To The Moon

In 2023, in the list of top-performing US stock ETFs, cryptocurrency-related ETFs stood out with impressive gains. In terms of net fund inflows, ETFs tracking the S&P 500 index, considered the benchmark, became the main attractors of capital.

As 2023 draws to a close, reflecting on the performance of the US stock market over the past year can be summarized in one phrase: reaching new highs and continuing to soar.

Undoubtedly, this year has been rightfully dominated by the US stock market, particularly in the technology sector. The Nasdaq index surged over 40%, the S&P 500 index accumulated a growth of over 20%, and the Dow Jones Industrial Average reached historic highs. For short-sellers, losses were substantial, while for forecasters, facing challenges seemed inevitable.

In December, with the dovish shift in the Federal Reserve's policy stance, the celebration in the US stock market became unstoppable.

According to Bloomberg's statistics, on December 15th, the world's largest ETF, the SPDR S&P 500 ETF (SPY), attracted a staggering $20.8 billion in a single day. This marked the largest single-day inflow for the fund since its inception in 1993, and it also set a record for the highest single-day inflow among all ETFs.

As the capital market with the richest supply of financial products globally, the US stock market boasts a diverse range of ETF products. These ETFs track various asset classes and can incorporate leverage. In an exaggerated sense, almost anything you can think of is available for purchase.

Next, let's review the market trends of US stock ETFs in 2023 through this article.

01 Top 10 ETFs‘ Performance

Looking at the list of top-performing US stock ETFs, as of December 30th, cryptocurrency-related ETFs have shown outstanding performance.

For the cryptocurrency market, unlike the thrilling developments of the previous year, this year experienced a rebound at the end after a sluggish first half. The Bitcoin miner ETF, Valkyrie Bitcoin Miners ETF (WGMI), saw a year-to-date increase of approximately 308%, and other cryptocurrency ETFs such as VanEck Vectors Digital Transformation ETF (DAPP) and Blockchain ETF-Global X (BKCH) also recorded gains exceeding 285% and 291%, respectively.

The optimism in the market stems from several factors:

1. Approval of spot Bitcoin ETF: There is growing optimism that the U.S. Securities and Exchange Commission will approve a spot Bitcoin ETF in early 2024. The ETF is expected to make Bitcoin more accessible to mainstream investors, potentially attracting a significant influx of funds and driving up its price.

2. Bitcoin halving: Scheduled for April 2024, the Bitcoin halving is a significant event that reduces the reward for mining new blocks by half. Historically, the scarcity of Bitcoin has led to substantial price increases after previous halving events. Post-halving periods have often seen significant bull markets, making it an eagerly anticipated event for investors.

3. Fed rate cut bets: Investors turned to cryptocurrencies this year due to expectations that the Federal Reserve would soon pause its interest rate hikes. The Fed has indicated a possible end to the rate-hiking cycle, with expectations of three rate cuts in 2024. This is seen as a potentially positive factor for cryptocurrencies and crypto stocks.

However, the digital asset market still faces criticism, with some viewing cryptocurrencies as fundamentally valueless and a haven for criminals. In November, Binance, the largest exchange, agreed to pay a $4.3 billion fine for a series of regulatory violations, leading to the CEO, Zhao Changpeng, stepping down. FTX CEO Bankman-Fried was jailed for fraud, and liquidity has yet to fully recover from the collapse of his empire.

02 Top 10 Capital-Attracting ETFs

As of December 30th, the top ten list of funds with the highest net inflows this year features ETFs tracking the S&P 500 index as the main attractors of capital.

The ETF tracking the S&P 500 index and leading in capital attraction is the SPDR S&P 500 ETF Trust (SPY). As the world's largest and oldest ETF, managing $493 billion in assets, it has recorded a net inflow of over $52.9 billion year-to-date, followed by Vanguard S&P 500 ETF (VOO) with $41.8 billion and iShares Core S&P 500 ETF (IVV) with $37.8 billion.

Invesco S&P 500 Equal Weight ETF (RSP) has attracted nearly $13 billion in fund inflows this year, with a gain of about 13% since the beginning of the year.

Warren Buffett once said, "By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals." This index he referred to is essentially the S&P 500 index. Buffett has endorsed the S&P 500 on more than one occasion, stating in his 2014 shareholder letter, "My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund."

US stock ETFs are often the first choice for many novice investors and a preferred option for lazy investing. Individual stock investing requires a significant amount of time researching stocks, while investing in ETFs to create passive income can effectively diversify investment risks and save a considerable amount of research time.

Covered call ETFs gained popularity in 2023. JPMorgan Equity Premium Income ETF (JEPI) attracted the most funds among all active management ETFs in the US this year. JEPI has a total return rate of 8.5% year-to-date.

Vanguard Total Stock Market Index Fund (VTI) has consistently reached new highs in 2023. As one of the largest US total stock market index funds with assets under management of $1.27 trillion, VTI's performance this year is comparable to the S&P 500 index ETF.

Invesco NASDAQ 100 ETF (QQQM) has surged over 55% this year. Most companies in QQQM experienced significant growth in 2023, with NVIDIA's stock soaring nearly 240%, benefiting from the surge in demand for artificial intelligence, leading to accelerated revenue growth.

iShares Russell 2000 ETF (IWM) has outperformed the S&P 500 in the past month, with a gain of over 11%. This rebound reflects a cooling of inflation data and expectations of a Fed rate cut in 2024.

Vanguard Developed Markets Index Fund (VEA) has surged by 18% this year. The fund provides investment opportunities in developed market stocks outside the United States, including major markets in Canada, Europe, and the Pacific region.

iShares Edge MSCI USA Quality Factor ETF (QUAL) has attracted nearly $9.8 billion in funds this year. By tracking the MSCI USA Sector Neutral Quality Index, it provides investment in large and mid-cap stocks with positive fundamentals (high return on equity, stable year-over-year profit growth, and low financial leverage).