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Strategists, economists, and all manners of pundits have been somberly telling us since January why market euphoria is misplaced. There have been no shortage of rationales for their bearish forecasts. Tariffs, systemic instability, recession, inflation, ridiculously unprecedented valuations and more have explained why a major correction or potential crash has been inevitable this year. Their conclusions were that it was time to realize pare down on positions in “risky assets” such as equities and precious metals.

The table below including data for 11 asset class benchmark ETFs illustrates that investors ignoring this advice performed quite well in the tree periods analyzed in this blog: one-month, three months, and year-to-date ending September 30, 2025.

Readers of this blog who read the last article know that gold has been on an unprecedented streak this quarter-century thus far.  The spot price of gold has outperformed the S&P 500 Index for the period beginning January 1, 2000, through September 30 of this year, for the 2020’s and year-to-date.  The year-to-date rise of 47%  easily tops our list of year-to-date price gains.  For reasons explained in our last blog article, there are many reasons behind the surges. The bottom line is that I don’t see the rationales for these surges reversing merely because of valuation.  GLDM is our choice here among the exchange-traded “ETFs,” actually grantor trusts, which hold gold. For most investors, it makes little sense to pay more than 4 times the expense ratio for GLDM to garner precisely the same exposure to gold bars.

Beyond gold, a number of strategic experts, notably Van Eck and Sprott, have discussed a de-dollarization theme underlying investment rotations, especially by many of the largest European institutional investors.  This explain the next highest performers on the highest gainers’ list.  The two ETFs are EEM, iShares MSCI Emerging Markets ETF and EFA, the iShares MSCI EAFE ETF. 

For US-only equity ETFs, growth has generally outperformed value in defiance of strategists’ predictions of a rotation.  This is why the highly correlated Invesco Nasdaq-100 ETF, QQQM (lower fee than QQQ Trust) and the Vanguard Growth ETF (VUG) led the way in this category with 17.5% and 17.3% returns, respectively.  Both topped the SPDR Portfolio S&P 500 Index ETF, SPLG as the established benchmark index gained 13.6%.   In contrast, the Vanguard Value ETF, VTV, gained just 10.2% with similar lags in the 3^rd quarter and in September.  Although small cap spent the first quarter of the year in negative territory, standard-bearer, IWM, iShares Russell 2000 Small Cap ETF, rebounded sharply in the 3^rd quarter with its 12.1% leading the way among equity ETFs.  Even with that lift, IWM’s 9.5% finished even below value as represented by VTV.  By far the laggard in almost every time period was MDY, the S&P MidCap 400 ETF.  Its 5.5% year-to-date return placed it even below US aggregated bonds.  The latter, represented by AGG, iShares Core US Aggregate Bond ETF, posted a 6.1% return for the period.  MidCap stocks have become an unhappy medium in recent years.

The other ETF placed here as an asset class benchmark would normally be considered a sector benchmark.  However, our contention is that utilities, long considered a value sector valued only for high dividend yields and price stability, have been transformed into a hybrid growth and value sector as earnings growth has been competitive with other sectors in recent years and with technological changes, which is expected to continue.  We used VPU, Vanguard’s Utilities ETF, as its representative.  The ETF outgained SPLG, 15.9% to 13.6%, with more than double the dividend yield.  This has been a comparative trend throughout the decade.  Conservative investors may wish to consider a separate equity allocation to VPU for the remainder of this decade.  We observe that this may constitute a paradigm shift.

In terms of ValuEngine’s predictive model, we rate seven of the above ETFs, the ones covering US stocks.  Generally, our forecasts for the next 1-to-12 months are in line with the recent year-to-date trends we just observed.  Top-rated at 5 (Strong Buy) is VUG, Vanguard Growth ETF with QQQM right behind it at 4 (Buy).  As a bell curve is behind most of our ratings, it is no surprise that most of these ETFs are rated 3 (Hold).  That includes: SPLG, VPU, VTV and IWM.  We see no upswing ahead for laggard MDY.  The SPDR MidCap Index ETF gets our only poor rating, 2 (Sell). 

It was a similar story for US Sector Index ETFs using the State Street’s Select Sector SPDRs representing sectors comprised exclusively by S&P 500 Index member stocks.

The two top sectors in terms of year-to-date performance are also the two most highly ranked sectors by ValuEngine’s forecast model.  Communications, led by Meta (META), Alphabet (GOOGL) and Netflix (NFLX) has our highest rating of 5 (Strong Buy).  At this time, our forecast model sees current trends continuing to be investors’ friends.  The Technology ETF (XLK) is just second in the year-to-date category and topping the other two is also rated 5.  The only other sector ETF rated to buy is XLF with a ranking of 4.  Three sector ETFs are rated 1 (Strong Sell) representing Materials, Energy and Health Care, respectively. 

Using ETFdb.com from VettaFi also allows us to look at the top performing Smart Beta ETFs and the top performing actively managed ETFs.  When we profile such ETFs here, we prefer to omit ETFs with less than $50 million in assets along with leveraged and inverse ETFs as that may distort results.  Smart Beta’s are built with a particular time-tested strategy as the basis for investment.  Therefore, this look can validate which strategies have been working year-to-date.

The central themes of gold’s strength and global de-dollarization are present throughout this top 10 list of qualifying Smart Beta ETFs.  Sprott Junior Gold Miners (SGDJ) uses three smart beta factors to select which Junior Gold Miner stocks to include.  The others also take fundamental factors into account.  One surprise to us on this list is GVAL, Cambria Global Value ETF which selects global value stocks based upon fundamental factors.  Its methodology was so in favor that even though value stocks generally underperformed growth stocks, this price-sensitive fund with value as part of its objective managed to make it into the top 10.  Among the top 10 year-to-date, it also has the best 5-year annualized return.  For those considering a combination of smart beta and de-dollarization, a fund this resilient in multiple environments might be worthy of further investigation. 

Finally, a quick look at actively managed ETFs looking for the same criteria

We were a bit surprised that the top of this list was dominated by ETFs managed by ARK Asset Management, taking four of the first 6 slots for year-to-date performance.  In the latter part of the past decade, ARK ETFs helped legitimize the actively managed ETF category within the industry with excellent returns in several consecutive years, attracting a formidable level of assets for a fledgling asset manager.  They did this through concentrated research into the companies that make and efficiently use technology innovations.  Unfortunately, that also made ARK a target for critics who delighted when many of these ETFs underperformed in the early part of this decade. Therefore, this return to performance leadership is a welcome rebound.  For the most part, other than their Genome ETF, the ARK family performed quite well last year and is thriving even more thus far this year.  ARKW, the ARK next generation ETF led the way with 59.9%.  The other three, ARKF, ARKK and ARKQ.  Other sponsors with two or more actively managed ETFs include Amplify with Amplify Transformational Data Sharing ETF.  Also noteworthy, the aforementioned GVAL is also on this list.

Let’s take a look inside a select few of these ETFs for highly ranked stocks.  There are several stocks in the top 10 holdings of some of these ETFs worth mentioning.  For example, in ARKW, we rate Shopify, SHOP, a Canadian e-retailer and Intellia Therapeutics, NTLA, 5 (Strong Buy). NTLA is a leading genome editing company.   The largest holding in BLOK, Amplify Transformational Data Sharing ETF, is Cipher Mining, CIFR, an industrial scale bitcoin mining company rated 4 (Buy).  It should be noted that BLOK has the highest 5-year return of any ETF on this list.  A personal favorite of mine that has been a holding for a long time on this list is UTES, the Virtus Reaves Utilities ETF, the first US active ETF to focus on utilities.  Far ahead of the curve of competitive earnings growth for utilities, this actively managed ETF focuses on capital appreciation rather than income. Its top holding, Vistra Corp., VST, is currently rated 4 (Buy).  As a result of its focus on growth rather than value in the utilities sector, UTES has enjoyed a 31.3% this year, about double that of VPU which we use to monitor the utilities sector. UTES also has the second highest 5-year annualized gain on our list.  ValuEngine reports are available for all of these stocks along with almost all the others held by these year-to-date top-performing ETFs. 

Wrapping up this third quarter wrap-up, it has obviously been a very strong year thus far for almost every asset class category indexed ETFs.  Beyond that, many smart beta strategy and actively managed ETFs have also had strong years, especially if they were more focused on growth and capital appreciation than traditional value metrics and dividend yield.  As documented, the great rotation into value and smaller stocks many were expecting has not happened yet in 2025.  Despite all this documentation on how well many equity ETFs have performed this year, only a very select few have managed to surpass the 47% posted year-to-date by gold as represented by GLDM.  It is fascinating to see all this global equity bullishness alongside the continued new highs made by gold and attributed to lack of confidence in fiat currencies and potential systemic risk.  For the next three-to-six months our models are bullish on growth stocks and the major cap-weighted index ETFs even though our valuation model rates more than 60% of the stocks we cover as overvalued.  Since the trend is our friend until we see signs of reversal, staying on course with current asset class allocations may be the wisest thing to do now.  It appears that the inevitable correction, or worse, may be delayed until some time in 2026.  No one actually knows but that is our best forecast at this time given our quantitative models and available information.

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