are two ETFs that Griffin is buying hand over fist.
1. SPDR S&P 500 ETF Trust
Citadel's largest holding isn't a stock; it's an ETF. Griffin's hedge fund owned 5.6 million shares of the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) valued at $3.05 billion as of June 30, 2024. This total was much lower three months earlier. Griffin bought around 2.03 million additional shares of the ETF in the second quarter of 2024, increasing Citadel's stake by 56.7%.
The SPDR S&P 500 ETF Trust became the first ETF listed in the U.S. in January 1993. Today, it's the largest ETF based on assets under management (AUM) with assets of $603.7 billion. The SPDR ETF also ranks as one of the most actively traded ETF.
This ETF attempts to track the performance of the S&P 500 Index. Its top holdings include several of the largest companies around: Apple, Nvidia, Microsoft, Amazon, Facebook parent Meta Platforms, and Google parent Alphabet.
Why does Griffin like this ETF so much? There are several likely reasons.
The billionaire is a fan of diversified portfolios, as evidenced by the 5,800+ holdings in Citadel's portfolio. The SPDR S&P 500 ETF Trust provides an easy way to invest in the 500 biggest U.S. companies in one fell swoop.
This ETF has also been a big winner. Since its inception in 1993, the fund has delivered an average annual return of nearly 10.5%. In 2024 alone, it's up close to 23%.
2. Invesco QQQ Trust
Citadel's second-largest holding is also an ETF, the Invesco QQQ Trust (NASDAQ: QQQ). As of June 30, 2024, the hedge fund owned 3.3 million shares of the fund valued at $1.58 billion. And Griffin aggressively added to Citadel's position in the Invesco QQQ Trust in Q2, buying roughly 2.82 million shares that boosted his hedge fund's stake in the ETF by nearly 585%.
The Invest QQQ Trust ranks as the fifth-largest ETF based on AUM. Over the last three months, its average daily share volume trailed only the SPDR S&P 500 ETF Trust.
This ETF attempts to track the performance of the Nasdaq-100 Index. It owns shares of the 100 largest stocks traded on the Nasdaq Stock Market. The fund's top holdings include Apple, Microsoft, Nvidia, Broadcom), Meta Platforms, and Amazon.
Griffin probably likes the Invesco QQQ Trust for the same reasons he likes the SPDR S&P 500 ETF Trust. The ETF provides a simple way to invest in a large basket of stocks. It has been an even bigger winner than the SPDR ETF, with Lipper ranking it as the best-performing large-cap growth fund based on total return over the past 15 years.
Are these ETFs good picks now?
The main knock against both the SPDR S&P 500 ETF Trust and Invesco QQQ Trust is valuation. The stocks owned by the SPDR ETF trade at an average price-to-earnings ratio of 28.1. The average earnings multiple for stocks owned by the Invesco ETF is even higher at 37.7.
However, I think both of Griffin's favorite ETFs remain good picks for long-term investors. These funds own the biggest and arguably best stocks on the market. They regularly rebalance to replace laggards with other stocks that are on the rise. I expect both the SPDR S&P 500 ETF Trust and the Invesco QQQ Trust will continue to be big winners over the next decade and beyond.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $845,679!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Nasdaq and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 ETFs That Billionaire Ken Griffin Is Buying Hand Over Fist was originally published by The Motley Fool
32.
SPY Helps State Street Top Vanguard in Monthly Flows
2024-10-16 20:07:24 by Jeff Benjamin from etf.com
State Street Global Advisors led all ETF issuers in September with $18.4 billion in net inflows, according to Morningstar's latest flows report, the most recent example of how the $588 billion SPDR S&P 500 ETF Trust (SPY) impacts flows at the third-largest ETF issuer.
State Street's SPY, which trades $30 billion in 500,000 trades on an average day, took in $16 billion in September, according to State Street.
A month ago, Morningstar highlighted nearly $27 billion worth of net outflows from SPY this year through August and illustrated how the world’s first and largest ETF has become the tail wagging the dog at the $1.3 trillion ETF issuer.
Morningstar’s report even called out SSGA’s $8.1 billion worth of inflows over the first eight months of the year as putting the issuer on track for its worst year for net inflows since 2018.
September Flows
Source: Morningstar
But this is mostly noise to Matthew Bartolini, head of SPDR Americas Research at SSGA.
“SPY stands alone,” he said. “We deeply understand the buying behaviors of SPY and we know there will be a boost in September.”
Citing typical trading and rebalancing activity during the final quarter, Bartolini shrugged of the ebb and flow of SPY’s net flows as “seasonality and structural trends.”
“For example, we had a gigantic fourth quarter in 2023, so we know our January will be effected by that,” he said. “We understand it and can say those numbers are what they are.”
Bond ETFs Rake in Billions
Beyond the ongoing SPY saga, the latest data from Morningstar illustrates a steady and continued appetite for fixed income funds over equities.
Taxable bond ETFs stood out with $93 billion worth of net inflows during the third quarter.
ETFs overall have taken in nearly $685 billion this year, including $95.6 billion in September.
Of those inflows this year through September, $490 billion went into passive strategies and $193 billion went into active strategies.
On the lopsided flows into bond ETFs, Ryan Jackson, Morningstar’s senior manager research analyst, said there are multiple drivers.
“We’re looking at a backdrop of a pretty friendly time to invest in bonds,” he said, adding that the extended bull market for equities is fueling some portfolio rebalancing out of stocks and into bonds.
The start of interest rate cuts this year has also given investors a reason to start moving down the yield curve, Jackson said.
“For the better part of the past two years investors were all in on bond portfolios because investors were putting money into longer term bond funds in anticipation of rate cuts,” he said. “We’ve gone from anticipating rate cuts to actually experiencing them.”
33.
Tech is leading markets higher — but 3 other sectors have joined in: Morning Brief
2024-10-16 10:04:53 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
There's no doubt that Big Tech is in the bull market's driver's seat — but it's got company.
Though the major indexes are narrowly in the green this October, they have been boosted by third quarter earnings from Bank of America (BAC) and Goldman Sachs (GS), which reported a big beat on investment banking fees.
More significantly, the so-called "fins" have rallied alongside three others — tech, consumer discretionary, and industrials — to outperform the S&P 500 since the Japanese yen-induced panic of Aug. 5. All four sectors are up about 15%, with a slight edge to tech. (The low is important technically because it marks the bottom of the year's biggest decline — a quite normal 8.5%).
It might seem familiar — and perhaps a bit unnerving — that "tech is leading" once again after the concentration hand-wringing over the "Magnificent Seven." But unlike other periods in this bull market — now two years old — tech has some company, thanks to money flowing, or rotating, into other sectors.
It's a process as old as public markets. As the godfather of technical analysis, Ralph Acampora, CMT, famously quipped, "Sector rotation is the lifeblood of a bull market."
Ralph's nephew, Jay Woods, who is an executive NYSE floor governor and chief global strategist at Freedom Capital Markets, recently joined Stocks In Translation to break down the concept.
"Money's not leaving the market, it's just going from one sector to the next to the next," said Woods, noting the strength in software stocks. He specifically highlighted cybersecurity plays like CrowdStrike (CRWD) and Cisco (CSCO) — both damaged stocks at one time that are now leading.
Woods reflects on Cisco's round-trip journey right back to its dot-com bubble highs.
"I hate that I like Cisco right now," Woods said. "I liked it in '99, and it's right where it was trading in 1999. That's amazing."
In fact, the tech sector leadership of today stands in stark contrast with earlier in the year, when the Mag Seven stocks dominated. Although perennial leader Nvidia (NVDA) is up 30% since the Aug. 5 low, IBM (IBM) is close on its heels — rising from its legacy tech ashes to fresh records.
For that matter, more than 20 stocks in the S&P 500 are doing better than Nvidia since the yen low, led by electric power company Vistra Corp. (VST) and United Airlines (UAL) — up 85% and 70%, respectively.
Many of these stocks are simply laggards that got beaten up in the 2022 bear market and left behind. But even among the overextended, there are still potential winners to be found.
"Put up a five-year weekly chart in utilities for me. Talk about a nice rounded base and then a breakout," Woods said, adding, "[These are] not your grandparents' utilities anymore."
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
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34.
Investor sentiment sees biggest jump since June 2020 — but offers a sign of caution
2024-10-15 15:04:23 by Josh Schafer from Yahoo FinanceInvestor sentiment saw its largest jump in nearly four years during October amid resilient economic data and the start of interest rate cuts from the Federal Reserve.
In Bank of America's October Global Fund Manager Survey, investor sentiment rose to a reading of 5.6 from 3.8, marking its largest one-month increase since June 2020. The broad measure of sentiment takes into account investors' allocations to cash and equities as well as their economic growth expectations.
Allocations to bonds and cash plunged in October, according to BofA's survey, as investors appeared more confident in the economic outlook. The drop in cash allocations fell to a level that BofA noted is often a near-term "sell signal." But when looking at other broad measures, the firm's "big sell signal" hasn't been triggered yet.
The survey of 195 global participants was conducted from Oct. 4 to Oct. 10. The first day of responses was on the same day the blowout September Jobs report helped quell recession fears.
Just 8% of respondents said they see a "hard landing" for the global economy over the next 12 months. That marked the lowest level of respondents fearing a situation where restrictive central bank policy leads to an economic downturn in four months.
The optimism from investors reflects the recent market action.
The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) have both surged, hitting several record highs, including closing at all-time highs on Monday. Artificial intelligence market leader Nvidia (NVDA) closed at its first record high since June on Monday. More speculative areas have rallied too, with cryptocurrencies bitcoin (BTC-USD) and ethereum (ETH-USD) both gaining more than 5% on Monday.
Tuesday's Bank of America Survey did come with a sign of caution, though, as hyper-optimistic investors can sometimes be considered a sign of a near-term top in the market. Cash allocations among respondents fell to 3.9% in October. Bank of America noted that any reading under 4% can be considered a "sell signal."
Since 2011, the worldwide equity index iShares MSCI ACWI ETF (ACWI) has declined by 2.5% on average in the one-month period following sell signals and fallen 0.8% over the next three months, per BofA.
Still, there are plenty on Wall Street who think optimism among investors has further to run before the current bull market rally hits a true bump in the road.
"We are in 'goldilocks zone', where investors are rightly trying to pick winners and avoid losers but are not so optimistic that they have thrown caution to the wind," DataTrek co-founder Nicholas Colas wrote in a note to clients on Tuesday when making the case for the stock market rally to keep rising higher.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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35.
The bull market is 2 years old. Here's where Wall Street thinks stocks go next.
2024-10-12 10:00:50 by Josh Schafer from Yahoo FinanceThe bull market in the S&P 500 (^GSPC) began two years ago and is showing few signs of slowing.
Backed by the rise of artificial intelligence euphoria and a surprisingly resilient US economy, the S&P 500 has gained more than 60% in the past two years and is hovering near an all-time high.
Wall Street strategists who spoke with Yahoo Finance believe the bull can keep running wild. Barring any unexpected shocks, the path higher appears to be clear, with earnings growth expected to keep accelerating and the economy on seemingly solid footing as the Federal Reserve cuts interest rates.
A bull market for the S&P 500 was officially declared in June 2023 when the index rose 20% from its recent bear market low. History says this bull market still has legs. At two years, the bull market is well shy of the average run of 5.5 years. And the total return thus far, about 60%, is a far cry from the average 180% gain, per research from Carson Group chief market strategist Ryan Detrick.
In the past few weeks, several Wall Street equity strategists have made the case for the benchmark index to rise further into both year-end and into 2025, supported by accelerating earnings for the S&P 500.
"We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted," BMO Capital Markets chief investment strategist Brian Belski wrote in a September note when raising his year-end price target for the S&P 500 to a Street high of 6,100 from a previous target of 5,600.
On Oct. 4, Goldman Sachs boosted its year-end target to 6,000 and initiated a 12-month target of 6,300. Goldman Sachs chief equity strategist David Kostin did note, though, that already high valuations could limit the upside for how far the index can reach in 2025.
Risks to the rally
Strategists who spoke with Yahoo Finance agreed with Kostin that already stretched valuations present a challenge to how much higher stocks can go. Charles Schwab senior investment strategist Kevin Gordon noted that dating back to the mid-1960s, the only time valuations have been this stretched on a trailing 12-month price-to-earnings ratio were 2021 and the dot-com bubble of the late 1990s.
"This would tell you that the bull is much older or somewhat near the end of this life," Gordon said.
But strategists often warn that a high valuation itself isn't a proper tool for calling the end of a bull market. Stocks can trade at what are considered to be expensive valuations for longer than expected. What that does tell investors is that much of the good news that could push stocks higher might've already been priced in.
"If you look at what the market's discounting right now, we'd say front and center, a big chunk of what's being priced in is a soft landing sentiment," Citi equity strategist Scott Chronert told Yahoo Finance.
Piper Sandler chief investment strategist Michael Kantrowitz noted that high valuations themselves aren't why bull markets end. There needs to be a catalyst. He explained there are two common reasons market drawdowns happen: a spike in interest rates or a rise in the unemployment rate.
With inflation well off the boil of 2022 and the recent increase in unemployment stalling out, neither of the two downside catalysts are clearly in view.
There could, of course, be a surprise no one sees coming. But "it's a little bit harder to see where the shock comes from," Chronert said. "If things continue to play out incrementally, investors can handle a little bit of a change [to the economic narrative] here, a little bit of a change there ... It's when you get a more immediate unraveling, and it's hard to really say that immediate unraveling is going to come."
This sets the market up for a narrative shift. To Kantrowitz, the currently expensive valuations show that the bull market is likely moving from a macro-driven environment, where factors like inflation falling and other signs of economic resilience have pushed stocks higher, to one that is more based on the fundamentals.
"For this market to continue moving higher, and particularly to determine what stocks lead, it's going to be all about earnings," Kantrowitz said.
The bar for earnings remains high. Consensus estimates project earnings to grow nearly 10% in 2024 and almost 15% in 2025. The key for investors remains finding which sectors are seeing earnings growth accelerate rather than just staying steady.
And , according to Chronert, part of that story could come down to the two letters that defined the first part of the bull market: AI.
Chronert, who said his team is still a holder of the "Magnificent Seven" tech cohort, doesn't doubt that the AI narrative will continue to manifest itself in the market. But after significant gains seen in those tech stocks over the past two years amid large earnings growth, focus may continue to shift to the broadening impact of AI on companies that aren't making the AI chips or the cloud servers operating the new technology.
For AI to continue to have broader impact on the market and keep pushing earnings growth for the index above expectations, "you've got to have more companies delivering on the AI promise via margins [and] profitability metrics," Chronert said.
He added, "It would be that sort of thesis that has to play out, and that's going to take two to five years."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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36.
Tesla ETFs Slammed After Robotaxi Letdown
2024-10-11 18:32:19 by Sumit Roy from etf.com
Tesla ETFs were slammed on Friday after the highly anticipated reveal of the company’s Cybercab self-driving taxi, or robotaxi, failed to impress investors.
Shares of Tesla dropped as much as 10%, fueling a more-than 20% loss for the Direxion Daily TSLA Bull 2X Shares (TSLL).
Tesla CEO Elon Musk unveiled the Cybercab at an event near Los Angeles, California Thursday evening. While the vehicle, with no steering wheels or pedals, was a prototype, it awed many in attendance with its slick look and design.
Investors were another matter. Musk’s comments that the robotaxi would begin production in 2026 frustrated those who had hoped it would hit the market sooner.
The Tesla CEO has often offered optimistic predictions for when the robotaxi would be ready, but the timetable has continually been pushed back.
Gene Munster, Managing Partner at Deepwater Asset Management, tweeted that the long wait for the Cybercab was the reason for Friday’s sell-off in shares of Tesla.
“Timing of Cybercab is still two plus years away, too far for the incremental investor to put much weight into the opportunity and the timing asks existing investors to continue the waiting game,” he wrote.
“The disappointment makes sense. Tesla investors have been waiting for a few things recently including improving margins, higher delivery growth rates and FSD.”
Still, Munster remained bullish on the company, remarking that he feels that the Cybercab “falls squarely into the ‘worth the wait camp’, and even if it’s three years before it sees the light of day, investors will be rewarded.”
Cheaper Teslas Coming?
Munster also noted that there was some disappointment among investors about Tesla saying nothing about releasing a potential cheaper electric vehicle model.
Munster predicted that a cheaper model was still in the works and that initial production could begin in late 2025.
“The reason why they held off was there is little reward for them to highlight a cheaper model given it risks buyers hitting the pause today on Model 3 and Y,” he speculated.
Nearly 270 million Tesla shares are held in 341 U.S.-traded ETFs, according to etf.com data. The Invesco QQQ Trust (QQQ) is the largest holder, with approximately 36 million shares. The largest allocation to TSLA stock TSLL, with a portfolio weight of 53%. On average, U.S. ETFs allocate 2.49% of Tesla to their portfolios.
37.
Insurance ETFs Shrug Off Hurricane, 'Quick Buck' ETFs Rise
2024-10-11 12:00:00 by Exchange Traded Fridays from etf.com
In this episode of Exchange Traded Fridays, etf.com’s Sumit Roy, Jeff Benjamin, and Kent Thune discuss why insurance ETFs have been so strong. They also dive into the macro outlook following the latest economic data, as well as the rise of “quick buck” ETFs that offer 100% yields.
What hurricane? You would never have guessed that a powerful Category 3 hurricane had just made landfall in Florida by looking at the performance of insurance ETFs.
Up a whopping 30% so far this year, insurance funds have been standout performers in 2024. Find out the reasons behind this counterintuitive rise, as well as the story behind the popularity of derivative funds like covered call ETFs and leveraged ETFs.
38.
etf.com’s New ETF Pulse Tool: What It Is, How It Works
2024-10-11 12:00:00 by Kent Thune from etf.com
etf.com has launched ETF Pulse, a powerful and user-friendly research and analysis interface, adding to its growing suite of investing tools.
Whether you’re a do-it-yourself investor or a seasoned financial advisor, ETF Pulse is a valuable tool that leverages etf.com data to track ETFs and help make informed investment decisions.
What Is ETF Pulse?
ETF Pulse is an investing analytics tool that provides investors quick visual data on ETF trends based on fund flows and performance metrics.
Fund flows and performance are essential metrics for ETF research, analysis, and selection because they provide valuable insights into investor sentiment and investment strategy.
Fund flows indicate the level of investor interest and confidence in an ETF, while performance metrics measure the ETF's potential to generate returns. By analyzing these metrics, investors can assess the popularity and effectiveness of an ETF and make informed decisions about whether it aligns with their investment goals and risk tolerance.
ETF Pulse Benefits
- User-friendly interface: Use a simple interface with intuitive features making it easy for investors of all levels to navigate and utilize the tool effectively.
- Tracking: By following fund flows and performance metrics for selected ETFs, investors can stay updated on the latest trends, ensuring timely decision-making in a rapidly changing market environment.
- Performance and momentum: While historical returns don’t guarantee future results, analyzing performance is an important metric that can help identify potential opportunities and optimize investment strategies.
- Fund flow analysis: Monitor fund flows into different ETFs to understand investor sentiment and market dynamics, enabling informed investment decisions.
How ETF Pulse Works
ETF Pulse automatically generates a one-day overview of the top 15 equity ETFs. Users can generate their own custom results by selecting desired filters.
- Step 1: Select classification: Choose your desired ETF asset class, equity or fixed income.
- Step 2: Select data metrics: Choose between fund performance and fund flows.
- Step 3: Select time period: Choose a time period ranging from one day to one year.
- Step 4: Select performance: Choose between top or bottom performers.
- Step 5: Submit selections: Once selected, your criteria will appear in results.
Check out etf.com’s other investing tools to compliment and supplement ETF Pulse, including the Markets Monitor, ETF Screener, Fund Flows, and ETF Comparison Tool.
39.
Why pro trader Tom Sosnoff says to bet on yourself instead of passive index funds
2024-10-10 19:00:57 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
Passive investing hit a major milestone in 2023. For the first time ever, passive funds surpassed active funds in net assets with global assets hitting $13.3 trillion.
Though 2023 saw paltry flows after the 2022 bear market, the milestone capped a decades-long trend in how money flows from investors into the markets.
But Tom Sosnoff, co-founder of Tastytrade and co-founder and CEO of Tastylive, has made a career believing investors shouldn’t just sit back and relax in passive funds. He earned his trading chops over two decades in the trading pits and another two on trading screens and is known for his contrarian opinions.
In a recent appearance on Stocks in Translation, he asserted that set-it-and-forget-it passive investing is actually riskier than stock-picking and actively managing your money.
“The problem with passive investing,” Sosnoff explained (see video above; listen below), “is that when you start passive investing when you're young — you close your eyes, take a nap, and wake up at 60 — and you don’t know how markets work.”
Sosnoff believes passive investing breeds complacency and that it potentially deprives the investor of an education in risk management, market mechanics, and decision making. In contrast, active trading forces investors to think strategically, take calculated risks, and adapt to market shifts. Losses are, so to speak, tuition for an education.
The irony of this position in favor of active trading is that it's seemingly at odds with the near-constant drumbeat of pro-passive investing advice (such as that dispensed most recently by this author this week).
However, as William Lock, head of the international equity team at Morgan Stanley wrote in July, "The decision to opt for passive investing is still an active decision," adding for emphasis, "There are over 3 million stock indices in the world — over 50 times more indices than stocks!"
Sosnoff’s stance is clear: Betting on yourself in the market, through active participation, provides an education in real-world finance — one that might provide benefits down the road.
Sosnoff also sees the volatility that scares most investors as an opportunity, musing that it's "the only true math equation in finance. Price is not mean-reverting, but volatility is."
For the Tastytrade co-founder, learning to navigate volatility equips you with the tools to take advantage of short-term inefficiencies, especially through strategies like selling options.
To be clear, beginning investors can face potentially unlimited risk by selling options. But there are also many ways investors can learn to limit that risk, bringing Sosnoff's arguments once again back to education and real-world experience in investing with an eye toward risk management.
And here, Sosnoff takes a unique view of risk that sees it as overblown in finance.
“Risk is something you can’t control,” he said, likening it to the unpredictability of another car hitting you. "The only thing you can control in finance is actually what you do."
And what you can control, he said, is position size and diversification.
Keeping your size small and spreading investments across multiple assets, he argues, essentially defines and limits your risk. "Anybody can do it," he assured.
Sosnoff hammered home the point, saying, "The whole concept of active trading is you learn how to make decisions. You learn how to take risk. You learn how to assess probabilities. You learn how to invest strategically if you want to. And then if you don't want to, you can always go back and passively invest."
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
40.
Why strong earnings and cash flow are key to navigating value traps
2024-10-10 18:18:38 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
The S&P 500 (^GSPC) has been riding a high lately, with the 5,800 mark clear in sight.
That leaves some investors feeling a bit anxious, as the current index level implies a price-to-earnings (P/E) multiple that's a bit on the expensive side, historically.
“When I look at a P/E ratio today of 24 times, it makes me a little nervous," said Michaella Gallina on a recent episode of Stocks in Translation (see video above; listen below).
Gallina has a unique perspective on the market. She began her career on the buy side, shifted to the sell side, then leaped into corporate finance. She now serves as both the CFO of the consultancy group Wave HQ and as vice president of investor relations at H&R Block (HRB) — where she has transformed corporate communications, facilitating a 191% appreciation in stock price over her brief tenure at the tax preparation company.
It’s easy for investors to get caught up in the hype around high-growth unicorns, said Gallina, who cautions against chasing moonshots.
“There’s been a lot of hoopla around some [of the] unicorns that we're seeing with tremendous growth," she observed, adding, "If you want to beat the market, you need to play with what's in the game."
In general, that means focusing on companies that offer long-term stability and reliable performance, rather than chasing the latest trend or speculative opportunity. But the quest for value over growth is easier said than done.
Gallina noted that any market frenzy (and there's usually something) can lead investors to look for stocks that may be cheap but that have fundamental flaws, leaving them with little hope of ever going anywhere. These stocks are called value traps.
"Price is what you pay. Value is what you get," wrote legendary investor Warren Buffett in a letter to partners in 1966. In Buffett and partner Charlie Munger's classic aphorism, it's far better to "buy a wonderful company at a fair price than an average company for cheap."
And in a market where over 80% of active global equity funds underperform their benchmarks, Gallina’s focus on value stocks becomes even more critical. Stock picking has never been easy, but in today’s market fueled by a bazooka of alternative and traditional media sources, it’s arguably harder than ever.
According to a comprehensive study by Morningstar of the stock-picking records of active managers over a decade, only 44% of professional stock-pickers beat their benchmarks. But more importantly — and dangerously — they struggled to size their positions effectively.
The study found, in part, that the biggest challenge many active managers and retail do-it-yourself investors face is not struggling to find more winners, but "rather in sizing them in a manner that leads to outperformance," wrote Morningstar senior manager Jack Shannon.
“The ground that active managers’ winners gain often cannot make up for what their laggards lose. Of course, higher fees don’t help, either," said Shannon, referring to the relatively high commission structure still found in fund management. (The historical standard is a 2% management fee and 20% incentive fee — still charged in many cases.)
For Gallina, value follows the Buffett model in not looking for cheap stocks but in identifying companies with steady and growing profits and cash flows. She's looking for “strong, consistent earnings and cash flow over time that you can predict and is stable." These qualities provide a potential safeguard against the wild swings behind so many growth stories in today’s market.
The reality is that many companies that look promising on the surface don’t hold up to scrutiny.
“I think if most investors got a peek behind the curtain, they would find most companies completely uninvestable," said Gallina, which brings up a separate (but related issue) of the difficulty in corporate communications with investors.
Gallina invests with a very long-term view, aiming for steady gains with low volatility.
“We’re not flashy, but we’re consistent,” she said of H&R Block stock which has soared 191% in her three years directing their corporate communications. For her, this is proof that steady, predictable companies are the true winners in the market, even if they don’t grab the headlines.
She relates it to her side gig as an equestrian, saying, “Riding a 1,200-pound animal teaches you a lot about grit. In the ring, there’s no one coming to save you. You just have to get through it.”
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
41.
MicroStrategy Is a Strategic Buy to Capitalize on Bitcoin’s Outperformance
2024-10-09 17:47:06 by TipRanks from TipRanksMicroStrategy (MSTR) is a tech company that has spent the last few years accumulating Bitcoin (BTC-USD) on its balance sheet through a well-executed financing strategy. This approach supports my bullish stance on the company, particularly in a rising crypto market. MSTR has outperformed Bitcoin, highlighting the advantages of holding the company’s stock over directly investing in the cryptocurrency. By investing in MSTR, investors can amplify Bitcoin’s potential returns through a regulated stock, making it a more accessible option for institutional investors compared to holding cryptocurrency directly.
Specifically, this year, MSTR shares have benefited from their high correlation with Bitcoin’s price swings, rallying over 211%. Recently, the shares saw an increase in momentum following the Fed’s interest rate cut. The last time this occurred, Bitcoin’s price more than doubled.
In this article, I will delve into the strategy behind MicroStrategy’s business and explain why buying at current levels may be a wise decision.
Is MicroStrategy Essentially a Bitcoin Company?
Before delving further into the bullish thesis, it’s essential to provide some context. MicroStrategy is (or was) primarily a data software company that helps customers make informed decisions by analyzing large sets of data from multiple sources. However, facing strong competition from powerful players like Microsoft (MSFT) and Salesforce (CRM), its core business has struggled to grow. About four years ago, the company pivoted to make aggressive investments in Bitcoin, led by its CEO, Michael Saylor, a staunch advocate of cryptocurrency.
According to MicroStrategy’s shareholder letter released last year, the company holds an unwavering confidence in Bitcoin for the long term. The management team stated, “Because of its characteristics, we believe Bitcoin is a superior store of value, akin to digital gold or digital property. Just as records and CDs gave way to digital music, we believe gold and other traditional physical stores of value will give way to Bitcoin.”
Currently, about 38% of MicroStrategy’s market cap corresponds to its Bitcoin holdings. By the end of July, MicroStrategy owned 226,500 Bitcoins, purchased at a total cost of $8.3 billion, and now valued at about $14.3 billion.
Breaking Down MSTR’s Bitcoin Strategy
The main bullish argument for MicroStrategy centers on its clever strategy of expanding its balance sheet through Bitcoin acquisitions. Since 2020, CEO Michael Saylor has focused on growing MicroStrategy’s value by buying Bitcoin with debt, particularly through convertible bonds, and capitalizing on the cryptocurrency’s high volatility.
As the price of Bitcoin rises, the company is able to borrow even more money and add to its crypto holdings. At the same time, the company generates revenue from its software business, which amounted to $111 million in Q2, the most recent quarter. However, this represents a slowdown compared to the $120 million generated during the same period last year.
As a result, over the past five years, MicroStrategy’s shares have appreciated by nearly 1,200%, closely mirroring fluctuations in Bitcoin prices. However, the journey has not always been smooth. A few years ago, high inflation and rising interest rates made it more expensive for the company to issue new debt or rollover existing obligations. During the crypto winter, from early 2021 to early 2023, MSTR shares plummeted by as much as 86%, falling to less than $15 per share. Today, however, shares have rebounded and exceed $185.
Why Buy MSTR Rather than BTC Itself?
My Buy stance on MicroStrategy extends to the belief that purchasing MicroStrategy stock may be more advantageous than buying the cryptocurrency or investing in a BTC fund. At first glance, it may seem illogical to pay a premium on MicroStrategy’s net asset value (NAV) in Bitcoin, which currently exceeds 2.3x. This premium reflects how much more or less the market values the company’s stock compared to its Bitcoin holdings alone, especially when you could simply buy the cryptocurrency directly.
However, MicroStrategy’s primary advantage lies in its ability to capitalize on and acquire more Bitcoin. So far this year, the company issued two convertible debt offerings at less than 1% in March, scaled up its convertible note offering in June, and conducted another offering more recently in September, using the proceeds to buy additional Bitcoin.
This ability to raise capital is one of the main justifications cited by Benchmark analyst Mark Palmer, who notes that the company has timed the market extraordinarily well. In fact, MicroStrategy’s stock has significantly outperformed Bitcoin since it began its Bitcoin acquisition strategy in August 2020. It has also outperformed the S&P 500 (SPY), NASDAQ (QQQ), gold (GLD), silver (SLV), and major tech stocks. Palmer concludes that, particularly in a bull market, the premium on MicroStrategy shares is justified, and I tend to agree.
Is MSTR a Buy, According to Wall Street Analysts?
The Wall Street consensus on MSTR stock is exceptionally optimistic. All eight analysts covering the stock recommend buying it, resulting in a Strong Buy consensus. The average price target is $202.25, indicating a potential upside of 2.93% based on the latest share price.
Conclusion
In summary, I believe that during crypto bull markets, investors who are bullish on Bitcoin should consider a position in MicroStrategy. This approach makes sense because MicroStrategy’s use of debt to increase its Bitcoin holdings has been effectively executed, potentially leading to outperformance relative to both the market and the currency itself. Therefore, I view MicroStrategy as a Buy. However, investors should be aware of the risks associated with strong volatility, as fluctuating Bitcoin prices can quickly alter the short- to medium-term outlook.
42.
'No landing' chatter returns as markets question inflation's defeat: Morning Brief
2024-10-09 09:57:34 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
Markets are on the brink, once again torn among three landing scenarios: soft, hard, or none at all.
When the Federal Reserve cut short-term rates by a greater-than-expected 50 basis points in September, some concerns were raised that the Fed might see risks the public could not.
Then last Friday's jobs report beat expectations on the headline payrolls number by over 100,000, putting the specter of reinflation and tightening policy back into investors' minds. As Josh Schafer wrote Monday, the "is good news good news" discussion is back.
In a recent conversation on Stocks in Translation (the episode airs Thursday, Oct. 10), Hennion & Walsh president and chief investment officer Kevin Mahn responded to the question of whether the risk of "no landing" is back on the table.
"I think it is, until we find out more from the Federal Reserve," Mahn said, adding a nod to the upcoming US presidential vote in November: "We have a big election coming up too, and we don't know the outcomes of that election."
Soft landing optimism still lingers, though it's now tempered with these fresh no-landing warnings. And nary a hard landing worry seems to be found as stocks surge.
The CNN Fear & Greed Index is currently flashing "GREED," with an elevated reading of 72 — not far from the threshold for "EXTREME GREED" triggered at 75. This arguably reflects optimism, but it also raises a contrarian cautionary flag: Markets may be underestimating risks.
Despite the bullish sentiment, other signals suggest fading bullish tailwinds ahead. This Friday, JPMorgan and the big banks unofficially kick off earnings season. While expectations are solidly bullish as to the results, stock buybacks are largely paused, cutting off a key liquidity source.
Meanwhile, bond yields have surged, with the US Treasury curve leaning toward inversion once again (after only recently climbing out of a historic two-year inversion).
Critically, the bond market's version of the VIX Volatility Index — the ICE BofA MOVE Index (^MOVE) — just jumped to the highest levels of the year, indicating investor anxiety about market disruptions. Prior instances of a surging MOVE Index have been accompanied by stock market wobbles.
It's worth remembering that in the summer of 2008 — only months before the failure of Lehman Brothers — investors were preparing for Fed hikes after a prolonged easing cycle. In that market episode, the hard landing won out and served as a warning against investor complacency amid falling liquidity.
But currently, liquidity has been surging, according to the work of Capital Wars founder Michael Howell, who reported, "Rising liquidity [is supporting] risk assets. This relationship is borne out by recent events. Risk asset markets have been choppy of late, but rising liquidity levels are underpinning their upward track."
Howell also noted that a typical liquidity cycle lasts five to six years, with the current cycle only about one-third completed on this timeline. This jives with Mahn's observation that the average length of a bull market is about 5.3 years, and we're only two years in — with a few more to go "if history serves as a guide," Mahn said.
With all these mixed signals, it's no wonder the market is in wait-and-see mode.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
43.
A surprisingly resilient US economy is once again leading stocks higher: Morning Brief
2024-10-08 10:00:02 by Josh Schafer from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
The better-than-expected September jobs report put an exclamation point on a trend that's been underway for the better part of two months now.
US growth data is once again surprising to the upside.
"Forget soft landing, maybe we're having no landing," Interactive Brokers chief market strategist Steve Sosnick told Yahoo Finance. "That's what this jobs report may be telling us."
For investors who have closely followed the economic narrative over the past several years, this should all feel a bit familiar. Just as consensus believed the US economy was finally slowing to the point where it needed help from the Federal Reserve, the data says otherwise. Escalating fears of a "hard landing," where the Fed's restrictive interest rates send the economy into a tailspin, have quickly moved to discussion about a "no landing," where the economy keeps growing and inflation risks once again emerge.
This brings to mind the defining phrase of the surprisingly strong 2023 economy and all the caveats that come with it.
Indeed, we are, once again, so back. Back to a time headlined by calls for strength in the stock market as the Fed cuts interest rates while the economy remains on solid footing. Back to a time when good economic news is "good news" for stocks.
But it's a delicate balance. Too much strength could mean once again seeing good news framed as the precursor to an inflation rebound. As our Chart of Day shows, there have been plenty of moments over the last year alone where markets have been rooting for data to cool off. At times, data that's come in weaker than expectations has been cheered by investors fearful of another spike in inflation and interest rates staying higher for longer than initially hoped.
Markets appear to be wrestling with what the narrative shift means. After initially rallying nearly 1% on Friday after the jobs report, the S&P 500 was off nearly 1% on Monday. This comes as the 10-year Treasury yield (^TNX) added about 20 basis points over the past two sessions to breach 4% for the first time since August.
This move in yields represents how market participants are now adjusting to expect fewer interest rate cuts from the Fed as the economy holds steady. A week ago, investors were pricing in a 34% chance that the Fed would cut interest rates by another half a percentage point in November, per the CME FedWatch Tool. As of Monday, investors were pricing no chance of a jumbo-size cut and instead giving a 15% chance to the Fed not moving rates at all.
For now, this seems to be acceptable for equity investors. Bank of America US and Canada equity strategist Ohsung Kwon noted that further good economic news could be welcomed by investors "as long as inflation remains in check." At some point, though, the move higher on yields could weigh on investor appetite for risk in the stock market.
"If the data continue to improve, long-term rates and commodity prices are likely headed higher, which could put a strain on stocks without [earnings per share]," Piper Sandler chief investment strategist Michael Kantrowitz wrote in a note to clients.
Sosnick said the current economic backdrop leads to a "tough setup" for anyone hoping for more interest rate cuts over the next 12 months (yes, we're looking at you, potential homebuyers).
But on balance, this is an instance to see the forest through the trees. Fewer interest rate cuts because the economy is doing better than everyone thought isn't a bad thing. If asked to pick between more interest rate cuts or a better economy, Sosnick said he's "always going to pick the stronger economy."
He added, "We should always be looking for a stronger economy because that's really what drives stock prices."
So, while many things about the economic narrative may be coming back, that framing of rooting for good data to drive corporate profits has never left.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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44.
3 China ETFs Had Huge Inflows Last Week
2024-10-07 20:59:19 by Sumit Roy from etf.com
Year-to-date inflows for U.S.-listed exchange-traded funds topped $694 billion last week thanks to a strong week of inflows.
Investors plowed $10.3 billion into U.S. equity ETFs, $8.6 billion into international equity ETFs and $5.8 billion into U.S. fixed income ETFs during the week ending Friday, Oct. 4. In total, $28.2 billion went into U.S.-listed ETFs last week.
The hefty inflows for international equity ETFs, in particular, were notable. Investors used ETFs to get exposure to the rip-roaring rally in China’s stock market.
Three of the ten ETFs with the largest inflows last week were China funds, while one was a broad emerging markets ETF with a heavy weighting in Chinese stocks.
The iShares Trust - China Large-Cap ETF (FXI) had inflows of $2.6 billion last week; the KraneShares CSI China Internet ETF (KWEB) had inflows of $1.3 billion; and the Direxion Daily FTSE China Bull 3X Shares (YINN) had inflows of $819 million.
The iShares Core MSCI Emerging Markets ETF (IEMG) picked up $662 million of inflows.
While fast money rushed into China ETFs, long-term investors focused on the U.S. stock market continued to put money to work at the same time.
The iShares Core S&P 500 ETF (IVV) and the Vanguard 500 Index Fund (VOO), two funds popular with long-term investors, had inflows of $7.2 billion and $3.7 billion, respectively, last week.
In contrast, the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) topped the outflows list, with redemptions of $6 billion and $4 billion, respectively.
The two ETFs have wide ranging investor bases composed of both short- and long-term investors.
For a full list of last week’s top inflows and outflows, see the tables below:
Top 10 Creations (All ETFs)
| Ticker | Name | Net Flows ($, mm) | AUM ($, mm) | AUM % Change< |
| IVV | iShares Core S&P 500 ETF | 7,168.56 | 530,561.63 | 1.35 |
| VOO | Vanguard 500 Index Fund | 3,685.97 | 525,155.17 | 0.70 |
| FXI | iShares Trust - China Large-Cap ETF | 2,634.05 | 7,752.71 | 33.98 |
| KWEB | KraneShares CSI China Internet ETF | 1,364.16 | 8,055.45 | 16.93 |
| VTI | Vanguard Total Stock Market ETF | 869.00 | 436,127.70 | 0.20 |
| RSP | Invesco S&P 500 Equal Weight ETF | 837.09 | 64,862.68 | 1.29 |
| LQD | iShares iBoxx USD Investment Grade Corporate Bond ETF | 834.60 | 30,891.87 | 2.70 |
| YINN | Direxion Daily FTSE China Bull 3X Shares | 818.59 | 2,332.78 | 35.09 |
| IEMG | iShares Core MSCI Emerging Markets ETF | 661.70 | 85,909.09 | 0.77 |
| SCHD | Schwab U.S. Dividend Equity ETF | 641.79 | 61,914.14 | 1.04 |
Top 10 Redemptions (All ETFs)
| Ticker | Name | Net Flows ($, mm) | AUM ($, mm) | AUM % Change |
| SPY | SPDR S&P 500 ETF Trust | -6,041.17 | 579,638.53 | -1.04 |
| QQQ | Invesco QQQ Trust | -4,041.17 | 288,470.83 | -1.40 |
| HDV | iShares Core High Dividend ETF | -490.67 | 11,203.95 | -4.38 |
| SCHO | Schwab Short-Term U.S. Treasury ETF | -431.05 | 11,094.85 | -3.89 |
| IWF | iShares Russell 1000 Growth ETF | -427.49 | 97,639.68 | -0.44 |
| IJK | iShares S&P Mid-Cap 400 Growth ETF | -383.05 | 9,285.48 | -4.13 |
| IWM | iShares Russell 2000 ETF | -378.64 | 67,502.92 | -0.56 |
| MDY | SPDR S&P MidCap 400 ETF Trust | -367.23 | 22,745.19 | -1.61 |
| USMV | iShares MSCI USA Min Vol Factor ETF | -336.81 | 24,318.79 | -1.38 |
| TQQQ | ProShares UltraPro QQQ | -335.86 | 23,336.99 | -1.44 |
ETF Weekly Flows By Asset Class
| Net Flows ($, mm) | AUM ($, mm) | % of AUM | |
| Alternatives | -59.03 | 8,660.23 | -0.68% |
| Asset Allocation | 77.29 | 20,517.81 | 0.38% |
| Commodities | 725.60 | 162,176.49 | 0.45% |
| Currency | 305.11 | 64,381.78 | 0.47% |
| International Equity | 8,594.39 | 1,612,405.16 | 0.53% |
| International Fixed Income | 2,335.89 | 225,913.42 | 1.03% |
| Inverse | -24.62 | 13,301.47 | -0.19% |
| Leveraged | 132.05 | 110,969.37 | 0.12% |
| U.S. Equity | 10,302.33 | 6,170,277.23 | 0.17% |
| U.S. Fixed Income | 5,837.72 | 1,552,014.18 | 0.38% |
| Total: | 28,226.72 | 9,940,617.14 | 0.28% |
Asset Classes (Year-to-Date)
| Net Flows ($, mm) | AUM ($, mm) | % of AUM | |
| Alternatives | 1,833.39 | 8,702.33 | 21.07% |
| Asset Allocation | 1,920.25 | 20,625.40 | 9.31% |
| Commodities | -338.32 | 161,833.45 | -0.21% |
| Currency | 18,407.28 | 70,331.69 | 26.17% |
| International Equity | 69,610.77 | 1,627,348.03 | 4.28% |
| International Fixed Income | 48,754.61 | 225,147.77 | 21.65% |
| Inverse | 3,049.34 | 13,127.01 | 23.23% |
| Leveraged | 4,651.45 | 113,884.74 | 4.08% |
| U.S. Equity | 373,987.68 | 6,209,455.45 | 6.02% |
| U.S. Fixed Income | 172,125.57 | 1,558,673.85 | 11.04% |
| Total: | 694,002.03 | 10,009,129.72 | 6.93% |
Top 10 Volume Surprises, Funds >$50 mm AUM
| Ticker | Name | Average Volume (30 Day) |
1 Week Average Volume |
% of Average |
| HYDW | Xtrackers Low Beta High Yield Bond ETF | 35,163 | 930,072.00 | 2,645.02%% |
| CPNJ | Calamos Nasdaq-100 Structured Alt Protection ETF - June | 31,979 | 676,255.00 | 2,114.68%% |
| JVAL | JPMorgan U.S. Value Factor ETF | 90,295 | 1,349,833.00 | 1,494.91%% |
| CIL | VictoryShares International Volatility Wtd ETF | 2,171 | 27,622.00 | 1,272.05%% |
| QLTA | iShares Aaa-A Rated Corporate Bond ETF | 178,268 | 2,167,517.00 | 1,215.87%% |
| SPYX | SPDR S&P 500 Fossil Fuel Reserves Free ETF | 106,232 | 981,466.00 | 923.89%% |
| AGGY | WisdomTree Yield Enhanced U.S. Aggregate Bond Fund | 152,523 | 1,293,247.00 | 847.90%% |
| OMFS | Invesco Russell 2000 Dynamic Multifactor ETF | 43,544 | 355,754.00 | 817.00%% |
| BBRE | JPMorgan BetaBuilders MSCI U.S. REIT ETF | 49,369 | 397,750.00 | 805.67%% |
| SEIX | Virtus Seix Senior Loan ETF | 103,485 | 825,894.00 | 798.08%% |
Top 10 Weekly Performers, Excluding Leverage/Inverse Funds and <1,000 Shares Traded
| Ticker | Name | Weekly Performance | Weekly Volume | AUM ($, mm) |
| SFY | SoFi Select 500 ETF | 402.22% | 612,139 | 885.45 |
| CNXT | VanEck ChiNext ETF | 13.23% | 1,291,829 | 20.20 |
| ASHS | Xtrackers Harvest CSI 500 China-A Shares Small Cap ETF | 12.78% | 617,270 | 33.74 |
| ASHR | Xtrackers Harvest CSI 300 China A-Shares ETF | 12.56% | 127,498,186 | 2,206.33 |
| FXI | iShares Trust - China Large-Cap ETF | 12.06% | 637,722,052 | 7,752.71 |
| PGJ | Invesco Golden Dragon China ETF | 11.36% | 3,064,423 | 183.70 |
| JCHI | JPMorgan Active China ETF | 10.61% | 66,327 | 13.50 |
| CGRO | CoreValues Alpha Greater China Growth ETF | 10.56% | 10,157 | 9.94 |
| BWET | Breakwave Tanker Shipping ETF | 10.29% | 17,009 | 3.24 |
| KWEB | KraneShares CSI China Internet ETF | 10.22% | 302,328,174 | 8,055.45 |
Top 10 YTD Performers
| Ticker | Name | YTD Performance | Weekly Performance | AUM ($, mm) |
| NVDY | YieldMax NVDA Option Income Strategy ETF | 96.08% | 1.84% | 1,110.93 |
| GBTC | Grayscale Bitcoin Trust ETF | 57.36% | -1.62% | 13,465.27 |
| UTES | Virtus Reaves Utilities ETF | 49.10% | 3.82% | 219.96 |
| GDMN | WisdomTree Efficient Gold Plus Gold Miners Strategy Fund | 48.12% | -0.50% | 14.20 |
| FXI | iShares Trust - China Large-Cap ETF | 44.03% | 12.06% | 7,752.71 |
| MCH | Matthews China Active ETF | 41.71% | 8.85% | 43.84 |
| WUGI | AXS Esoterica NextG Economy ETF | 40.76% | 4.81% | 32.61 |
| SMH | VanEck Semiconductor ETF | 39.85% | 1.00% | 24,121.35 |
| MAGS | Roundhill Magnificent Seven ETF | 39.58% | -0.39% | 769.78 |
| SPMO | Invesco S&P 500 Momentum ETF | 38.32% | 1.13% | 2,491.36 |
Disclaimer: All data as of 6 a.m. Eastern time the date the article is published. Data is believed to be accurate; however, transient market data is often subject to subsequent revision and correction by the exchanges.
45.
Before You Buy the Invesco QQQ ETF, Here Are 3 Others to Try First
2024-10-06 10:26:00 by Adam Levy, The Motley Fool from Motley FoolInvestors looking for a quick and easy way to invest in the biggest and fastest-growing technology stocks in the world have flocked to the Invesco QQQ Trust ETF (NASDAQ: QQQ).
The ETF tracks the Nasdaq-100 index, which consists of the largest non-financial companies listed on the Nasdaq stock exchange. The Nasdaq is historically the exchange of choice for tech companies, so it should be no surprise that the majority of the index consists of technology stocks.
The Invesco fund has dramatically outperformed the S&P 500 index over the past decade, producing a total return of 435% compared to just 248% for the broader index. Still, investors should consider a few other options before putting their money into the popular ETF. Here are three to try.
1. QQQ's little sister
Invesco launched a new ETF in 2020 called the Invesco Nasdaq 100 ETF (NASDAQ: QQQM). It tracks the same Nasdaq-100 index as QQQ, but it offers investors a 5 basis point discount on the new shares versus the older ETF.
Where QQQ charges 0.20% of assets each year, the new Nasdaq-100 ETF charges just 0.15%. While that difference might not seem like much, it adds up over time, and there's no reason for investors to leave money on the table.
Invesco isn't offering a lower-priced ETF to investors out of the goodness of its heart. The company faces a lot more competition than it used to when it launched the QQQ Trust back in 1999. While it could easily rack up assets under management at any price in the early 2000s, it needs to offer much more competitive pricing today.
But there are billions locked into the older ETF. Investors with substantial unrealized capital gains may be willing to give up a few basis points in order to delay taxes by not selling. Additionally, the larger asset base makes the fund more liquid, which is attractive for big investors or frequent traders.
If you plan to buy and hold an ETF tracking the Nasdaq-100 index, though, QQQM is a no-brainer compared to QQQ.
2. A contrarian ETF focused on fundamentals
If you take a look under the hood of the Invesco QQQ Trust, you'll find a heavily concentrated portfolio. The top 10 holdings account for over 50% of the entire fund. What's more, many of the biggest holdings trade at high prices that aren't aligned with their fundamental financial performance.
One way to offset the high concentration and prices found in the QQQ Trust is to invest in the Schwab Fundamental U.S. Large Company ETF (NYSEMKT: FNDX). The ETF tracks an index that ranks and weights securities by fundamentals -- adjusted sales, operating cash flow, and cash returned to shareholders. The result is a portfolio with far less concentration and a lower overall price relative to the fundamentals.
The Schwab fund sports a P/E ratio of just 19.4 times compared to the Invesco fund's 39.5 times P/E. While it still has substantial stakes in some of the biggest names in the Nasdaq-100, it also integrates more value stocks into the portfolio. In fact, the focus on fundamentals tilts the fund toward more large-cap value stocks than the growth-stock-focused Invesco fund. But that diversification may pay off for investors in the long run.
The Schwab ETF sports an expense ratio of 0.25%, higher than the Invesco QQQ ETF. But the contrarian play could pay off for patient investors.
3. A small-cap value ETF
The biggest draw of the Invesco QQQ Trust ETF is its strong track record of returns. But one group of stocks has an even better track record than the large-cap growth stocks found in the Nasdaq-100. Small-cap value stocks have historically produced the strongest returns out of any segment of the stock market. The S&P 600 index, which tilts toward small-cap value, has outperformed the Invesco QQQ Trust ETF since its inception in 1999, despite the Nasdaq ETF's incredible performance over the past decade.
The Avantis US Small Cap Value ETF (NYSEMKT: AVUV) is one of the best ways to invest in small-cap value stocks. Instead of investing blindly in all small-cap stocks trading at a valuation metric in the lower half of a small-cap index, the fund screens stocks based on profitability to weed out those that may be value traps. It then invests in the remaining companies based on market capitalization. With over 700 stocks in the portfolio, no single investment makes up more than 1% of the fund.
While the Avantis fund is technically an actively managed fund, it shares many more characteristics with passive indexing than active management. The strategy has a great track record of performance based on the founder's previous experience at investment firm Dimensional. The Avantis fund has nearly doubled its benchmark index's return since its inception in 2019.
For long-term investors seeking exposure to a piece of the market that can offer stronger returns than the S&P 500 or the Nasdaq-100 for many years to come, the Avantis US Small Cap Value ETF could be a great option.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $765,523!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
Adam Levy has positions in American Century ETF Trust-Avantis U.s. Small Cap Value ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Before You Buy the Invesco QQQ ETF, Here Are 3 Others to Try First was originally published by The Motley Fool
46.
US jobs report crushes expectations as economy adds 254,000 jobs, unemployment rate falls to 4.1%
2024-10-04 13:10:17 by Josh Schafer from Yahoo FinanceThe US labor market added far more jobs than projected in September while the unemployment rate unexpectedly ticked lower, reflecting a stronger picture of the jobs market than Wall Street had expected.
Data from the Bureau of Labor Statistics released Friday showed the labor market added 254,000 payrolls in September, more additions than the 150,000 expected by economists.
Meanwhile, the unemployment rate fell to 4.1%, from 4.2% in August. September job additions came in higher than the revised 159,000 added in August. Revisions to both the July and August report showed the US economy added 72,000 more jobs during those two months than previously reported.
Wage growth, an important measure for gauging inflation pressures, rose to 4% year over year, from a 3.9% annual gain in August. On a monthly basis, wages increased 0.4%, in line with August's reading.
The key question entering Friday's report was whether the data would reflect significant cooling in the labor market, which could prompt another large Fed interest rate cut. Robert Sockin, Citi senior global economist, told Yahoo Finance that the better-than-expected jobs report makes it less likely the Fed moves with the "urgency" it did at its September meeting when the central bank cut interest rates by half a percentage point.
"This pushes the Fed out a lot," he said, adding that it's uncertain the Fed will make a 50 basis point cut again this year.
Read more: Jobs, inflation, and the Fed: How they're all related
Following the report, markets were pricing in a roughly 5% chance the Fed cuts interest rates by half a percentage point in November, down from a 53% chance seen a week ago, per the CME FedWatch Tool.
"Looking at the labour market strength evident in September’s employment report, the real debate at the Fed should be about whether to loosen monetary policy at all," Capital Economics chief North America economist Paul Ashworth wrote in a note to clients on Friday. "Any hopes of a [50 basis point] cut are long gone."
Futures tied to major US stock indexes rallied on the news. S&P 500 futures (ES=F) put on nearly 0.8%, while Dow Jones Industrial Average futures (YM=F) added roughly 0.5%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) moved 1.1% higher.
Renaissance Macro head of economics Neil Dutta wrote in a note following the release that September's jobs report was "undeniably good news" for the equity market.
"At the end of the day, the Fed is still cutting policy rates even as the economy grows," Dutta wrote.
Also in Friday’s report, the labor force participation was flat from the month prior at 62.7%. Food services and drinking places led the job gains, rising 69,000 in the month. Meanwhile, healthcare added 45,000 jobs, and government jobs ticked higher by 31,000.
Earlier this week, data from ADP showed the private sector added 143,000 jobs in September, above economists' estimates for 125,000 and significantly higher than the 99,000 seen in August. This marked the end of a five-month decline in private-sector job additions.
"This is a pretty healthy, widespread rebound," ADP chief economist Nela Richardson said. "And probably unexpected by many people who thought the job market was on a downward slide. This month, of course, gives pause to those kinds of assessments. Hiring is still solid."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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47.
Is Invesco QQQ Trust a Millionaire Maker?
2024-10-04 11:05:00 by Neil Patel, The Motley Fool from Motley Fool
Investors are likely familiar with the S&P 500, an index of 500 large and profitable U.S.-based businesses. This is often viewed as the bellwether for how the overall stock market is performing.
However, the Invesco QQQ Trust (NASDAQ: QQQ) deserves attention from investors, since it has crushed the S&P 500 in recent times. This exchange-traded fund (ETF) could continue to supercharge returns. But is it a millionaire maker?
Portfolio composition
The Invesco QQQ Trust differs from the S&P 500 because it tracks the performance of just 100 stocks. These are the biggest nonfinancial companies on the Nasdaq stock exchange, known as the Nasdaq 100 Index.
Investors should understand what areas of the economy shine brightly in this ETF. The information technology sector commands a hefty 50.3% weighting in the Invesco QQQ Trust. Businesses that are part of the "Magnificent Seven" combined make up a notable 42.5% of the whole portfolio. Therefore, the performance of these stocks has a big influence.
This has been a benefit in the past few years. Companies in this group of seven are driven by powerful tech-enabled tailwinds, which has boosted their prospects. Digital advertising, cloud computing, digital payments, electric vehicles, online shopping, and streaming entertainment are some trends to pay attention to.
The average investor who wants exposure to these tailwinds doesn't need to pick single stocks. Buying and holding the Invesco QQQ Trust provides adequate exposure.
Fantastic performance
While it's crucial to know what this ETF holds, investors are certainly more worried about performance -- what matters when it comes to generating long-term wealth.
In the past five years, the Invesco QQQ Trust has produced a total return of 169%. A $10,000 investment made in September 2019 would be worth almost $27,000 today. That's an impressive gain for a passive investment vehicle, and it trounces the S&P 500.
What's also worth mentioning is the cost of owning this ETF. The expense ratio is just 0.20%. This means that for every $10,000 you invest, just $20 is earmarked for annual dues. That's hard to beat.
Cathie Wood and her firm ARK Invest have received a lot of attention in recent years. Investors like the focus on owning innovative and disruptive companies, which is similar to the strategy of the Invesco QQQ Trust.
However, the ARK Innovation ETF, ARK Invest's main fund, charges an expense ratio of 0.75% but has only returned 16% in the last five years. The performance has disappointed greatly, even though this fund costs nearly four times as much as the Invesco QQQ Trust.
Getting to $1 million
In the past three months, the Invesco QQQ Trust has experienced two notable dips, and there's no question this ETF will likely have more volatility than the S&P. It's more concentrated in tech stocks, which see higher ups and downs.
Investors might be wondering if it's still a good time to invest while the QQQ trades close to its all-time high. It's crucial to never forget that time in the market matters more than anything else. It can be enticing to trade in and out of stocks to avoid the lows, but trying to time the market is a losing activity.
From its inception in 1999 to today, the Invesco QQQ Trust would have turned a $90,000 initial outlay into a cool $1 million. I think it's reasonable to assume a similar rate of return in the future. This means that investors who are able to adopt a long-term time horizon, and for those who can put in more cash upfront, getting to $1 million is a realistic outcome, perhaps even in a shorter period than 25 years.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $728,325!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Invesco QQQ Trust a Millionaire Maker? was originally published by The Motley Fool
48.
Here Are My 2 Favorite ETFs in October
2024-10-04 09:22:00 by Geoffrey Seiler, The Motley Fool from Motley FoolThere is little doubt that the best way for the average person to create wealth over the long term is through investing. While over 60% of Americans own stocks, most of that is through buying into funds that own multiple stocks. The direct ownership of stocks accounts for a little over 20%.
For most people, investing in stocks through vehicles such as exchange-traded funds (ETFs) is a great option. Let's look at two ETFs I'd be buying this month with cash I have available for investing.
1. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (NYSEMKT: VOO) is a classic, and for good reason. The ETF tracks the performance of the S&P 500 stock index, which tracks the stock performance of roughly 500 of the largest public companies traded in the U.S. (as ranked by market capitalization (market cap)). When investors talk about the performance of the stock market, they are quite often referring to the performance of the S&P 500 index.
The Vanguard S&P 500 ETF has generated strong returns over the years. Over the past decade, the ETF has had an average annual return of 13.3% (as of the end of September 2024). Over the past five years, it's been even stronger, up an average of 15.9%. Meanwhile, the ETF is up nearly 20% year to date.
While investors may fret about investing in the ETF with the S&P at all-time highs, they shouldn't. In fact, according to a study from J.P. Morgan, since 1970, investors actually would have seen better returns investing only on days the S&P hit an all-time high compared to any random day.
After one year, investing at all-time highs would result in an average annual return of 9.4% versus 9% on any random day. After two years, investing only on days the S&P 500 hit an all-time high would result in a 20.2% gain versus 18.5% investing on any random day.
This speaks to how bull markets tend to last much longer than bear markets, with the medium bull market lasting three times longer than the average bear market.
An S&P 500 ETF should be a core holding in any investor's portfolio, and the Vanguard ETF is a great option with a minuscule expense ratio of 0.03%, meaning investors get to keep virtually all their gains with little payment going to the fund.
2. Invesco QQQ ETF
Technology continues to change the world, so perhaps it is not surprising that many of the world's largest companies today come from the tech sector. As such, I think it is a good idea to add a little more tech exposure to one's portfolio.
One way to do that is with the Invesco QQQ ETF (NASDAQ: QQQ), which tracks the Nasdaq-100 index. This is a very tech-heavy weighted index, with nearly 65% of its portfolio in the tech sector and over 13% in consumer discretionary stocks, which include some pretty tech-adjacent names, such as Amazon and Tesla.
The ETF has been a huge winner over the past decade, outperforming the S&P by a fair amount. As of the end of August, its annual average return over the past 10 years is 21.2%. The ETF has outperformed the S&P 500 index 87% of the time over the past decade and 83% over the past five years.
The ETF's 10-year cumulative return (including dividends reinvested) is 437%. If you invested $10,000 in Invesco QQQ 10 years ago, it would be worth $53,700 today, and a $10,000 investment for the Vanguard S&P ETF would be worth $35,110 based on its 249.54% 10-year cumulative return.
While the Invesco QQQ ETF carries more risk due to its high concentration in a single sector, I think it is set to continue to outperform over the next decade. The artificial intelligence (AI) revolution is still in its early days, and this trend will likely help power many of the top tech names higher in the years to come. The Invesco QQQ ETF, meanwhile, is a great way to play this trend, with a low expense fee of 0.2%.
I'd buy both the Vanguard S&P 500 ETF and Invesco QQQ ETF this month and continue to consistently invest in both over time through a dollar-cost averaging strategy. This strategy is ultimately a great way to create wealth over the long term.
Should you invest $1,000 in Vanguard S&P 500 ETF right now?
Before you buy stock in Vanguard S&P 500 ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $728,325!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, JPMorgan Chase, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
Here Are My 2 Favorite ETFs in October was originally published by The Motley Fool
49.
Why Gen Z bets big while boomers play it safe: A generational breakdown of market returns
2024-10-03 16:31:39 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
It's a Goldilocks moment for investors.
As the books are closed on September, the S&P 500 (^GSPC) has delivered a solid 20% return so far this year. Meanwhile, bonds are up a respectable 4.7%. And cash is yielding a similar percentage return — even after the Fed began cutting rates a few weeks ago.
But new research from Jack Manley at JPMorgan Asset Management uncovers hidden pitfalls, particularly for those entering their investment years during periods of high cash yields (much like the present). His findings suggest that all investors, regardless of generation, are heavily shaped by the market environment they grew up in.
Manley's methodology, rooted in demographic and behavioral analysis, assumes individuals begin investing 20 years after their generation's inception. For example, baby boomers started investing around 1966, Gen X in 1985, millennials in 2001, and Gen Z in 2017.
Over the decades, boomers have weathered all sorts of market turmoil, from the inflation crises of the 1970s to multiple tech booms later in life. With average annual stock returns around 10.2% and bond returns of 6.2%, their experience reflects a period of high growth and volatility.
As Manley explained in an episode of Stocks in Translation, “the Fed paid pathological attention” to the inflation crisis, and the entire experience had a profound effect in shaping boomers' cautious and diversified approach to investing — despite the strong returns.
For Generation X, the journey has been one of boom-bust cycles. But the older cohort of this group largely began investing amid a secular boom in markets. Entering adulthood during the 1980s, they witnessed the rise of tech but also faced brutal recessions, from the dot-com bubble to the 2008 financial crisis.
With returns hovering around 11.6% for stocks, their approach is cautious but optimistic. As Manley noted about the current market environment, “strong balance sheets are very important right now.” This may resonate with Gen X’s preference for financial resilience in uncertain times.
Millennials are the most educated generation, as measured by the percentage with bachelor's degrees or higher. But they have not fared as well in stock market returns, averaging around 8.0%, according to Manley.
When millennials came of investing age in 2001, the S&P 500 peaked, ushering in the dot-com bust. After stocks roared back amid a housing boom, the global financial crisis created a double top in the benchmark in 2007 that would not be eclipsed until 2013 — leaving millennial investors underwater for a dozen years.
Their outcomes, as Manley highlights, are the worst among the four generations in both stocks and a 60/40 blended portfolio. This underperformance has driven some to believe that traditional investing is “pointless” unless they make "large, risky bets," such as in cryptocurrencies.
This lack of faith in financial markets has led millennials to embrace higher-risk strategies at the expense of diversification, reflecting their desire for outsized returns.
Gen Z has had the best generational stock market performance (14.1%) but the worst bond returns (-0.5%), which combine to stoke the risk engine that modern markets seem to have become.
Coming of age in a rather eventless year, 2017, they would soon face Volmageddon (2018), a pandemic (2020), stimulus checks, the Reddit/GameStop retail revolution (2021), NFTs (2021), the near-death of cryptocurrencies (2022), and the most aggressive Fed hiking in four decades (2022-2023).
“Generation Z has had a very lopsided experience,” wrote Manley, explaining further that it "may lead to a lack of interest in diversification and a lack of experience with true bear markets, which could result in panic if fortunes turn in the other direction."
With their portfolios concentrated heavily in high-risk assets like crypto, Gen Z has yet to experience the full brunt of a secular bear market (like millennials faced) — making them particularly vulnerable when economic conditions shift.
The current moment has had an unusual influence on cash as well. One of the key trends Manley discusses in his research is its rising popularity, driven by peak CD rates recently nearing 5%.
"Because of the strong yield and minimal risk associated with CDs today, many investors have decided to allocate more heavily to cash," said Manley. But he warned, "[I]nvesting at peak CD rates in the past has resulted in underperformance relative to other fixed income instruments."
Historical data shows that during previous rate hikes, investing heavily in CDs underperforms against stocks or bonds.
Manley advised considering the opportunity cost of cash in a portfolio, adding, "[T]here may be better options for deploying excess capital than in CDs." Allocating too much to cash can hinder long-term growth, especially in a diversified portfolio.
While what we invest in often make up the bulk of the investing conversation, Manley emphasizes the banal (but underrated) importance of tax strategy, especially for younger generations like millennials and Gen Z. As many advisors point out, the government is every investor's silent partner.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
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etf.com Launches New Subscription Plans for All Users
2024-10-03 12:00:00 by etf.com Staff from etf.com
etf.com has announced the launch of new subscription plans for all users seeking U.S. based news, insights, tools, and more related to exchange traded funds.
“Following the success of our subscription launch to our international users, we are now expanding our offerings globally,” explained etf.com CEO Mike Morelli. “These plans are part of our commitment to delivering premium content for ETF investors, including newly launched tools designed to assist financial advisors and retail investors alike in their investment decisions.”
The new plans became live for all users Thursday morning and gives subscribers access to award-winning investing tools including Compare ETFs, ETF Screener, model portfolios and Markets Monitor dashboard. Subscribers will gain access to exclusive content across all our media platforms.
etf.com’s subscription model will also include early access to new tools, such as ETF Pulse tool, which will enable ETF investors to stay informed about ETF trends by providing performance insights and flow analysis.
“This new subscription launch is going to accompany an increase in ETF news and content both off and on the site,” said etf.com Editor-in-Chief Kristin Myers. “All subscribers are going to be a part of a growing etf.com community where members can expect exclusive content, newsletters, events, and more."
The model offers two different subscriber tiers including Content+ and All Access, providing users with the option to be billed on a monthly or annual basis.
etf.com readers can check out the different subscription offerings here or etf.com Subscription.