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Today in the Market (4/26/2024)

Good Morning! On Friday, U.S. equities markets rebounded as the quarterly reports from Alphabet (GOOG, GOOGL) and Microsoft (MSFT) renewed optimism for a further surge driven by major technology companies, despite inflation measures indicating persistent price pressure.

The Nasdaq led the way with a significant gain of 2.03%, while the S&P 500 had a solid return of 1.02%. The Dow Jones had a small increase of 0.40%.

CHANGE OF PACE

Snap (SNAP) the stock has been known to fall after earnings reports for over a year. However, stock price soared 27%, breaking the streak, after the release of financial data for the first quarter of 2024.

What did investors like? During the first quarter, the firm had better-than-expected results with 422 million daily active users (DAUs) vs. 420 million DAUs. Snap also generated $1.2 billion in revenue, representing a 21% increase compared to the previous year. This is the highest pace of growth it has had in more than two years.

But what changed for this quarter? The subscription service Snapchat+ had a growth in its user base, with a total of 9 million subscribers in the first quarter, compared to 7 million users by the end of 2023. In addition, advertising prices (the cost per thousand views) increased by 8% compared to the previous year, which is a reversal of the fall seen in many previous quarters. This is important because when the cost per thousand views increases, the company generates more revenue for the same number of ad displays

ETF GROWTH

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Active ETFs have been gaining a larger portion of the market compared to mutual funds. They have had a 20% increase in assets each year over the previous five years. This trend reflects investors’ growing preference for exchange-traded funds, which provide cheaper costs and more flexibility.

Simultaneously… actively managed funds are seeing significant growth in the ETF industry, increasing their market share from 2% to 8.5% between 2019 and the present, as reported by Morningstar. Although their assets amount to little over $600 million, which is a small fraction of the total $8.9 trillion in U.S. ETFs, their growth rate exceeds that of the broader market and their passive equivalents.

Why the switch? According to Bryan Armour, the director of passive strategies research at Morningstar, the increase in activities is due to a confluence of factors including reduced expenses, changes in regulations, the introduction of new products, and market activity. On top of that, the typical active ETF is 36% more affordable than the average mutual fund, according to Morningstar.

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