Displaying items by tag: volatility

Private equity firms began the year with strong momentum and over $1.6 trillion in dry powder, eager to deploy capital amid improving deal activity. However, rising trade tensions and macroeconomic uncertainty are making investors more cautious, with many GPs expecting tariffs to slow deployment over the coming months. 

Despite this, Q1 saw a surge in deals—volume rose over 45% and value more than doubled year-over-year—driven by large transactions like Sycamore Partners’ take-private of Walgreens. Market volatility has paradoxically raised firms’ risk appetite, with nearly three-quarters indicating they’re more willing to act on mispriced opportunities across sectors such as defense, middle-market manufacturing, and distressed assets. 

Amid these trends, firms such as CNL Strategic Capital are shifting focus to value creation within their portfolio of companies seeking long-term growth

Finsum: Private Markets are a great way to sidestep current volatility

In a market rattled by volatility in both stocks and bonds, dividend ETFs are drawing attention as a middle ground between growth and income strategies. While passive giants like Vanguard’s VIG and Schwab’s SCHD dominate with low fees and broad exposure, a growing number of active ETFs—like T. Rowe Price’s TDVG—are betting they can outperform by handpicking high-quality dividend payers. 

TDVG blends income with potential capital appreciation and holds familiar names like Apple and Microsoft, offering tech exposure without overconcentration. Active managers argue their flexibility allows them to adapt to changing market conditions in ways passive index funds cannot, especially when navigating risks like dividend cuts or sector shifts. 

Although passive dividend ETFs still attract more investor flows due to cost advantages, actively managed funds are slowly gaining traction, particularly among investors seeking income stability amid rising macroeconomic uncertainty. 

Finsum: For those dependent on income—like retirees—dividend strategies remain appealing, but experts caution that yield alone shouldn’t drive decisions.

In early 2025, target date fund (TDF) investors experienced a setback as U.S. stock markets declined sharply, with a 12% year-to-date loss driven by tariffs and fears of a market correction. For years, diversification beyond U.S. equities hurt performance, but that trend reversed as global factors began to weigh on domestic markets. 

The SMART TDF Index, which models ideal TDF allocations with better risk management, has outperformed the industry standard, revealing that most TDFs are overexposed to risky U.S. assets. April’s turbulence, sparked by the April 2 “Liberation Day” tariffs and further losses in the S&P 500, has intensified concerns about sequence-of-return risk, especially for those nearing retirement. 

Despite historical lessons and available low-risk alternatives like the SMART Index and TSP, most TDFs remain unprepared for prolonged downturns. 

Finsum: With fear dominating investor sentiment, now may be the time to rethink how TDFs protect retirement savers.

Low-volatility ETFs are proving their worth during the current market downturn, outperforming broad benchmarks like the S&P 500. Funds like iShares USMV and Invesco SPLV are both up over 3% year-to-date, even as the Vanguard S&P 500 ETF (VOO) is down nearly 5%. 

Despite their performance, these ETFs haven't attracted significant inflows, overshadowed by trendier buffered and defined-outcome products that rely on complex options strategies. Low-volatility ETFs, by contrast, use a simpler factor-investing approach and tend to come with lower fees, making them more cost-efficient. 

While they can underperform during strong bull markets, their resilience shines when equities struggle, as seen during major drawdowns in 2022 and 2018. 

Finsum: Advisors still value them for clients seeking steadier returns in uncertain conditions, especially as bonds show increasing volatility themselves.

As market volatility rattles investors, many are turning to “buffer” ETFs—funds that trade off some upside potential in exchange for protection against downside risk. These ETFs, which use options strategies to cap losses while limiting gains, have drawn $4.7 billion in inflows so far this year, with a notable $140 million coming in on the S&P 500’s worst day of 2024. 

Financial advisors are increasingly adopting them to reassure clients and keep them invested during turbulent times, especially as traditional stock valuations remain high. The appeal lies in downside protection, though investors must accept lower upside caps and higher fees—some charging more than ten times what plain index ETFs do. 

Assets in buffer ETFs surged to $64 billion by February, up from $38 billion at the end of 2023, as their defensive qualities grow more attractive in an uncertain economic and political climate. 

Finsum: Some advisors warn against overcommitting, reminding investors to balance protection with realistic expectations about long-term growth and costs.