State Street Global Advisors reported unprecedented ETF industry growth in 2024, with investors pouring a record-breaking $1.15 trillion into U.S.-listed funds.
The massive inflows reflect investors’ strong conviction in U.S. markets, especially in growth and technology sectors, despite historically high valuations, according to Matthew Bartolini, head of Americas ETF research at State Street. This preference for domestic exposure comes as U.S. stocks delivered their best two-year return—gaining 53%—since 1998, while international markets lagged behind.
U.S. equity ETFs took in $672 billion in 2024, and have now recorded inflows for 22 consecutive months, a new record, according to the State Street report. The dominance peaked in December, when these funds captured 87% of all equity ETF flows.
The final quarter of 2024 saw exceptionally strong momentum, with ETFs gathering more than $430 billion—the largest three-month inflow ever recorded, according to State Street data. November saw the highest inflows for the year at $160 billion, while December’s $150 billion haul marked the second-highest monthly total.
“With such impressive inflows and stronger market returns than other regions, US equity ETF assets grew market share within the equity category,” writes Bartolini. “Total assets are now over $6.7 trillion, or 82% of all equity ETF [assets under management.]”
Growth-oriented ETFs captured $115 billion in 2024, their first year exceeding $100 billion in inflows and outpacing value ETFs by the widest margin on record, according to the report. Technology sector ETFs alone drew $33 billion, representing 76% of all sector ETF flows despite comprising only 37% of sector assets.
The decisive shift towards growth and technology came as artificial intelligence emerged as a dominant theme, with U.S. firms leading the global AI race, according to Bartolini’s analysis.
The concentration in U.S. equities comes despite stretched valuations. The S&P 500’s forward-looking price-to-earnings ratio sits 45% above its 35-year median, while its premium-to-non-U.S. stocks has reached the 96th historical percentile, the report shows.
This elevated valuation means U.S. stocks are trading at historically expensive levels compared to their international peers, Bartolini explains in the report. He notes that this creates a situation where U.S. companies will need to meet high growth expectations to justify these premium prices, leaving little room for disappointment.
Bond ETFs also posted impressive figures, taking a record $303 billion for the year. Risk-on credit sectors attracted $87 billion, boosted by loan ETFs’ record $26 billion in inflows, according to State Street data.
Looking ahead, Bartolini notes that while U.S. economic and fundamental tailwinds remain strong relative to other regions, numerous macro risks—including ongoing wars, evolving monetary policy, a new U.S. administration likely to depart from the status quo, and an uncertain path for U.S. fiscal policy—could present challenges in 2025.