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Associated Press
29-05-2025
- Business
- Associated Press
With Lightweight Competitors Potentially Poised To Bounce Back, Infrastructure Capital Small Cap Income ETF Deserves A Closer Look
By JE Insights, Benzinga DETROIT, MICHIGAN - May 29, 2025 ( NEWMEDIAWIRE ) - For the equities market, President Donald Trump's Liberation Day initiative – essentially a set of sweeping new tariffs announced in early April this year – represented something akin to a mini-catastrophe. Following the announcement, the Dow Jones Industrial Average plunged 1,178 points, representing a loss of 2.7%. Investors found themselves scrambling to understand the broader implications of the move, but small-capitalization companies especially found the matter troubling. Historically, small businesses are a key backbone of the U.S. economy, helping to drive broader growth and employment metrics. Furthermore, when circumstances improve for the rest of the market, small caps tend to rebound harder. As such, opportunistic investors tend to focus on smaller enterprises when positive momentum builds in certain sectors. However, in the current market recovery, small caps have conspicuously underperformed their larger counterparts. In the trailing month, the benchmark SPDR S&P 500 ETF Trust gained over 5% of value, leading to a year-to-date loss of 1.19%. On the other end, the iShares Russell 2000 ETF gained over 4% in the past 30 days as of this writing, which still translates to a year-to-date loss of more than 8%. Notably, the ratio between the IWM and SPY exchange-traded funds continues to hover around levels last seen 24 years ago, indicating that market participants prefer large, multinational firms amid ongoing macroeconomic volatility. On the surface, such a circumstance may seem unconducive for the Infrastructure Capital Small Cap Income ETF (ARCA: SCAP), an actively managed fund by Infrastructure Capital Advisors, better known as Infrastructure Capital. However, those with a contrarian and forward-looking mindset may want to keep close tabs on SCAP. Down But Not Out: Why The SCAP ETF Brings Relevance To The Table According to analyst Michael Gayed, CFA, a clear reason exists for why small companies have consistently lagged their larger rivals. 'These companies are likely to be more negatively impacted by tariffs because of their lesser ability to shift supply chains quickly and the comparative lack of financial resources to be able to handle higher costs,' stated Gayed. It comes down to the mathematical realities of the business world. Large corporations generally command more diversified operations and, as a result, enjoy pricing power – the ability of an enterprise to raise prices without losing market share to the competition. This edge allows large caps to weather tariff-related shocks better compared to smaller, domestically focused entities. At the same time, forward progress related to the tariff environment is evident. Earlier, President Trump's aggressive rhetoric on trade – especially against key economic partner China – sparked widespread anxieties. While it's too early to say that a solution has been reached, both the U.S. and China have agreed to de-escalate their trade war by cutting tariffs. Subsequently, this U-turn on tariff policies has opened the door for a transition in market leadership. Gayed points out that investors who had bet against small caps may need to rethink their thesis. 'If the Liberation Day tariffs have been largely responsible for small cap underperformance, wouldn't it stand to reason that a reversal of those policies could inspire them to lead?' he stated. It's this inquiry that makes the SCAP ETF relevant under the present circumstances. As an actively managed fund, the SCAP can navigate around the pitfalls that could ensnare passive small cap funds. Indeed, the performance metrics speak for themselves. In the trailing month, SCAP gained nearly 5%, outpacing the Russell 2000 index's 4.2% lift during the same period. Since the January opener, SCAP lost 7.5%, a conspicuous improvement over the Russell 2000's loss of 8.53%. Breaking Down The Mechanics Of The Infrastructure Capital Small Cap Income ETF Primarily, the SCAP ETF offers an alternative investment vehicle for contrarian investors thanks to its active stock selection process. While small caps tend to outperform larger peers during upswings, this dynamic doesn't affect all lightweight enterprises. Because small caps tend to be more volatile, it's vitally important for investors to avoid high-risk securities. What makes the selection process stand out compared to other actively managed funds is the rigorous criteria involved. For entities to make up the funds under SCAP's umbrella, the prospects must demonstrate financial viability, such as: This discerning process helps SCAP filter out woefully unprofitable or speculative ventures which may drag down passive funds. In addition, SCAP leverages the advantage of enhanced yield through strategic tools, namely, income generated through writing (selling) options. Options represent derivative contracts of underlying securities and afford far greater flexibility than merely buying and selling stocks in the open market. Specifically, traders can utilize both debit and credit-based strategies, thus enhancing portfolio performance. Writing options falls under the credit-based approach. Here, traders underwrite the risk that the underlying security will not reach a defined profitability threshold within a given time period. In exchange for underwriting this risk, option writers receive the premium from the debit side of the transaction as income. This income is referred to as the yield. Infrastructure Capital's other popular product, the Virtus InfraCap U.S. Preferred Stock ETF (ARCA: PFFA), utilizes a similar option-writing strategy. This approach allows investors to productively enjoy the benefits of credit strategies that are not available for simple open-market transactions. Nevertheless, credit-based strategies suffer a unique danger known as tail risk. Essentially, tail risk is the variable risk that materializes from a credit-based trade that has gone awry. Such losses can easily derail multiple positive trades that have occurred in the past, necessitating competent leadership in active management. For investors of both SCAP and PFFA, they can rely on the skills and experience of Jay D. Hatfield, Infrastructure Capital's Founder, CEO and Portfolio Manager. A Wall Street veteran with nearly 30 years of experience, Hatfield brings a deep understanding of income-generating assets. Thanks to his broad perspective on the U.S. financial markets, he has a keen ability to navigate the ebb and flow of price discovery. A Rebound Prospect Built On Fundamentals Small cap stocks have been hammered in 2025, lagging far behind their large-cap counterparts amid tariff headwinds and investor risk aversion. But with signs emerging of a policy reversal and improving trade dynamics, the case for a small cap rebound is gaining traction. In this shifting environment, the Infrastructure Capital Small Cap Income ETF could offer contrarian investors a compelling edge – particularly given its active approach and income-enhancement strategies. Unlike passive funds that blindly track volatile and often speculative small cap indexes, SCAP applies a rigorous selection process focused on dividend-paying companies with strong earnings, cash flow and attractive valuations. The fund also leans into option-writing and modest leverage to bolster yield – tools that require experienced hands to manage effectively. Importantly, investors don't have to go it alone, as SCAP, alongside its preferred-stock counterpart PFFA, is managed by a seasoned Wall Street veteran known for his disciplined income strategies. In an uncertain market, that leadership could make all the difference. Featured image fromShutterstock. This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice. This content was originallypublished on Benzinga. Read further disclosureshere. View the original release on
South China Morning Post
19-05-2025
- Business
- South China Morning Post
China's new home prices stabilise as rate cut, lifeline funding lift market confidence
Home prices in major cities in mainland China stabilised, holding onto recent gains as lower borrowing costs and state-led measures to support developers helped inject confidence in the market. Advertisement Prices of new homes in China's four first-tier cities were unchanged in April from a month ago, following a 0.1 per cent rise in March, according to data covering 70 large and medium-sized cities published by the statistics bureau on Monday. Prices in second-tier cities were also unchanged, while those in third-tier cities slipped 0.2 per cent, it added. Beijing and Shanghai recorded a 0.1 per cent and 0.5 per cent gain, respectively, while those in Guangzhou and Shenzhen declined 0.2 and 0.1 per cent, the report showed. 'This marks a phased victory for cities at all levels,' said Yan Yuejin, vice-president of E-House China Real Estate Research Institute in Shanghai. 'Continued momentum will be needed in the second quarter' to sustain the market recovery over the past seven months, he added. 08:23 China unveils policy package to guard against US tariffs ahead of trade talks in Switzerland China unveils policy package to guard against US tariffs ahead of trade talks in Switzerland China's central bank cut the mortgage rate on housing provident funds by a quarter-point cut on May 7 for first-time homebuyers, bringing it down to a record low 2.6 per cent. The nation's commercial banks have also approved 6.7 trillion yuan (US$929 billion) of loans to 'whitelist' housing projects to date, covering nearly 16 million homes, it added.
Yahoo
11-05-2025
- Business
- Yahoo
The ‘Magnificent Seven' are back in the stock market's driver's seat — but are they still a buy?
Technology stocks are back in charge after a rocky start to the year — a comeback that feels all too familiar as investors hope to keep April's market slide firmly in the rearview mirror. After falling out of favor in the first four months of 2025, the so-called Magnificent Seven group of megacap tech companies has fueled the stock market's May recovery from the sharp selloff seen last month, after President Donald Trump announced aggressive and far-reaching trade tariffs on April 2. My second wife says her 2 kids should inherit our estate, but I also have 2 kids. Is that fair? Here's how an obscure bet on bonds almost crashed the $29 trillion Treasury market, Fed official says 'I am scared to death that I'll run out of money': My wife and I are in our 50s and have $4.4 million. Can we retire early? Stocks are at a risk of a drop of nearly 20%, says Goldman Sachs. Here's the trigger. My eldest son refused to share his father's $500K inheritance with his siblings. Should I cut him off? Investors are now wondering what it will take for tech stocks to maintain their leadership for the rest of the year — and how to position their portfolios should volatility return to U.S. financial markets. The Roundhill Magnificent Seven ETF MAGS, which offers equal-weight exposure to the seven megacap companies — Nvidia Corp. NVDA, Apple Inc. AAPL, Google parent Alphabet Inc. GOOGL GOOG, Meta Platforms Inc. META, Microsoft Corp. MSFT, Inc. AMZN and Tesla Inc. TSLA — has risen 18.2% since its recent low on April 8, according to FactSet data. 'Those oversold conditions in April led investors back into some of the previous market leaders amid potential de-escalation in trade tensions, and the fact that the U.S. economy may avoid falling into a recession,' said Anthony Saglimbene, chief market strategist at Ameriprise. Strong first-quarter earnings for tech companies also helped the Magnificent Seven rally off their April lows and drew investors back to megacap names, defying market concerns about the durability of the artificial-intelligence theme and the long-term profitability of these companies, Saglimbene told MarketWatch in a phone interview. Slightly less aggressive valuations for Big Tech have also lured investors back in. The forward price-to-earnings (P/E) multiple of the Roundhill Magnificent Seven ETF fell to around 23 on April 8, from about 30 earlier this year. It was the lowest level since the fund's inception in April 2023, according to Dow Jones Market Data. While the rebound in the Magnificent Seven over the past two weeks offered some relief for retail investors aggressively buying the dip in the stock market, it was not enough to boost their year-to-date performance. The tech-related sectors of the S&P 500 SPX have still underperformed both the broader large-cap index and its defensive sectors so far this year, signaling a degree of hesitancy among investors about pushing tech stocks back into the stratosphere. Read from February: Is it a bubble? 'Magnificent 7' market cap now equals the GDP of 11 major world cities. In another cautious signal, the S&P 500's consumer-discretionary sector XX:SP500.25 has slumped 11.7% so far in 2025, while the information-technology XX:SP500.45 and communication-services sectors XX:SP500.50 were off 8.2% and 4.5%, respecitvely, in the same period, according to FactSet data. At the other end of the spectrum, shares of utilities and consumer-staples companies — the market's traditional defensive sectors — have stood out among the best stock-market performers in the early months of 2025. The S&P 500's utilities sector XX:SP500.55 has popped 5.8% so far this year, while the consumer-staples sector XX:SP500.30 has risen 4.4% in the same period, according to FactSet. To be sure, investors were on the hunt for ways to play defense in the early months of 2025, as concerns over economic growth and President Trump's tariff plans put Wall Street on edge. But now, strong earnings from technology companies have left many torn between betting on a further tech rally or sticking with a defensive approach. First-quarter earnings results have highlighted a widening dispersion in earnings growth between Big Tech and nontech companies, according to Barclays. Megacap technology firms beat annual earning-per-share growth estimates by 8% in the first three months of 2025, while nontech earnings fell short of forecasts in the same period, a team of Barclays strategists led by Venu Krishna said in a Thursday client note. Earnings expectations are also favorable for technology names: Cyclical stocks are projected to outpace defensives through 2027, according to Janus Henderson Investors (see table above). To be sure, another reason why megacap tech companies came under pressure this year — aside from tariffs that could punish international sales — was concerns about potential overspending by U.S. companies on AI infrastructure after China's release of the DeepSeek platform. 'First-quarter earnings trends showed resilience in cyclical sectors like technology and communication services, while estimates in defensive areas of the market like utilities and food producers saw flat to lower forecasts,' said Jeremiah Buckley, portfolio manager at Janus Henderson. However, some strategists caution against drawing direct parallels between the performance of the Magnificent Seven and defensive stocks, because they appeal to different types of investors for different reasons. Stocks in the utilities, consumer-staples and healthcare sectors are often considered defensive since these companies tend to operate in less cyclical industries, making them less sensitive to economic downturns — and thus helping investors to hedge portfolio risks. 'You're not getting the same level of earnings growth [each quarter for defensive stocks], but if there is an escalating trade war or a recession, these companies should do well … so you're paying for defense,' Mike Cornacchioli, senior vice president for investment strategy at Citizens Private Wealth, told MarketWatch via phone. See: Trump floats 80% tariff on China. Here's why that level could sink this weekend's talks. That puts this weekend's U.S.-China trade talks in focus as the next major event for investors, even though the stock market is closed over the weekend. Officials from the world's two largest economies are set to meet in Geneva, Switzerland on Saturday, as Washington and Beijing seek to navigate a path forward amid a bruising trade fight. U.S. stocks finished the week lower on Friday. The Dow Jones Industrial Average DJIA lost nearly 0.2% this week, while the S&P 500 was off 0.5% and the Nasdaq Composite COMP dipped 0.3% over the same period, according to FactSet data. My father is giving me $250K to buy a home, but told me not to tell my two siblings. Am I morally obligated to tell them? 'We live modestly': My wife and I have $900K in stocks and $380K in savings and CDs. Are we holding too much cash? Suze Orman says retirees should have a 5-year 'just-in-case' fund. Is this true? One of the last obstacles to 24-hour stock trading is about to fall The U.S. economy might be able to handle any disruption from Trump's tariffs more easily than Wall Street expects Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
