Wall Street’s impressive 20% gains in 2024 fueled a record-breaking year for exchange-traded funds (ETFs), as investors poured over $1 trillion into the market. Total ETF inflows hit $1.15 trillion, with U.S. equity ETFs alone accounting for $672 billion.
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When breaking down the numbers further, equity ETFs brought in $782 billion, while fixed-income ETFs and active funds saw $303 billion and $310 billion, respectively. In addition, U.S. large caps led with $489 billion in inflows, whereas mid and small caps saw $36 billion and $37 billion, respectively.
December demonstrated that demand for ETFs remains strong, as equity funds marked their 32nd straight month of inflows, and bond ETFs reached their 35th consecutive month of positive flows. Indeed, Matthew Bartolini, Head of Americas ETF Research at State Street Global Advisors, noted that “December saw streaks continue with great force.”
Treasury Market Sees Rising Borrowing Costs
Although bond ETFs are doing well, the U.S. government’s latest $39 billion auction of 10-year Treasury notes resulted in a 4.68% yield—the highest since 2007—following stronger-than-expected economic data. This could make it less likely that the Federal Reserve will cut interest rates before mid-2025, which led to today’s Treasury selloff.
Tracy Chen from Brandywine Global said that the data confirms interest rates may not be high enough to slow the economy. The 10-year bond yield rose to 4.7%, the highest since May, and the 30-year bond yield reached 4.92%, the highest in over a year.
The auction results also show that borrowing costs are rising as investors remain concerned about the national debt, and with a 30-year bond auction coming up, experts predict that yields will remain high due to inflation, budget deficits, and global economic factors.
Is SPY Stock Worth Buying?
When it comes to ETFs, the SPDR S&P 500 ETF Trust (SPY) is the largest and most popular in terms of assets under management. When turning to Wall Street, analysts have a Moderate Buy consensus rating on SPY stock based on 402 Buys, 96 Holds, and six Sells assigned in the past three months, as indicated by the graphic below. After a 26% rally in its share price over the past year, the average SPY price target of $668.12 per share implies 13.5% upside potential.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
