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Pedestrians walk past the New York Stock Exchange, adorned with a large U.S. flag, in New York City, on November 6, 2024.
According to new data from Cerulli Associates, assets in U.S. exchange-traded funds (ETFs) surpassed $10 trillion for the first time in November. This milestone reflects growing investor interest and confidence in this investment vehicle.
In November, ETFs experienced a remarkable $156 billion in inflows, setting a new record for monthly inflows. Cerulli highlighted that this surge aligns with typical year-end investing patterns.
Additionally, as noted by Morningstar’s research, a substantial influx of $115 billion into U.S. funds, which includes both ETFs and mutual funds, was noted in November. This marked the highest total since April 2021, spurred in part by what some are calling a “Trump bump” in market sentiment.
As we approach the conclusion of 2024, several key trends in the ETF market have emerged, supported by the recent data.
S&P 500 Continues to Shine
As of this week, the S&P 500 index has risen nearly 24% year-to-date. This robust performance is largely attributed to the so-called “Magnificent Seven” stocks—Apple, Microsoft, Alphabet (Google’s parent company), Amazon, Nvidia, Meta Platforms, and Tesla. These seven companies accounted for approximately half of the S&P 500’s gains this year, according to VettaFi.
Among the top 10 ETFs for 2024 in terms of inflows, four track the S&P 500 index, as reported by Cerulli. The Vanguard 500 Index Fund leads the pack with the highest year-to-date inflows, followed by several other notable funds, including iShares Core S&P 500 ETF and Invesco QQQ Trust.
Malcolm Ethridge, a certified financial planner and managing partner at Capital Area Planning Group, shared insights on his use of S&P 500 ETFs for his clients. He emphasizes the cost-effectiveness of these ETFs, which provide exposure to large-cap growth stocks at a fraction of the cost compared to actively managed funds. While an actively managed fund might incur fees of 50 to 75 basis points, a passive S&P 500 ETF can charge only about 10 basis points.
Given the S&P 500’s current momentum, Ethridge believes that the index could continue to excel, as it rebalances to better reflect the market’s leaders. He predicts that SPDR S&P 500 ETF Trust (SPY) may outperform many fund managers in 2025.
Surge in Alternative ETFs
Alternative ETFs have also seen substantial growth, crossing the $400 billion mark in net assets for the first time in November. Cerulli reports that the year-over-year growth rate for these alternative funds stands at an impressive 93%, the highest among all asset classes.
Predominantly, the alternative ETF market comprises around $325 billion—or about 80%—of assets linked to digital assets, leveraged equity, and derivative income funds. Despite this growth, financial advisors have reported only a 3.6% allocation to alternative ETFs in 2024, though this figure is expected to rise. Within their current allocations, 14.4% are held in ETFs, as per Cerulli’s findings.
The Future of Crypto ETFs
This January marked the commencement of trading for bitcoin ETFs on U.S. exchanges, which have since gained traction. Presently, spot bitcoin ETFs possess more cryptocurrency than what is held by bitcoin’s creator, Satoshi Nakamoto, according to VettaFi. Despite a slower rollout for spot ethereum ETFs, the consensus is that crypto ETFs are established players in the market.
Cerulli has noted that the top five newly launched ETFs by asset accumulation this year are all bitcoin-focused, led by iShares Bitcoin Trust ETF, followed closely by Fidelity Wise Origin Bitcoin ETF and ARK 21 Shares Bitcoin ETF, among others.
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