Victory Capital Blog

With the S&P 500® coming off back-to-back years of 20-plus percent returns,
passive investors may be celebrating. However, WestEnd Advisors cautions that passive investment based on market cap-weighted equity indices is inherently
backward-looking and risks creating overconcentration in what has already done
well, rather than emphasizing what may be likely to outperform going forward. It’s
important for investors to understand the nuances and embedded risks of a passive equities strategy to determine if there are better alternatives.  

As 2024 drew to a close, it was clear that change was in the air on several levels. There was a pending change in political leadership in Washington D.C., and monetary policy had shifted as the Federal Reserve was into a new easing cycle. What does it all mean for fixed income investors as we forge ahead into 2025 and beyond?

There’s no denying that U.S. small caps have lagged the broader market in recent years, especially compared to their large- and mega-cap counterparts. However, our analysis suggests that market leadership tends to move in long cycles. Given the current economic backdrop and proposed policies of a new political regime, we see a compelling case for small companies to lead the market once again.  

Core equity allocations built around market-cap-weighted indexes have been a go-to approach for investors. But the continued growth of the Magnificent Seven and their influence over the S&P 500® raises concerns. We like to remind investors that there are other methodologies worth considering, especially if diversification and risk management are objectives. 

Over the past decade many investors have eschewed emerging markets equities in favor of domestic equities. But it may be high time for investors to rebalance portfolios and rethink their allocation. Sophus Capital offers compelling thoughts on the outlook for emerging markets.

The Federal Reserve has finally made its much-anticipated interest rate move, and this is likely to have ramifications for money market instruments. For investors who have grown comfortable capturing attractive yields in these funds, now might be a good time to contemplate alternatives. 

The domestic economy appears to be grinding through its late-cycle phase, but risks remain despite the market’s resilience through the first half of the year. WestEnd Advisors shares its thoughts on portfolio positioning that might allow investors to play both offense and defense. 

After an epic run for large-cap growth stocks, many portfolios may be either out of balance and/or under-allocated to value-oriented strategies—especially, small-cap value. For those looking to reallocate, it is important to understand that not all value strategies are the same. 

Many investors allocate to passive bond funds that track the ”Agg”—the widely followed Bloomberg US Aggregate Bond Index—for their core fixed income holding. Yet few understand the nuances of its make-up, which, upon closer inspection, suggests there may be hidden risks and better alternatives.

There’s no denying that China—the world’s second largest economy—continues to face headwinds. But all too often investors assume that the emerging markets story begins and ends with China. We think actively managed strategies should look broadly to extract the differentiated return potential of emerging markets. 

Recent turmoil in financial markets, along with the near-term price dislocations it has created, has bolstered the case for active investment management. Is it any surprise why more and more active strategies are now being delivered via Exchange Traded Funds (ETFs)? This pairing makes perfect sense to us. 

Large-cap stocks, and especially the mega caps, have been on a roll in recent years. But will this era of large-cap dominance last forever? And if market leadership changes, will core equity allocations be at risk? What’s an investor to do? 

In the face of high interest rates, elevated inflation and geopolitical turmoil, global equities have been resilient and managed to rise over the past year. What’s the outlook now, and how can investors position for success? 

The past two years have been nothing short of extraordinary in the bond market. But as we head deeper into a new year, investors have questions. Here are some thoughts on the current market and why investors might consider shifting to an active approach.

Dividend-yielding stocks had a tough go compared to many other segments of the equities market during 2023. But don’t lose faith. There are ample reasons why we continue to like the cohort of attractive dividend-yielding stocks with strong fundamentals. 

Attractive yields at the ultra short end of the curve have enticed (and kept) many investors in money market funds this year. But at some point the risk-reward of longer-term bonds shifts. Is it time to consider moving further out the curve? The concept of escape velocity tells the story.

In the current environment many investors are considering allocating new capital to value-oriented strategies. There’s a sound basis to that, but many strategies—and in particular passive ones—are relying on antiquated approaches. Is there a better way? 

The domestic economy has shown resiliency in the face of sharp interest rate hikes, yet there has been some deterioration in certain economic measures as well. WestEnd Advisors explains how they are balancing exposures amid the mix of risks in this landscape.

Investors often barbell their portfolios, focusing on pairing large-cap stocks with an allocation to small caps. All too often, however, this ignores a significant and potential return-enhancing segment of the equities markets—mid caps. THB Asset Management explains why there are ample reasons to mind the middle. 

After an epic series of rate hikes, the Federal Reserve parked in neutral for a short two months. But at the July FOMC meeting, the Fed hit the gas again and bumped rates higher. Bond investors are now wondering how to position for the uncertain road ahead. 

Why are we increasingly hearing securities analysts talk about an accounting metric called free cash flow? What exactly is free cash flow, and why might it matter more
than ever today?

Global equity investors have navigated an array of challenges over the past 10 years. While it’s never easy, the RS Global team continues to like the broad opportunity set and diversification potential of global equities for the next decade, and beyond.

Small-cap growth stocks have fallen out of favor with investors. But looking at relative valuations, as well as where we may be in the interest rate cycle, investors may ask: Is small-cap growth poised for a rebound? 

The Federal Reserve (Fed) hints that it may finally be pausing the rate hikes, but equity investors still have their hands full wondering if a recession is on the horizon. What does this mean for your equity allocations? 

Emerging markets have been mired in a long bear market. Finally, however, there are catalysts that suggest we might be on the cusp of the next positive chapter for
emerging markets equities. 

Fixed income ETFs are growing in popularity, but we don’t think investors should settle for traditional, passively managed funds. An active ETF might be a better way to play your fixed income hand.

Is the Federal Reserve’s rate hike cycle over, or will interest rates stay higher for longer? Nobody truly knows. That’s why fixed income investors might want to maintain broadly diversified portfolios, including strategies that may help hedge against higher rates and, hopefully, outpace inflation.

The era of low rates and easy money ended abruptly last year, and many popular equity indexes took a drubbing. Now, investors are wondering if it’s time to favor active management, and more specifically, value-oriented strategies that aren’t afraid to stray from the benchmark.

When market  uncertainty abounds, equity investors may be able to find a guidepost for their portfolio by keeping an eye on where we are in the overall economic cycle.

The environment changed markedly for fixed income investors in 2022, and as we drive into the New Year it’s becoming clear that the tired old passive playbook might not work so well. Perhaps it’s time to be more active and do a better job of explicitly matching risk tolerance with duration.

Inflation, interest rates, a strengthening U.S. dollar and geopolitics have proven to be formidable challenges for emerging markets. But what’s the outlook, and will EM investors be singing a different tune in 2023?

Growth investing, and small-cap growth in particular, has faced strong headwinds in 2022. But is the tide finally turning, and when will small growth close the valuation gap? New equity allocations might even favor growth as a potential value play. 

Despite the difficult first half of 2022 and the Federal Reserve’s new more restrictive monetary policy, investors should remember that there may be a potential silver lining to this new higher-yield backdrop. This might bode well for new bond allocations and reinvestment opportunities.