In the year 2023, Wall Street experienced its best week as the Federal Reserve signaled a pause in raising interest rates due to softer jobs data for October [440d4126]. This news brought optimism to investors, leading to significant gains in the S&P 500, Dow Jones, and Nasdaq [440d4126]. Additionally, Q3 earnings results exceeded expectations, with earnings growth on track to turn positive [440d4126]. The US economy also saw substantial growth in Q3, with GDP expanding at an annual rate of 4.9%, largely driven by consumer spending [440d4126].
During this period, two types of exchange-traded funds (ETFs) emerged as top performers: low P/E top-ranked growth ETFs and meme stock ETFs. The low P/E growth ETFs were expected to thrive in a low interest rate environment, as the chances of the Fed rate hike cycle peaking increased [440d4126]. These ETFs included the S&P 500 Growth at a Reasonable Price Index, S&P 500 Pure Growth Index, Growth Strength Index, Bloomberg Pricing Power Index, and NASDAQ Next Generation 100 Index [440d4126].
On the other hand, meme stock ETFs gained significant traction as 'animal spirits' returned to the market [b97e9bc3]. ETFs such as the Roundhill MEME ETF, the Robotics & AI ETF, and iShares Russell 2000 Growth saw substantial gains, outperforming the S&P 500 [b97e9bc3]. These ETFs tracked meme stocks, which had become popular among retail investors. The top holdings of these meme stock ETFs also performed well, indicating the speculative nature of these investments [b97e9bc3].
The battle between growth ETFs and meme stock ETFs became a focal point in the financial markets. Investors were torn between the stability and potential of low P/E growth ETFs and the excitement and potential high returns of meme stock ETFs. The year-end equity rally further fueled the competition between these two types of ETFs, as investors sought to capitalize on the market momentum.
However, recent developments shed light on the surge of meme stock ETFs. The Roundhill MEME ETF, in particular, has seen a significant increase in value, driven by the popularity of meme-related companies such as online marketplace Etsy and video game retailer CD Projekt [2c74e3eb]. This indicates that the surge of the meme ETF is not solely reliant on specific stocks, but rather on the broader influence of internet memes on the stock market [2c74e3eb].
Despite its recent success, the Roundhill MEME ETF is now facing closure due to limited investor interest and trading volume [ff851da6]. Roundhill Investments, the company behind the ETF, has decided to shut it down as it has struggled since its debut in December 2021, currently down 57% [ff851da6]. The closure reflects the waning interest in meme stocks as U.S. interest rates rise and the S&P 500's gains concentrate in a few large-cap companies [ff851da6]. The Roundhill MEME ETF is expected to cease operations and liquidate assets on or about December 14, 2023 [ff851da6].
The battle between growth ETFs and meme stock ETFs continues to unfold, with the closure of the Roundhill MEME ETF highlighting the changing dynamics and evolving interests of investors. While growth ETFs have shown stability and potential, meme stock ETFs have captured the excitement and speculative nature of the market. As the year comes to a close, investors are closely watching the performance of these ETFs to determine the winners and losers in the ongoing battle of Wall Street.
Meme stocks have made a comeback, with the S&P 500 Index reaching a new all-time high [cf7e89e3]. This resurgence is attributed to a tweet from Keith Gill, also known as 'Roaring Kitty,' who is known for his involvement in the GameStop short squeeze earlier this year [cf7e89e3]. The S&P 500's climb is driven by weaker-than-expected U.S. economic data, including a drop in April's inflation rate and flat retail sales, which suggest that the U.S. Federal Reserve may be done with rate hikes [cf7e89e3]. Market expectations for central bank easing later this year have increased [cf7e89e3]. Trade tensions between the U.S. and China are expected to persist, with rising tariffs and the risk of higher inflation and retaliation [cf7e89e3].
The resurgence of meme stocks and the new high in the S&P 500 Index provide further context to the closure of the Roundhill MEME ETF. The limited investor interest and trading volume in the ETF reflect the changing dynamics of the market and the shifting preferences of investors. While meme stocks have regained popularity, the Roundhill MEME ETF has struggled to attract investors and deliver positive returns. This highlights the speculative nature of meme stocks and the challenges faced by meme stock ETFs in maintaining investor interest [ff851da6] [cf7e89e3].