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Top ETF Stories of January

The year 2023 recorded the best January in four years. The S&P 500 (up 5.6%), the Dow Jones (up 2%), the Nasdaq Composite (up 10.3%) and the Russell 2000 (up 8.4%) – all gained handsomely past month (as of Jan 30, 2023).

The month marked the return of growth stocks as inflation showed signs of cooling and the Fed is expected to slower rate hike pace in the coming months. The benchmark U.S. treasury yield fell to 3.55% on Jan 30, 2023 from 3.79% recorded at the start of the year. China’s economic opening has contributed to the recovery in the global supply chain.

Bitcoin Marks Best January Since 2013

Bitcoin logged a gain of 39.4% in January, Bitcoin closed out its best month since a 40% rally in October 2021 and its best January since 2013. The rally in cryptocurrency has been driven by bets that the Fed will soon wrap up its inflation-fighting campaign as inflation is cooling. This has pushed the bitcoin, the largest digital currency by market value, higher. In fact, bitcoin is racing ahead this year, surging 40% after its second-worst annual performance in 2022 when it crashed 64%. As a result, Valkyrie Bitcoin Miners ETF WGMI skyrocketed as much as 95% in January (as of Jan 30, 2023) (read: Bitcoin ETF Wins in January: 5 Best Stocks).

Tesla Back With a Bang

Tesla Motors TSLA, which erased 65% of its value in 2022 for its worst year on record, rallied 37.7% in January (as of Jan 30, 2023). Gains were meaningful in the final stretch of the month as the stock jumped 11% on Friday due to strong earnings. Tesla reported record-breaking Q4 results, wherein it beat both earnings and revenue estimates. The company posted record quarterly revenues, operating income and net income in its history.

In 2022, the electric carmaker delivered a record 1.31 million electric vehicles, up 40% from 2021. It has ramped up production after opening new factories in Texas, Shanghai and Berlin. As a result, leveraged Tesla ETFs gained massively in January. Along with electric vehicle ETFs, Tesla-specific ETFs like Daily Tesla Bull 1.5X ETF Direxion TSLL and Graniteshares Tesla 1.25X Daily ETF (TSL) added 56% and 47%, respectively.

Decent Early Q4 Earnings Season

Per Earnings Trends issued on Jan 25, 2023, for the 96 S&P 500 companies that have reported Q4 results, total earnings were down 6.0% from the same period last year on 5.5% higher revenues, with 71.9% beating EPS estimates and 67.7% beating revenue estimates. Earnings estimates for full-year 2023 have been coming down.

The proportion of these 96 index members beating both EPS and revenue estimates at 53.1% compares to the average for the preceding 20 quarters of 59.5%. Finance companies’ earnings were not satisfactory so far as the share of finance companies beating on both counts have been well below the five-year average. However, energy earnings have been upbeat, as expected.

U.S. GDP Optimistic; Release of Some Upbeat Economic Data

The American economy expanded faster than expected in the fourth quarter, with GDP rising 2.9% annually versus a 2.6% expectation. Though the economy has been resilient, the pace of momentum has slowed in recent months due to stubborn inflation and higher interest rates. The GDP growth marks a slowdown from the 3.2% advancement in the third quarter.

New Home Sales report showed that New Home Sales had unexpectedly increased by 2.3% in December. Pending Home Sales in December grew by 2.5% sequentially versus analyst expectation of -0.9%. The Michigan Consumer Sentiment report for January improved from 59.7 in December to 64.9 in January, compared to analyst consensus of 64.6. Since small-cap stocks better reflect the domestic economic strength, such data points helped Invesco S&P SmallCap 600 Pure Value ETF RZV to advance11.2% in January.

IMF Hikes 2023 Global Growth Forecast

The outlook for the global economy is turning brighter as China ended its zero-COVID policies and the world showed strength despite high inflation, higher interest rates and Russia's ongoing war against Ukraine. The International Monetary Fund (IMF) now expects the world economy to expand 2.9% this year. That forecast is better than the 2.7% expansion for 2023 that the IMF predicted in October, though down from the estimated 3.4% growth in 2022. The IMF opined that recession risks are lower.

Such boost in GDP forecasts may help propel risk-on trade sentiments. iShares MSCI ACWI ETF ACWI could be a beneficiary of it.

U.S. Dollar Logs Fourth Monthly Loss

Invesco DB US Dollar Index Bullish Fund UUP has lost 1.1% past month (as of Jan 31, 2023) on Fed slowdown bets. The prime beneficiary was gold bullion. SPDR Gold Shares GLD has added 5.8% this year. As bullions are priced in the greenback, a lower U.S. dollar is beneficial for all commodity trading.

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Tesla, Inc. (TSLA) : Free Stock Analysis Report

SPDR Gold Shares (GLD): ETF Research Reports

Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports

iShares MSCI ACWI ETF (ACWI): ETF Research Reports

Invesco S&P SmallCap 600 Pure Value ETF (RZV): ETF Research Reports

Valkyrie Bitcoin Miners ETF (WGMI): ETF Research Reports

Direxion Daily TSLA Bull 1.5X Shares (TSLL): ETF Research Reports

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