Wall Street was downbeat last week. The S&P 500 (down 2.1%), the Dow Jones (down 1.7%), the Nasdaq Composite (down 2.7%) and the Russell 2000 (down 1.9%) — all lost last week. Amid major developments last week, the Fed’s rate hike deserves mention.
As expected, the Federal Reserve boosted its benchmark interest rate by 50 basis points last week. Fed Chair Jerome Powell reiterated the central bank’s commitment to hike rates further in order to tame multi-decade highs in inflation. The latest rate hike took the benchmark rate to the range of 4.25% to 4.5%, its highest level in 15 years. However, the latest hike was lower than its previous four three-quarter-point hikes.
Against this backdrop, below, we highlight the ETF asset report of last week.
S&P 500 Tops
The S&P 500 amassed huge assets last week. SPDR S&P 500 ETF Trust SPY and iShares Core S&P 500 ETF IVV amassed about $7.71 billion and $2.69 billion in assets, respectively, last week. Vanguard Total Stock Market ETF VTI fetched about $2.13 billion in assets. Cheaper valuation probably lured investors to focus on the S&P 500 ETFs as risk-on sentiments returned to the market.
Value ETFs in Favor
Vanguard Value ETF VTV, Vanguard Small-Cap Value ETF VBR and Vanguard Mid-Cap Value ETF VOE attracted about $2.09 billion, $1.17 billion and $764.7 million in assets last week.
Value stocks perform better in a rising-rate environment. With rates rising fast in the United States this year and the Fed likely to enact more rate hikes in 2023, investors betted big on value ETFs.
Small-Caps Too Hog Attention
Vanguard Mid-Cap ETF VO,Vanguard Small-Cap ETF VB andiShares Russell 2000 ETF IWM amassed about $2.34 billion, $1.37 billion and $1.2 billion in assets, respectively. This could be because of the impending January Effect.
January Effect is a seasonal increase in stock prices due largely to year-end tax considerations. Investors redeploy their capital to speculate on weaker performers in January after selling winners in December to create tax losses. This phenomenon pushes the stock market higher in the first month of the year.
According to some market experts, the January Effect actually runs from mid-December through February, with small caps continuing to outperform their large-cap cousins.
TIPs Lost Assets
iShares TIPS Bond ETF TIP lost about $260 million in assets. Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed. CPI jumped 7.1% year over year in November, down from a 7.7% year-over-year increase in October and a recent peak of 9.1% in June. This represents the lowest annual increase since late 2021 (read: ETFs to Benefit as Inflation Drops to One-Year Low).
Short-Maturity ETFs Fell Out of Favor
The monetary policymakers forecast that their key short-term rate will reach 5% to 5.25% by the end of 2023 before being slashed to 4.1% in 2024. That suggests that the Fed is prepared to hike its benchmark rate by additional three-quarters of a point and then stay put until the end of 2023.
This has probably cut demand for short-term bond ETFs like PIMCO Enhanced Short Maturity Active ETF MINT and SPDR Portfolio Short Term Treasury ETF SPTS.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares TIPS Bond ETF (TIP): ETF Research Reports
iShares Russell 2000 ETF (IWM): ETF Research Reports
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
Vanguard Value ETF (VTV): ETF Research Reports
Vanguard SmallCap Value ETF (VBR): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
Vanguard MidCap Value ETF (VOE): ETF Research Reports
Vanguard SmallCap ETF (VB): ETF Research Reports
PIMCO Enhanced Short Maturity Active ETF (MINT): ETF Research Reports
Vanguard MidCap ETF (VO): ETF Research Reports
SPDR Portfolio Short Term Treasury ETF (SPTS): ETF Research Reports
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