Third Time's A Charm: Rate Cut Adds Emphasis on Active ETFs

Group 1 - The U.S. Federal Reserve has implemented its third and final rate cut of 2025, with a quarter-point reduction that has been positively received by most markets, although some fixed-income investors are concerned about falling yields in 2026 [1][2] - There is a strong likelihood of another 25-basis-point cut in early 2026, with over 70% probability according to the CME Group's FedWatch indicator, contingent on economic data assessments by the Fed [2] - Recent dissent among Fed members has been noted, with three members opposing the cut, indicating a divided opinion on future rate adjustments [4] Group 2 - An actively managed strategy, such as an ETF, can provide flexibility and income during periods of rate cuts, allowing portfolio managers to adjust holdings in response to market conditions [5] - The Vanguard Core-Plus Bond ETF (VPLS) is highlighted as a suitable option for fixed-income investors seeking a core bond solution that aims to generate additional income during the current rate-cutting cycle [6][7] - VPLS is characterized by a low expense ratio of 0.20%, making it an attractive low-cost active fund for investors looking for core bond exposure while pursuing higher yields [8]