The market regime may continue to shift in response to easing rates, potentially serving as a catalyst for SMIDcap and mid-cap companies.
The rate cut cycle is expected to provide more relief for smaller and more leveraged companies needing more access to capital markets than larger companies. Declining rates could have an outsized positive impact on smaller U.S. companies. This makes now an ideal time to consider an allocation to a SMIDcap ETF.
While larger companies are less sensitive to rate changes, the segment is also currently overvalued compared to SMID caps. This could serve as further reason to allocate to a SMIDcap ETF.
See more: 5 ETFs For When Market Volatility Spikes
The Fidelity Small-Mid Multifactor ETF (FSMD ) may be worth consideration as its focus on companies with low valuations, high quality, positive momentum, and lower volatility sets it apart from peers.
FSMD’s underlying index is designed to reflect the performance of stocks of small- and mid-cap U.S. companies. The index targets companies with attractive valuations, high-quality profiles, positive momentum signals, and lower volatility than the broader SMID segment, as represented by the Fidelity U.S. Extended Investable Market Index.
Under the Hood of Fidelity’s SMID Cap Multifactor ETF
Fidelity’s SMID cap multifactor ETF has $532 million in assets under management. Additionally, the fund has garnered $345 million in net flows year-to-date through Oct. 28, according to ETF Database.
The ETF has the greatest exposure to industrials, financials, consumer discretionary, health care, and information technology relative to other sectors as of Sept. 30, according to the fund’s fact sheet.
FSMD’s top holdings as of Sept. 30 include NRG Energy, EMCOR Group, Lennox International, Texas Pacific Land Corp, and Manhattan Associates.
The Fidelity ETF charges 15 basis points, a competitive price for multifactor SMID cap ETF exposure.
FSMD is part of Fidelity’s Multifactor ETF suite. Other funds in the fund family include the Fidelity U.S. Multifactor ETF (FLRG ), the Fidelity International Multifactor ETF (FDEV ), and the Fidelity Emerging Markets Multifactor ETF (FDEM ).
For more news, information, and analysis, visit the ETF Investing Channel.
Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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