Core Insights - The article discusses the shift in investment strategy from cash to bonds, suggesting that bonds may offer better returns in the current rate-cutting environment [1][4] - Historical data indicates that during previous rate-cutting cycles, fixed income securities have outperformed cash, supporting the case for bonds [3][4] Bond Market Dynamics - In 2022, the Federal Reserve's aggressive rate hikes led to increased yields, prompting investors to flock to money market funds, which created opportunities for purchasing bonds at attractive prices [2] - As bonds approach maturity, their prices tend to rise, and with the Fed cutting rates, fixed income securities are expected to provide price appreciation alongside coupon payments, potentially exceeding declining money market yields [3][4] Active Management in ETFs - Active management is deemed essential in the current market due to the complexities of the bond market and the potential downward pressure on yields during a rate-cutting cycle [5][6] - Thornburg offers actively managed funds, such as the Thornburg Core Plus Bond ETF (TPLS) and the Thornburg Multi Sector Bond ETF (TMB), which aim to maximize income opportunities through high-quality bond portfolios and diverse fixed income assets [7][8]

Mozambique’s central bank extended its rate-cutting cycle, lowering its benchmark to a record low while warning of risks from the government’s delayed debt payments https://t.co/PBn3c47Fte ...

Industry Overview - Many investors are cautious about airline stocks due to their volatility, influenced by broader economic conditions, leading to an unclear outlook for 2025 [1] - The decline in jet fuel prices, typically a positive indicator, is attributed to lower demand, signaling a potential end to the travel boom that began in late 2021, especially among lower-income consumers [2] Company Insights Delta Air Lines - Delta Air Lines is a focal point for investors, showing resilience with "better-than-feared" earnings supported by strong corporate bookings and high-yield leisure travel [4] - Despite a 5.9% decline in stock price in 2025, Delta has received bullish upgrades, with a current price of $57.32 and a 12-month price forecast of $67.84, indicating an 18.35% upside [5][6] - The stock is trading about 20% below its consensus price target and is attractively valued at around 7x forward earnings, below historical and sector averages [6] Southwest Airlines - Southwest Airlines is trading at $32.56 with a 12-month price forecast of $33.38, suggesting a 2.50% upside, but has a high forward P/E ratio over 20, indicating it is not a value stock [8] - The company is well-positioned for domestic growth if lower interest rates stimulate demand, although it lacks an international presence [9] American Airlines Group - American Airlines Group is currently the worst performer among its peers, down over 34% for the year, primarily due to a significant debt burden of $37 billion [10] - The stock is trading over 45% below its consensus price target, raising questions about its potential for recovery, which may hinge on lower interest rates boosting domestic travel demand [11] - The company has a young fleet, which helps manage capital expenditures and supports efforts to deleverage and generate free cash flow [12]

Core Insights - The Russell 2000 index has surpassed its previous all-time high from November 2021, indicating strong performance in U.S. small-cap stocks [1] - The positive momentum in small-cap stocks has been observed leading up to and following the Federal Reserve's initiation of a rate-cutting cycle [1] Performance Analysis - The S&P SmallCap 600, which is considered a higher-quality index, has also shown favorable performance during this period [1]

Core Insights - The Federal Reserve has initiated a new rate-cutting cycle, which may lead to increased optimism regarding small- and mid-cap stocks, as well as speculative high-tech companies that currently show limited profits but promise significant growth in the future [1] Group 1 - The new rate-cutting cycle by the Fed is expected to influence market sentiment positively towards smaller and mid-sized companies [1] - Speculative high-tech firms, which are characterized by their lack of immediate profitability but potential for ambitious future growth, may also benefit from this environment [1]

Core Insights - The Federal Reserve's second year of rate cuts, initiated in September 2024, historically correlates with significant gains for the S&P 500, averaging over 16% returns in the second year following initial cuts [1][4] - The S&P 500 achieved a strong return of over 17% in the first year of the current rate-cutting cycle, surpassing the historical average of 9.6% for year one [2][4] Economic Environment - Robust returns for the S&P 500 are contingent on the U.S. economy avoiding a recession, as historical data shows declines during rate-cutting cycles coinciding with recessions [2][6] - Sustained economic growth is deemed essential for continued upward momentum in stock prices, supported by stable interest rates, cooling inflation, fiscal stimulus, and investment in artificial intelligence [7] Market Performance - Historical analysis indicates that the average gain during the second year of rate cuts is 16.4%, with a median return of 14.4% [4] - The S&P 500 index has advanced 12.47% year-to-date, 17.48% over the past year, and 98.84% over the last five years [10] Potential Challenges - The macroeconomic environment remains uncertain, with potential headwinds including deficit spending affecting long-term rates, a stalled job market raising recession fears, legal challenges to tariffs, and geopolitical risks [8] - Despite uncertainties, the consensus suggests that markets favor rate cuts that are seen as a luxury rather than an emergency, positioning the current backdrop as favorable for equities if recession risks remain low [9]