Wealth Management
Mid-cap stocks are tracked by multiple indexes, with the S&P Mid-Cap 400 being the most commonly referenced, alongside the Russell Midcap and Wilshire US Mid-Cap Index. These indexes serve as benchmarks for investors seeking exposure to mid-sized companies, which typically have market capitalizations between $2 billion and $10 billion, as defined by FINRA.
For investors looking to track mid-cap performance, popular ETFs include the iShares Core S&P Mid-Cap ETF (IJH), Vanguard Mid-Cap Index ETF (VO), and iShares Russell Mid-Cap ETF (IWR). IJH follows the S&P MidCap 400 Index, holding companies like Williams Sonoma and Interactive Brokers, with a strong weighting in industrials and financials.
Vanguard’s VO, which mirrors the CRSP US Mid Cap Index, includes firms such as Welltower and Palantir Technologies, while IWR, aligned with the Russell MidCap Index, features holdings like Applovin and Williams Inc.
Finsum: Mid-cap investments offer a middle ground between the stability of large caps and the growth potential of small caps, making them an attractive option for investors aiming to diversify their portfolios.
Fidelity's Enhanced High Yield ETF (FDHY) recently reduced its expense ratio from 45 to 35 basis points, making it one of the most cost-effective active high-yield bond ETFs among the top 10 in its category.
This reduction is projected to save shareholders approximately $331,000 annually, highlighting the importance of expense ratios in maximizing investor returns. Unlike passive strategies that track high-yield bond indexes, FDHY employs a quantitative, rules-based approach, screening for bonds with strong return potential and low default risks.
This active methodology allows the fund to exploit market inefficiencies, providing a potential edge over passive competitors. Since the expense cut in October, the fund has attracted over $24 million in net flows, demonstrating increased investor interest.
Finsum: Keeping an eye on fees, particularly for active funds can really advance returns in a macro environment.
A surge in annuity sales over the past few years has been driven by retiring baby boomers and elevated interest rates, with total sales surpassing $1.1 trillion between 2022 and 2024. Fixed annuities, which function similarly to certificates of deposit but typically offer higher returns, have been particularly popular, with some rates reaching 5.85% in early 2025.
However, as interest rates begin to decline, the appeal of these straightforward products may diminish, prompting investors to explore alternatives like fixed-index annuities. These annuities link returns to market performance while guaranteeing principal protection, making them an attractive option in uncertain economic conditions.
Despite their benefits, fixed-index annuities come with complexities, including caps on returns and intricate contract terms that require careful scrutiny. As the market evolves, investors should prioritize transparency and fully understand their options before committing to an annuity in 2025.
Finsum: With the potential of interest rates staying flat we could see more investment in index annuities in 2025.
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Actively managed U.S. bond funds saw a resurgence in 2024, drawing in substantial investment after two years of outflows, with industry leaders like Pacific Investment Management Co. leading the charge. Morningstar Direct data revealed that six of the ten bond mutual funds with the highest net inflows were actively managed, pulling in a combined $74 billion.
In total, actively managed bond funds attracted $261 billion over the year, the highest level since 2021, despite a bond market selloff triggered by the Federal Reserve’s first rate cut in four years. Core and income-focused bond strategies were the biggest winners, appealing to investors seeking stability in an uncertain interest-rate landscape.
With Treasury yields hovering near 5% and credit spreads historically tight, investors are weighing the risks and rewards of bonds versus other asset classes. While the Pimco Income Fund remained the largest actively managed bond fund with $26.8 billion in inflows, the Vanguard Total Bond Market Index Fund led all funds with $33.4 billion.
Finsum: Uncertainty around fiscal policy and potential inflationary pressures under the new administration could shape how bond markets evolve in 2025.
Donald Trump has promised to accelerate U.S. economic growth, but the economy already surged through 2024, likely ending the year with a 3% annualized GDP gain in the fourth quarter, according to the Atlanta Fed’s GDPNow. If accurate, annual growth for 2024 would range from 2.4% to 2.7%, a rate comparable to pre-pandemic levels but unexpected in the post-pandemic era.
This surprising strength is credited to two main drivers: an expanding population fueled by increased immigration and a notable boost in productivity, partially attributed to advancements in technology like AI. Yet, challenges remain, including persistent inflation, elevated interest rates that have slowed home and vehicle sales, and a weaker hiring environment despite low unemployment.
Businesses are optimistic about Trump’s plans to cut taxes, streamline regulations, and reduce energy costs, though his proposals for higher tariffs and mass deportations raise fears of higher material and labor costs.
Finsum: The outlook is upbeat, with early indicators of 2025 showing confidence, underscoring the nation’s resurgence as a global economic leader.
Mike Bailey, director of research at FBB Capital Partners, shared his outlook on large-cap stocks during an appearance on CNBC. Bailey expressed optimism about the U.S. economic outlook for 2025 and beyond, highlighting job growth and strong macroeconomic conditions as key factors.
He emphasized that large-cap companies are better positioned than small caps to deliver consistent long-term earnings growth and exceed expectations. Three of the large-cap stocks have seen significant gains due to favorable market conditions and growth prospects.
The selection of these stocks, all with market capitalizations exceeding $10 billion, was based on their top performance over the 30 days ending January 22, 2025. Among the standouts are SoFi Technologies, United Airlines, and Rocket Lab, which benefited from strong earnings, strategic partnerships, and growth in innovative sectors, cementing their positions as key players in their respective industries.
Finsum: Finding large caps without technology could be the short term play with all of the tech volatility.