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Investors Seek Diversification as Tech Frenzy Fades on Wall Street

2 Mins read

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Tech-Focused ETFs Experience Outflows as Investors Shift Strategy

While Wall Street has witnessed a surge in mega-cap tech stocks this year, exchange-traded fund (ETF) investors are taking a different approach by embracing a more diversified strategy. The Nasdaq Composite index, driven by the hype surrounding artificial intelligence, has soared approximately 31% for the year. However, the Technology Select Sector SPDR Fund and the Vanguard Information Technology Index Fund have experienced net outflows of $2.4 billion and $955 million, respectively, in the first half of 2023. This shift indicates a departure from the previous trend of going “all-in on tech stocks.

Investors Favor Quality Stocks Amid Economic Uncertainty

Having poured money into tech-focused ETFs when the sector fell out of favor last year, investors now seem to be reallocating their cash to quality stocks with strong balance sheets that can withstand potential economic downturns. Todd Rosenbluth, head of research at VettaFi, suggests that investors are adopting a defensive mindset due to expectations of the Federal Reserve raising interest rates in the second half of the year. The iShares MSCI USA Quality Factor ETF, with exposure to tech and other industries such as healthcare, has garnered $8 billion in net inflows during the first half of this year.

Wall Street Investors Seek Returns from Safer Sources After Market Volatility

Following a turbulent market in the previous year, characterized by the Federal Reserve’s rate hikes, persistent inflation, and geopolitical tensions, investors are now looking for higher quality sources of returns. Shelby McFaddin, an investment analyst at Motley Fool Wealth Management from Wall Street, suggests that after chasing returns, investors are now turning towards diversification and quality investments. The desire to mitigate risk and seek stability is driving this shift away from risky assets.

Bitcoin Surges to 13-Month High on Endorsement from BlackRock CEO

In a notable development, Bitcoin reached a new 13-month high, climbing to around $31,500 per coin. The surge came after BlackRock CEO Larry Fink, who was previously skeptical, endorsed the cryptocurrency and its potential to revolutionize finance. Fink highlighted the fantastic underlying technology of Bitcoin. Despite the hawkish noise from the Federal Reserve and concerns of a potential recession, Antoni Trenchev, co-founder of Nexo, observed that Bitcoin continues to chart its own course.

Bitcoin’s Momentum Pauses Amid Broad Market Sell-Off

Although Bitcoin touched new highs this year, its gains were tempered after robust jobs data triggered a sell-off across various markets. The cryptocurrency had surpassed $31,400 per coin in the previous month, buoyed by BlackRock’s application for a bitcoin spot exchange-traded fund and the launch of a digital asset trading platform by EDX Markets. The market correction highlights the ongoing volatility in the cryptocurrency market and its susceptibility to broader market movements.

Meta’s Threads App Gains Traction, Potentially Threatening Twitter

Meta Platforms, the parent company of Facebook, has introduced Threads, a social media platform that aims to compete with Twitter. The app’s early performance has been promising, with 30 million sign-ups reported by Meta. Dubbed by some as a potential “Twitter killer,” Threads may pose a significant threat to Twitter, particularly in light of criticism faced by Twitter CEO Elon Musk for recent platform changes. As users explore alternatives, Threads emerges as a contender in the social media landscape, prompting a surge in Meta’s shares.

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