$1 trillion influx, total assets surpassing $10 trillion! The U.S. ETF market is set for an explosion in 2024

In 2024, Wall Street is witnessing an "ETF frenzy," with new funds exceeding $1 trillion, breaking the record set three years ago.

According to data from ETFGI, as of the end of November, the total assets of U.S. ETFs reached a record $10.6 trillion, growing by more than 30% since the beginning of 2024.

Analysts point out that this growth is mainly due to the S&P 500 index rising by about 25% this year and investors' recognition of U.S. assets. Brian Hartigan, Head of ETF and Index Investments at Invesco, stated:

"Investors have clearly regained confidence this year, and market sentiment is leaning towards risk."

Risk Appetite Returns, ETF Market Booms

With the increase in ETF assets, Wall Street giants like BlackRock have also seen record management fees, driving their stock prices to all-time highs. Additionally, small asset management companies focusing on actively managed ETF strategies have also reaped rewards.

Invesco's QQQ fund (which tracks the tech-heavy Nasdaq 100 index) followed closely, attracting over $27 billion in new funds this year, compared to just $7.3 billion in 2023.

In November this year, following Trump's election victory, investor optimism drove ETF inflows to a historic monthly high of $164 billion. Many anticipate that Trump's second term will implement tax cuts and deregulation.

Bond ETFs have also experienced strong growth. As the Federal Reserve begins its rate-cutting cycle, investors are seeking to lock in higher yields. This year, inflows into bond funds accounted for nearly 20% of total assets under management at the beginning of the year. Although inflows into equity funds are more than twice that of fixed-income funds, the growth rate of bond funds is faster.

Behind the Frenzy, Risks Lurk

As 2024 comes to a close, stock ETFs remain the mainstay. According to research from State Street's ETF business SPDR team, the difference in inflows between U.S. stock funds and other types of ETFs reached a historic high in November, with 97% of net inflows into stock funds directed towards the U.S. market.

Matthew Bartolini, Head of Americas Research at SPDR, stated:

“People are very excited about the superiority of U.S. economic growth, earnings, and performance.”

However, Bartolini warned that in the pursuit of performance, investors may become overly concentrated in large tech companies and U.S. large-cap stocks, and this "buy high, sell low" mentality could pose potential risks.

Additionally, actively managed ETFs have also become a new area of growth. Although ETFs have long been dominated by passive investing, this year, more complex options-based strategies and the explosion of Bitcoin funds have changed the market landscape It is worth mentioning that the funds colloquially referred to in the industry as "baby boomer candies" use option-based strategies to reduce volatility and are favored by retired investors.

However, both passive and actively managed ETFs share a common point: fees. David Mann, Head of ETF Products and Capital Markets at Franklin Templeton, stated:

"Due to the increase in actively managed assets, our average fees have actually risen."

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk