Group 1: BlackRock, Inc. - BlackRock was highlighted as a strong investment opportunity following its robust third-quarter results, with CEO Larry Fink predicting rapid growth in the cryptocurrency market due to the firm's development of proprietary tokenization technology [2] - The company reported diluted EPS of $8.43, or $11.55 on an adjusted basis, and assets under management increased to $13.5 trillion, reflecting a 17% year-over-year growth [2][6] - BlackRock's shares rose by 0.7% to close at $1,202.59 on Wednesday [6] Group 2: Other Companies - SoFi's Liz Young Thomas selected iShares Russell 2000 ETF as a notable investment, which saw a 1% increase during the session [3][6] - Victoria's Secret & Co. was named by Stephanie Link as a final trade, with shares gaining 3.2% to close at $30.39; Telsey Advisory Group raised its price target from $24 to $29 [3][6] - Teradyne, Inc. was chosen by Joseph M. Terranova, with analysts expecting a quarterly earnings report of 79 cents per share, down from 90 cents per share a year earlier, and projected revenue of $744.2 million [4]

Core Insights - Small caps are experiencing a resurgence, with significant potential for dividends, specifically a 7.1% payout being highlighted as an opportunity [2][8] Small Cap Performance - Small caps have historically underperformed compared to large caps, but recent trends indicate they are now matching or even surpassing large caps in performance, as evidenced by the iShares Russell 2000 ETF [3] Advantages of Small Caps - Small firms maintain strong client relationships, benefiting from customer loyalty and directly profiting from the strength of the US economy, providing a hedge against global economic issues [4] Dividend Challenges - Many small caps are in early growth stages and may not be able to offer dividends while funding their expansion, contrasting with larger companies that typically provide more consistent dividends [5][6] Investment Strategy - The focus has been on closed-end funds (CEFs) that invest in large caps and high-yield bonds, which have historically provided higher returns and dividends compared to small caps [7] Exception in Small Caps - The Royce Small-Cap Trust (RVT) is noted as an exception, offering a 7.1% dividend while closely tracking small cap performance [8] Fund Structure and Holdings - RVT invests in a diverse portfolio of 488 small caps, with top holdings including IES Holdings, Assured Guaranty, and SEI Investments, all showing strong revenue growth [9][10] Dividend Flexibility - RVT's dividend is not fixed but floats based on the net asset value (NAV), allowing for potential increases in payouts as NAV rises, which has been consistent over the past five years [11][12] Market Position - RVT is currently available at a 9.2% discount to NAV, indicating potential for upside as the discount has decreased from higher levels earlier in the year [12][13]

Core Viewpoint - The small-cap segment of the US stock market has been experiencing a rally, but investors remain cautious and are quickly taking profits due to past underperformance and volatility [1][2][4]. Group 1: Market Performance - The iShares Russell 2000 ETF has seen $5.4 billion withdrawn this year, despite the Russell 2000 index reaching an all-time high [2]. - Small caps have underperformed larger companies since the pandemic, particularly during the 2022 bear market, and have struggled to rebound in the subsequent bull market [3][4]. - The Russell 2000 was the last major US equity index to reclaim its all-time high, taking four years to do so, while the Nasdaq 100 surged approximately 50% during the same period [6]. Group 2: Investor Sentiment - Recent positive flows into small caps in September have not been sufficient to offset earlier losses, reflecting a lack of confidence among investors [4]. - Investors are reportedly taking profits quickly, as historical trends show that small caps often do not maintain outperformance over large caps [5]. - Despite a recent run of weekly gains for small caps, there remains a sense of skittishness among investors regarding the sustainability of this performance [7][8].

Core Insights - Small-cap U.S. stocks are showing signs of a potential comeback after a prolonged period of underperformance, although it remains uncertain if this is the beginning of a sustained rally or a temporary rise [1] Performance Overview - The iShares Russell 2000 index has increased by 11% over the past three months as of September 25, 2025, compared to a 7.6% gain in the S&P 500. However, year-to-date performance shows the iShares Russell 2000 ETF (IWM) up 8.2%, lagging behind the SPDR S&P 500 ETF Trust (SPY) which is up 12.6% [2] - The early-year weakness in small-cap stocks was largely attributed to President Trump's announcement of higher tariffs in April, which adversely affected smaller companies [2] Economic Factors - The Federal Reserve's decision to cut interest rates by 25 basis points in September and the indication of two more cuts this year could benefit small-cap stocks, with an 87.7% probability of another 25-bp cut in October [3] - The U.S. economy experienced a robust growth rate of 3.8% in Q2 of 2025, driven by stronger consumer spending, marking an upward revision from a previous estimate of 3.3% [4] - The positive economic growth is favorable for small-cap stocks, which are closely tied to the domestic economy [5] Valuation Metrics - As of September 19, 2025, the Russell 2000 is trading at a P/E ratio of 34.65, significantly higher than the year-ago level of 25.12, indicating that small caps may be overvalued [6] - In comparison, the Nasdaq 100 is trading at a P/E ratio of 32.65, and the S&P 500 at 25.30, suggesting that small-cap stocks are not cheap relative to other indices [7] ETF Performance - Notable small-cap U.S. ETFs that have performed well in Q3 include: - Fidelity Enhanced Small Cap ETF (FESM) – up 15.5% - Invesco S&P SmallCap 600 Pure Value ETF (RZV) – up 14% - Vanguard Russell 2000 Value ETF (VTWV) – up 13.6% - First Trust Small Cap Core AlphaDEX ETF (FYX) – up 13.5% - Janus Henderson Small Cap Growth Alpha ETF (JSML) – up 13.4% - iShares Russell 2000 Growth ETF (IWO) – up 13% [8] Market Concerns - President Trump's announcement on September 25, 2025, regarding new tariffs on various imports starting October 1 may introduce volatility in small-cap stocks in the short term [9]

Core Insights - The biotech sector has been underperforming for several years, but recent trends indicate a potential shift in momentum as it begins to outperform broader market indices [1][2][12] - The anticipated rate cuts by the Federal Reserve are expected to positively impact biotech stocks, which are sensitive to interest rate changes [3][4][5] Performance Overview - Year-to-date, the iShares Nasdaq Biotechnology ETF (IBB) is up over 8%, while the SPDR S&P Biotech ETF (XBI) has gained only 6.2%, both trailing behind the S&P 500's 9.36% increase [1][2] - In the last month and quarter, the IBB has surged by 12.47%, indicating a potential turnaround for the sector [2] Interest Rate Impact - The biotech sector is highly rate-sensitive, relying on external funding for growth, particularly for early-stage firms facing high operational costs [4] - Lower interest rates can reduce borrowing costs and improve funding accessibility, which is crucial for biotech companies [5] Market Sentiment - Recent months have shown a resurgence in small-cap stocks alongside biotech, suggesting a broader shift in investor sentiment towards growth-sensitive sectors [6] - Easing financial conditions could enhance risk appetite and sentiment across markets, benefiting biotech investments [5] Investment Opportunities - Investors seeking exposure to the biotech sector can consider diversified ETFs like the iShares Nasdaq Biotechnology ETF, which includes major companies such as Amgen, Regeneron, and Gilead Sciences [7][8] - The IBB ETF has critical technical levels, with $140 acting as significant support and $150 as key resistance; a breakout above $150 could signal a major shift in the sector [8] Company Spotlight: Gilead Sciences - Gilead Sciences, a top holding in the IBB ETF with a 7.49% weighting, has outperformed the sector in 2025, with a year-to-date increase of nearly 28% [10][11] - Gilead's stock is consolidating near 52-week highs, and a breakout above $120 could propel further gains, potentially benefiting the entire biotech sector [11]

Group 1 - The iShares Russell 2000 ETF (IWM) experienced an inflow of approximately $385.3 million, representing a 0.6% week-over-week increase in outstanding units from 282,250,000 to 283,850,000 [1] - Among the largest components of IWM, Credo Technology Group Holding Ltd (CRDO) increased by about 1%, Fabrinet (FN) rose by about 0.6%, while EchoStar Corp (SATS) decreased by about 0.9% [1] - The 52-week range for IWM is between $171.73 and $244.98, with the last trade recorded at $239.25 [3] Group 2 - Exchange-traded funds (ETFs) operate by trading "units" instead of "shares," which can be created or destroyed based on investor demand [4] - Monitoring week-over-week changes in shares outstanding helps identify ETFs with significant inflows or outflows, impacting the underlying holdings [4]

Market Performance - All three major U.S. equity benchmarks, including the S&P 500, Nasdaq 100, and Dow Jones, reached record highs as investors favored risk assets amid expectations of falling interest rates [1][2] - The S&P 500 rose 0.8% to 6,585.53, the Nasdaq 100 increased 0.7% to 24,012.41, and the Dow Jones jumped 1.3% to 46,087.94 [2][7] - The Vanguard S&P 500 ETF increased by 0.8% to $604.49, while the SPDR Dow Jones Industrial Average rose 1.2% to $461.58 [7] Sector Performance - All 11 S&P sectors experienced gains, with consumer discretionary, materials, and financials leading the way [3] - The Consumer Discretionary Select Sector SPDR Fund outperformed, increasing by 1.3%, while the Energy Select Sector SPDR Fund lagged with a 0.1% rise [7] Company Performance - Top gainers in the S&P 500 included Synopsys, Inc. (+11.11%), Centene Corporation (+10.66%), and Micron Technology, Inc. (+9.57%) [8] - Notable losers included Delta Air Lines, Inc. (-4.30%), Oracle Corporation (-3.38%), and Netflix, Inc. (-2.83%) [9]

Core Viewpoint - The Federal Reserve is shifting focus from combating inflation to supporting economic growth, creating investment opportunities in certain sectors as interest rates are expected to decline [2][3][13]. Group 1: Economic Indicators - Producer prices unexpectedly dropped in August, indicating a potential end to the Fed's inflation battle [2]. - The U.S. government revised past employment figures downward by 911,000 jobs, prompting a shift in monetary policy [2]. Group 2: Investment Opportunities - Bank of America projects two 25-basis-point cuts this year, while Goldman Sachs anticipates three cuts in 2025 and two more in 2026, potentially lowering rates to 3.00% to 3.25% [3]. - Certain sectors and strategies are expected to thrive as rates fall, with exchange-traded funds (ETFs) being a clean way to capture these trends [3]. Group 3: Small-Cap Stocks - The iShares Russell 2000 ETF is highlighted as a direct beneficiary of lower rates, as small-cap companies are more sensitive to borrowing costs [5]. - The Russell 2000 has lagged behind the S&P 500 during the Fed's hiking cycle, creating a potential for significant gains as rates decline [5][6]. - The ETF has an expense ratio of 0.19% and a P/E ratio of 17.4, making small-caps appear relatively cheap compared to large-caps [6]. Group 4: Biotech Sector - The SPDR S&P Biotech ETF offers exposure to small- and mid-cap biotechs that are sensitive to capital market conditions [7]. - The biotech industry has faced significant declines during the rate-hiking cycle, with many stocks down 70% to 80% from their peaks [9]. - The ETF has a 0.35% expense ratio and is positioned to benefit from increased merger activity as funding concerns ease with falling rates [8][9]. Group 5: Real Estate Investment Trusts (REITs) - The Vanguard Real Estate ETF provides income and stability, with REITs benefiting from lower rates as financing costs decrease [10]. - The fund yields 3.76%, significantly higher than the S&P 500's 1.3%, and has an expense ratio of 0.13% [11]. - REITs must distribute 90% of taxable income as dividends, making them an attractive income source as bond yields decline [11]. Group 6: Portfolio Construction - A balanced approach to investing in rate cuts includes the iShares Russell 2000 ETF for small-cap exposure, the SPDR S&P Biotech ETF for speculative upside, and the Vanguard Real Estate ETF for defensive income [12]. - These ETFs provide tools for investors to capitalize on the Fed's pivot towards lower rates and potential economic growth [13].

Core Viewpoint - Small-cap U.S. stocks may be experiencing a resurgence after a prolonged period of underperformance, with recent data indicating potential positive trends for small-cap investors [1] Performance Summary - The iShares Russell 2000 ETF (IWM) has increased by 6.3% over the past month, compared to a 2% gain in the SPDR S&P 500 ETF Trust (SPY) [2] - Year-to-date, SPY is up approximately 10%, while IWM has advanced about 5.7% [2] - Early-year weakness in small caps was largely attributed to President Trump's tariff announcements, which adversely affected smaller companies [2] Market Dynamics - Bank of America's client flow data indicates near-record demand for small-cap stocks, with clients purchasing $1.5 billion worth of small and micro-cap stocks and ETFs in the past week [3] - The Federal Reserve is expected to cut interest rates in September, with a 97.6% probability of a 25-basis point cut, which could benefit small-cap stocks and ETFs [4] Earnings Analysis - For the small-cap S&P 600 index, Q2 earnings are up 8.6% year-over-year, with revenues increasing by 3.4% [5] - 61.1% of small-cap companies beat EPS estimates, and 72.4% exceeded revenue estimates [5] - In comparison, S&P 500 companies reported a 12.4% increase in earnings and 6.0% higher revenues, with 79.9% beating EPS estimates [6] Valuation Insights - The Russell 2000 is currently trading at a P/E ratio of 32.75, up from 27.79 a year ago, indicating that small caps are not cheap and may be overvalued [8][9] - The Nasdaq 100 Index has a P/E ratio of 32.97, while the S&P 500 Index is at 25.15, reflecting a relative valuation perspective [9] Economic Context - U.S. GDP grew by 3.3% in Q2 2025, rebounding from a 0.5% decline in Q1, driven by stronger consumer spending and private investment [10] - Job openings fell to 7.181 million in July, below expectations, which may signal potential weakness in the labor market [11] Investment Opportunities - Value and blend small-cap ETFs have outperformed growth ETFs over the past month, with notable performers including: - Invesco S&P SmallCap 600 Pure Value ETF (RZV) – Up 11.0% - Invesco S&P SmallCap Value with Momentum ETF (XSVM) – Up 9.9% - iShares US Small Cap Value Factor ETF (SVAL) – Up 9.1% [12]

Group 1: Market Trends - Large cap stocks have significantly outperformed small caps in recent years, which is an unusual trend, leading to attractive 7.2% dividends from closed-end funds [2][3] - Since the pandemic, small caps have lagged behind the S&P 500, but signs indicate a potential shift as investors may start looking for alternatives to large cap tech stocks [3][5] - The concentration of the S&P 500 is notable, with the top 10 firms accounting for 25% of earnings and 40% of market cap, indicating that Big Tech has become increasingly expensive relative to the rest of the market [4] Group 2: Investment Opportunities - If small caps begin to gain investor attention, it could lead to years of outperformance compared to large caps, with the iShares Russell 2000 ETF (IWM) potentially starting to outperform S&P 500 index funds [5][6] - The Royce Small-Cap Trust (RVT) is highlighted as a small-cap focused closed-end fund that offers a significantly higher yield of 7.2%, outperforming the IWM [7][8] - RVT has shown a near-10% net asset value (NAV) return, surpassing the small-cap index's 6.6%, indicating it is generating "alpha" [9][10] Group 3: Fund Performance - RVT's total market price return is up 5.8%, suggesting that its shares are not being bid up in line with its fundamentals, leading to a widening discount to NAV [10][11] - The fund's strategy of paying out a large portion of its profits as dividends makes it an attractive investment in the volatile small-cap sector, providing a steady income stream [12] - A potential strategy involves pairing RVT with another closed-end fund to optimize income and capital gains, reducing exposure to market volatility [13]