Wealth Management
Investors are increasingly turning their attention to small-cap stocks and ETFs due to a combination of favorable valuations, historical trends, and recent market dynamics. This renewed interest has been highlighted by a significant rally in small-cap stocks, particularly during July when the Russell 2000 recaptured much of its earlier underperformance relative to large-cap indices.
Analysts suggest that small-caps are still undervalued, with some estimates indicating a 20% to 30% discount compared to larger stocks. This presents a potential opportunity for prolonged outperformance in the small-cap sector. Notable options include the iShares Russell 2000 ETF (IWM), which tracks a broad index of small-cap companies, and the Vanguard Small-Cap Value ETF (VBR), which focuses on value-oriented small-cap stocks.
Each of these ETFs provides investors with a strategic entry into the small-cap market, with varying levels of risk and potential return depending on their investment goals.
Finsum: Also note that as interest rates come down small caps are historically in a position to take advantage because they are more levered.
Direct lending, once a niche market for companies with lower credit ratings, has expanded into a powerful alternative for both middle-market and large-cap firms, managing nearly $1.7 trillion by mid-2023.
This growth has been fueled by private credit’s ability to offer flexible, borrower-friendly terms, even in billion-dollar deals traditionally dominated by banks. Banks, recognizing this trend, are now entering the direct lending space themselves, fostering competition that benefits borrowers with better pricing and more tailored financing solutions.
As direct lending continues to grow, it's poised to play an increasingly vital role in funding mergers, acquisitions, and other corporate transactions, especially as the market prepares for potential interest rate changes later in 2024.
Finsum: It’s worth monitoring banks direct involvement in direct lending, because this could change the evolution of the industry.
J.P. Morgan Asset Management has appointed Travis Spence as the global head of ETFs, underscoring its strategic focus on leading the active ETF market. Spence, a 20-year veteran at the firm, will manage ETF product development, capital markets, and the newly established ETF insights team, while continuing to lead distribution across Europe, the Middle East, and Africa (EMEA).
His previous leadership in expanding J.P. Morgan's active ETF presence in Europe positions him well to guide the firm’s next phase of growth. The global ETF platform has already expanded to nearly $190 billion across more than 100 products, securing J.P. Morgan's position as second in active ETF assets under management (AUM) and eighth overall globally.
Active ETFs continue to make strides in growth along their passive counterparts and have made substantial strides this year.
Finsum: Active management is really about the harmony of merging quantitative insights with the best portfolio risk practices.
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Real estate has long been a cornerstone of wealth creation, but the responsibilities of being a landlord can be daunting. For those seeking passive income without the hassle, REITs like Realty Income Corp. offer an appealing alternative.
Known as “The Monthly Dividend Company,” Realty Income has a history of reliable payouts, currently offering a 5.59% dividend yield. However, REITs do tend to fluctuate more than underlying rents.
Investors looking for more direct involvement without the landlord duties might consider platforms like Arrived, which allows fractional investments in rental properties, combining monthly income with potential property appreciation. Both options provide avenues to invest in real estate without the headaches of property management.
Finsum: As interest rates fall yield seekers might consider real estate as an option to generate income, with fluctuations in equities markets.
The 2024 Olympics wrapped up with the United States leading the medal count, claiming a total of 126 medals, including 40 golds. China and Japan followed, securing 40 and 20 gold medals, respectively.
In basketball, the U.S. women's team maintained their dominance, winning their eighth consecutive gold medal, showcasing their exceptional skill and teamwork in an incredible finish over France. The U.S. men’s team slipped by Serbia in a comeback in the semifinals, and Stephen Curry’s electric performance secured the gold in the finals.
The Olympic ceremonies closed with Tom Cruise dropping down from the ceiling and carrying the Olympic flag off to Los Angles as they prepare to host in 2028.
Finsum: While Los Angles surely has an uphill battle when it comes to infrastructure, the Olympics had incredible viewership and engagement which is promising for 2028.
The recent market gyrations and decline prompted some retirement investors to react by shifting their 401(k) investments from large-cap stocks and target-date funds to safer options like stable-value, bond, and money-market funds.
The trading volume was nearly 700% the usual level, marking the highest activity since March 2020, during the onset of the COVID-19 pandemic. Despite the market's volatility, most 401(k) participants did not alter their accounts, but those who did generally moved towards more conservative investments to mitigate risk.
The S&P 500 and Dow Jones Industrial Average both showed slight gains by the market's close but remained below their mid-July highs. However stable value funds received a bulk of the inflows at just over 60%.
Finsum: While the recent sell off was prompted by international currency fluctuations, expect more volatility this fall and potentially more inflows into stable value.