Wealth Management
Markets entered 2025 on strong footing but were quickly rattled by earlier-than-expected U.S. tariff actions, delaying anticipated rate cuts and fueling volatility across equities, Treasuries, and currencies. AllianceBernstein expects moderate—not recessionary—growth in the second half, with fiscal and trade policy, Fed actions, and geopolitics serving as key macro drivers.
Credit markets have shown resilience, and despite tighter spreads, elevated yields make high-quality issuers—particularly BB-rated bonds—attractive for income and risk management. With inflation expected to peak by the third quarter, the firm favors short-to-intermediate bond maturities to balance yield opportunities against interest-rate risk.
Equity markets, while volatile in early 2025, have since broadened beyond U.S. tech leaders to global and value-oriented sectors, especially in Europe where banks and dividend payers stand out.
Finsum: Multi-asset income strategies as well-positioned for this uncertain backdrop, combining yield, diversification, and adaptability amid shifting policy and market conditions.
Free cash flow (FCF) is a critical measure of financial health, showing how much cash a company can reinvest or return to shareholders after covering essential costs. In the small-cap arena, where profitability is often limited, strong FCF can distinguish higher-quality businesses with better growth prospects and lower valuation risk.
The VictoryShares Small Cap Free Cash Flow ETF (SFLO) seeks to capture this advantage by tracking an index that emphasizes both historical and projected FCF performance. By filtering out slower-growing firms and prioritizing those with robust FCF yields, SFLO aims to balance growth potential with disciplined valuation.
Its broad small- and mid-cap universe also enhances liquidity and diversification, making it a potentially appealing option for investors seeking targeted small-cap exposure with a quality bias.
Finsum: Since a large share of small-cap companies remain unprofitable, focusing on those with consistent FCF can improve portfolio stability.
Amid growing advisor interest in fixed income, American Century’s Joe Gotelli highlights municipal bonds as a timely opportunity, especially after recent market dislocations tied to fiscal uncertainty and tariff concerns.
Despite early 2025 volatility, muni valuations remain appealing compared to taxable bonds, offering tax-free income and potential for excess returns as the Fed nears possible rate cuts. Gotelli notes that long-duration, high-quality muni assets may benefit in a softening growth environment, positioning investors for attractive long-term yields.
American Century’s active muni ETFs—such as the Diversified Municipal Bond ETF (TAXF) and California Municipal Bond ETF (CATF)—use flexible strategies to manage duration, credit quality, and sector exposure while maintaining tax efficiency. Gotelli emphasizes Active management provides an advantage over passive approaches by allowing deeper credit research and selective exposure to specialized sectors like charter schools and tobacco settlement bonds.
Finsum: Active ETF Fixed Income, gives investors innovative tools to navigate complex tax and interest rate dynamics.
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Faith-based investing has become an increasingly important niche within sustainable finance, offering investors the opportunity to align their portfolios with Catholic values while still pursuing competitive returns.
Funds such as Allianz Global Investors’ E.T.H.I.C.A. apply the Church’s social doctrine, emphasizing human dignity, social justice, and environmental care, while excluding sectors like abortion, weapons, or adult entertainment. Similarly, Invesco’s MSCI Europe ESG Leaders Catholic Principles ETF provides exposure to European firms that uphold Catholic ethics, combining strict exclusions with best-in-class ESG practices and achieving strong performance alongside transparency and affordability.
Investment houses like Tressis also integrate moral and financial discipline, using ethical commissions to ensure portfolios support social welfare, sustainability, and human rights, while excluding harmful industries.
Finsum: These strategies reflect a growing movement where values-based frameworks coexist with robust investment performance, helping advisors tailor to clients.
Advisors navigating today’s complex markets don’t have to go it alone, active ETFs provide institutional expertise and dynamic portfolio management to help address clients’ fixed income needs. In 2025, active bond ETFs have surged in popularity, with fixed income ETF inflows surpassing $325 billion by mid-October despite ongoing uncertainty around rates, tariffs, and geopolitics.
Vanguard’s Fixed Income Group actively manages portfolios across sectors and durations, offering flexibility for goals like yield enhancement, core exposure, or risk management. The firm’s lineup now includes nine active fixed income ETFs, such as the Core Bond ETF (VCRB), Core-Plus Bond ETF (VPLS), and municipal options like the Core Tax-Exempt Bond ETF (VCRM) and Short Duration Tax-Exempt Bond ETF (VSDM).
New additions, including the Multi-Sector Income Bond ETF (VGMS) and High-Yield Active ETF (VGHY), expand opportunities for investors seeking income and diversification.
Finsum: Look for expert management and low expense ratios to help advisors meet clients’ evolving bond-market challenges.
Emerging market (EM) bonds are increasingly attractive as EM governments have shifted from deficits to surpluses, while developed markets (DM) have accumulated debt and fiscal imbalances. EMs maintain stronger fundamentals, including lower government and private debt, greater central bank independence, and higher real policy rates, factors that enhance stability and yield potential.
Unlike DMs, EM policymakers have generally resisted moral hazard, allowing inefficient firms to fail rather than absorbing private risk, preserving long-term financial health. Over the past three decades, EMs have achieved persistent current account surpluses through fiscal discipline, contrasting with DMs’ crisis-prone fiscal dominance and policy coordination.
Actively managed EM strategies, such as VanEck’s, have demonstrated resilience through global shocks, reinforcing the case for a strategic EM debt allocation in modern portfolios.
Finsum: With DMs constrained by debt and low yields, EM debt offers compelling diversification benefits, higher returns, and sounder fundamentals.