SPY Back Near Highs. Is the Pullback Over?

The fund has rallied since dipping in April.

Contributing Editor
Reviewed by: etf.com Staff
Edited by: James Rubin

After a relentless rally that pushed the $511 billion SPDR S&P 500 ETF Trust (SPY) higher by more than 10% in the first three months of the year, the market hit a bump in April. 

But that pullback of 5.5% was short-lived. Three weeks after hitting its April low, SPY is less than one percent away from its highs. 

The inflation fears that prompted stocks to sell off last month have abated, and rate cut expectations have started to pick up again. 

Is the worst behind us? 

Judging by the hefty flows into ETFs, investors seem to think so. 

Over the past month, U.S.-listed exchange-traded funds have picked up $40 billion of new money, with around half of that going into U.S. equity ETFs like the $444 billion Vanguard S&P 500 ETF (VOO), the $260 billion Invesco QQQ Trust (QQQ) and the $43 billion iShares MSCI USA Quality Factor ETF (QUAL).  

If investors were fearful, we might have seen a slowing of ETF inflows. Instead, investors kept on buying, pushing up year-to-date ETF inflows to $266 billion. 

Inflation Concerns Linger 

Still, inflation and rate worries certainly aren’t gone. 

This year, investors have consistently underestimated the time it’ll take to get inflation firmly back to the Fed’s 2% target, and in turn, overestimated how quickly the Fed will cut rates.  

There is also the outside risk that inflation remains stubbornly high well into 2024 and beyond, causing the central bank to rethink whether interest rates are restrictive enough to tame consumer prices.  

For now, investors seem to be looking at the glass half full, with sentiment getting a boost from the incredible growth in profits and share prices for A.I.-related companies. 

Whether that optimism can carry the market through the rest of 2024 remains to be seen.  

James Rubin is a contributing editor for etf.com, where he produces the Morning Exchange and Weekly Exchange newsletters. A longtime financial writer, editor and book author, he formerly held positions as a news and markets editor for the Americas at CoinDesk, where he focussed on cryptocurrencies. 

He provided editorial guidance for a Wall Street Journal best-selling book on Bitcoin and oversaw a startup newsroom focused on digital financial assets. He has edited for TheStreet and Unchained, where he wrote daily news stories about the trial of fallen crypto entrepreneur Sam Bankman-Fried. His writing has also appeared in The Hollywood Reporter, Forbes.com, AdWeek, Bankrate, The Financial Brand and The Wall Street Journal. He has also written for Forbes Insights and the Economist Intelligence Unit, including papers presented at World Economic Forums in Davos and Mumbai. 

James is the co-author of The Urban Cyclist’s Survival Guide (Triumph Books) and has been interviewed about bike safety on a number of NPR affiliates. In a prior career, Rubin was a world-ranked tennis player, once competing in Wimbledon’s qualifying rounds. He speaks fluent German and is a graduate of the Columbia University Graduate School of Journalism and received his BA at Columbia University.