Top ETF Stories of the First Nine Months of 2024

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With just a few trading days left to end the first nine months of 2024, one cannot help but note Wall Street's remarkable rally in this span, buoyed by the artificial intelligence (AI) craze and rate-cut optimism. A surge in technology stocks and the rise in the share of the "Magnificent Seven" have also added to the strength. The S&P 500 and Dow Jones Industrial have risen 20.2% and 12%, respectively, and the Nasdaq Composite has gained 20.4%. 

The strong gains were a breather amid the economic slowdown worries, geopolitical tensions and uncertainty surrounding the elections.

Below, we discuss some of the hot events of the first nine months of this year that influenced the market in a big way:

Dovish Fed

After holding the rates at a 23-year high for 14 consecutive months since July 2023, Federal Reserve Chair Jerome Powell kicked off the new rate cycle era by initiating a 50 basis points cut in interest rates. This marked the first rate cut since 2020 to address slowing economic growth and showed greater confidence that inflation is moving sustainably toward the 2% target level.

The central bank projects two more rate cuts of 50 bps in its final two meetings this year due in November and December. It also indicates another 100-bps rate cut next year and a 50-bps cut in 2026, which means four rate cuts in 2025 and two in 2026. Low rates reduce the cost of borrowing, which is often needed to finance the expansion of companies, thereby driving growth. This can positively impact sectors like real estate, consumer discretionary and financial services, which are typically sensitive to interest rate changes. 

In real estate, lower rates can boost housing market activity by making mortgages more affordable. For consumer discretionary sectors, reduced borrowing costs can lead to increased consumer spending. In the financial sector, while lower rates can compress net interest margins for banks, they can also encourage lending and potentially lead to increased consumer and business loan activity (read: 5 Sector ETFs Scaling New Highs on Fed Rate Cuts).

As a result, investors could bet on any of these sectors to magnify gains in the rest of the year. Some of the ETFs include Vanguard Real Estate ETF VNQ, Consumer Discretionary Select Sector SPDR Fund XLY, iShares U.S. Home Construction ETF ITB, SPDR S&P Telecom ETF XTL and Financial Select Sector SPDR Fund XLF. XLF has a Zacks ETF Rank #1 (Strong Buy), while the rest have a Zacks ETF Rank #3 (Hold).

AI Boom

The AI boom will continue to fuel the rally in the broader equity market, with companies investing huge sums in the technology sector and beyond. The expansion of AI applications holds the promise of ushering in fresh growth opportunities. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030. 

Investors seeking to make the most of the AI industrial revolution should consider utility ETFs like Global X Robotics & Artificial Intelligence ETF BOTZ, and Global X Artificial Intelligence & Technology ETF AIQ.