This $10T Market Tells Us What to Expect in 2025  | | Shah Gilani
Chief Investment Strategist | The stock market is powered by many forces, but there's one force that has been front and center this year... Fund flows into U.S. equity ETFs. The movement of capital into these vehicles - from retail investors to institutional players - has been nothing short of remarkable. It has lifted market benchmarks throughout 2024. So what does this activity say about the health of the market and what investors can expect next year? Add It Up In October, $13 billion poured in U.S. equity ETFs. Investors were looking to capitalize on the bull market. November had even stronger inflows. BlackRock data showed that equity ETFs maintained a steady stream of new money. There was a particular focus on funds tracking major indexes like the S&P 500 and the Nasdaq 100. The shift in fund flows was not just a short-term phenomenon... Data from Fidelity showed that 2024's net inflows into U.S. equity ETFs outpaced previous years. That's a strong indicator of sustained interest in equities. We have a picture of not only short-term optimism, but also long-term confidence. Investors are making a bet that the bull market is here to stay. The S&P 500, the benchmark for U.S. equities, has been on a tear in 2024. Through October and November, the index saw steady gains, fueled by the continued inflows into ETFs. And benchmark ETFs have had a huge impact on the market. Here's why... Trillion With a "T" As investors pile into these ETFs, the underlying stocks that make up the indexes have to be bought. That propels prices higher, lifting the indexes. The feedback loop between fund flows and market performance cannot be overstated. We saw this play out in real time as major tech names - many of which are top holdings because of their outsized capital weightings in benchmark indexed ETFs - rallied significantly over the course of the year. BlackRock data showed that much of the inflows were concentrated in larger-cap, growth-focused ETFs. This trend is a testament to the fact that the big blue-chip stocks - the companies with the most weight in the major indexes - are the ones benefiting the most. Investors are placing their bets on the long-term growth of these companies, further reinforcing the overall positive market sentiment. The sheer size of the fund flows into U.S. equity ETFs speaks volumes about the health of the market. When 2024 is all said and done, total assets under management in the ETF universe will be close to $10.25 trillion. When you pair this strong demand for equity ETFs with the market's performance, the picture becomes clear... A Rosy Picture Momentum is alive and well. Fundamentals are solid, earnings are holding up, and the inflows into ETFs are continuing to provide the fuel needed for the market to march higher. So what does this mean for 2025? It's always risky to predict the future of the stock market, but the data I'm looking at strongly suggests that 2025 could be another solid year for U.S. equities. The momentum that has been built up through 2024 shows no signs of slowing down. The key drivers will likely remain the same: strong fund flows into equity ETFs, sustained investor confidence, and a favorable economic backdrop. One of the biggest questions for 2025 will be whether the growth we've seen in 2024 can keep up. And historically, periods of positive momentum often lead to further gains as investor sentiment feeds off itself. Watching fund flows is a smart way to see where sentiment is... And what we're seeing now says to get excited for 2025. Cheers, Shah Want more content like this? | | | | | | 
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