Fidelity and Invesco on small- and mid-cap strength

At VettaFi’s Midyear Market Outlook symposium on Thursday, Benjamin Treacy, an institutional portfolio manager at Fidelity Investments, and Paul Schroeder, director of factor and QQQ equity product strategy at Invesco, spoke in a session moderated by VettaFi head of research Todd Rosenbluth.

Both speakers pointed to resilient overall markets while noting inflationary and geopolitical pressures. They highlighted volatility and changes in leadership beneath headline index gains as items for investors and advisors to monitor.

Schroeder noted that the S&P 500 was up about 8% year to date while the seven largest technology stocks were down nearly 5%, and he referenced the VIX as a measure of underlying market tension. He described notable turnover in which stocks lead the market even as major indexes rise.

Treacy highlighted the stronger performance of small-cap stocks over the past year and said earnings in that segment have shown improvement. He described Fidelity’s fundamental ETF lineup as actively managed, multi-manager funds that use stock selection by several in-house portfolio managers. Treacy cited the Fidelity Fundamental Large Cap Growth ETF (FFLG), which carries a 38-basis-point fee and returned about 29.6% over the prior 12 months, and the Fidelity Investments Fundamental Small-Mid ETF (FFSM), which carries a 43-basis-point fee and returned roughly 39.9% in the same period.

Schroeder pointed to equal-weight strategies as an option to reduce concentration risk that can result from cap-weighted indexes dominated by a handful of large names. He framed equal-weight funds as an alternative for investors concerned about concentrated gains at the top of major U.S. indexes.

Panelists identified geopolitical uncertainty, inflation trends and concentrated gains among the largest stocks as primary risks to watch. They also noted that improving earnings in smaller companies has supported recent small- and mid-cap outperformance. The session served as a midyear check-in for advisors and investors considering how to position portfolios for the remainder of the year.