Harbor AlphaEdge Small Cap Earners ETF Q3 2025 Commentary
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Harbor Capital Advisors47 FollowersFollow5ShareSavePlay(9min)CommentsSummaryIn September, the U.S. Federal Reserve cut rates for the first time in over a year.During the third quarter, the Harbor AlphaEdge Small Cap Earners ETF returned 8.53% (NAV), underperforming its benchmark, the Russell 2000® Index, which returned 12.39%.The ETF underperformed the benchmark due to an underweight position and negative stock selection in the Industrials sector.Within the late-cycle backdrop, we have upgraded small caps to overweight. narvo vexar/iStock via Getty Images Market sentiment has improved, even as manufacturing data struggle to break out of contractionary territory, with consumer indicators stabilizing and inflationary pressures remaining contained amid tariff-related uncertainty. - Harbor Capital Advisors, Inc. Market inThis article was written byHarbor Capital Advisors47 FollowersFollowHarbor Capital is an asset manager focused on curating an intentionally select suite of active ETFs that they believe have the potential to produce compelling, risk-adjusted returns within a portfolio. Note: This account is not managed or monitored by Harbor Capital, and any messages sent via Seeking Alpha will not receive a response. For inquiries or communication, please use Harbor Capital's official channels.Quick InsightsWhat drove EBIT’s Q3 2025 underperformance versus the Russell 2000?EBIT underperformed due to underweight and negative selection in Industrials, disappointing Materials, and an unhelpful overweight in lagging Financials, partially offset by strong Consumer Discretionary picks.Why have small caps been upgraded to overweight in the current environment?Small caps are now overweight due to more attractive valuations versus large caps, improved earnings quality, robust cash flow, and a macro environment favoring rate-sensitive assets amid Fed easing.What late-cycle risks or parallels to past market cycles should investors monitor?Despite strong fundamentals, I note elevated valuations, ample liquidity, and narrative-driven capital flows reminiscent of the late 1990s, which could introduce fragility if market conditions deteriorate.Recommended For You