Curious about how to navigate all-time highs as we close out 2025? Join our team on Thursday, October 2nd at 1PM EST to discuss the technical and macroeconomic "Weight of the Evidence" heading into Q4.

Speakers Include:

• John Lewis, Senior Portfolio Manager, NDW
• Phil Mackintosh, Chief Economist, Nasdaq
• Yanni Angelakos, Head of Investment Insights, Nasdaq
• Miles Clark, Research Analyst, NDW

To register, click HERE

We also present to you our full-length quarterly report, going into greater detail across broad asset classes as we move into Q4. Note, this has been approved for financial professionals and non-professionals alike. Download the report HERE

Tuesday’s action marked the end of the third quarter of 2025. Reports over the next week will go into greater detail about changes or lack thereof in the third quarter, along with how market action impacts our stance for the fourth quarter. To begin, the table below looks at the performance of asset class ETFs with accompanying commentary.

Domestic Equities

Q3 was one of the best third quarters over the last decade with the SPDR S&P 500 ETF Trust (SPY) gaining 8.12%. Continued strength from technology, communication services, and consumer discretionary led to strong performances from growth-oriented areas of the market. The Invesco QQQ Trust (QQQ) gained nearly 9% during the third quarter while the Invesco S&P 500 Equal Weight ETF (RSP) lagged with a gain of 4.83%. While the equal-weighted large cap representative lagged, small caps had a fantastic quarter. The iShares Russell 2000 ETF (IWM) rocketed higher with a 12.45% return in Q3; however, IWM still lags SPY and QQQ year-to-date.

International Equities

While small caps played catch-up on the domestic front, emerging markets caught with developed markets in Q3. The iShares MSCI Emerging Markets ETF (EEM) gained 10.70% in the third quarter, moving its year-to-date performance up to 28.91%. Developed market representative EFA, the iShares MSCI EAFE ETF, posted a positive 4.45% return for the quarter but gave up its year-to-date performance lead over EEM in the third quarter. Chinese equities were the largest driver of emerging markets rallying in Q3 and they continue to show a tendency for volatility. Nonetheless, there is broad strength in international equities to choose from on either side of the risk spectrum.

Commodities

Precious metals continued their onslaught in the third quarter with the SPDR Gold Shares (GLD) gaining 16.61%, which moves its year-to-date return up to 46.81%. The strong performance from precious metals carried broad commodities representatives higher with the iShares S&P GSCI Commodity Index Trust (GSG) gaining 4.22% in Q3. The lackluster performance from broad commodities despite the strength of precious metals highlights the lack of broad strength within the asset class. The energy space has been mostly rangebound over the last two quarters, hampering the asset class from competing with domestic or international equities.

Fixed Income

Fixed income had a relatively quiet quarter that culminated in the Fed lowering interest rates in September. While fixed income representatives performed well heading into the announcement, there was an element of “Buy the rumor, sell the news,” as intermediate interest rates rose following the cut. The lack of a clear trend on intermediate and long-term interest rates is troubling for fixed income investors expecting a big payday into Fed easing the front-end of the curve.

The 3rd quarter of 2025 saw a continuation of a mostly strong equity market as major benchmarks marched to further all-time highs. Large cap momentum strategies still lag YTD, but did do a bit of catchup throughout Q3 as broader leadership trends continued. Small cap momentum strategies advanced, but lagged benchmarks as new leadership emerged to push the group to new highs.

The performance table below compares the price return of the Invesco Dorsey Wright Momentum ETF PDP and the Invesco Dorsey Wright SmallCap Momentum ETF DWAS to their respective benchmarks through the first three quarters, while the two bottom tables compare their YTD return against the same timeframe in prior years.

Our approach toward momentum through relative strength analysis looks to capitalize on consistent trends across the market. Changing trends cause the portfolios to readjust to maintain exposure to the strongest areas. Underperformance is typical during those environments as areas that had demonstrated relative strength fall in our rankings. The most important step in our approach comes next – those areas that have declined in strength are sold to make room for the new leaders. Any investment process is going to produce a portfolio of winners and losers. Relative strength analysis gives us a systematic way to cull the losers and constantly push the portfolio toward the strongest areas of the market.  

In the most recent quarter (Q3) we saw 45 changes (out of 100 holdings) in PDP and 100 changes (out of 200 holdings) in DWAS, repositioning both portfolios toward areas of leadership as we enter the second quarter. That is roughly on par with what we saw last quarter, but still more than we saw throughout periods of consistent leadership last year.

Below you'll find an update about the specific changes made in both strategies with the most recent index reconstitution. Keep in mind that removed positions likely no longer maintain characteristics of superior relative strength; meanwhile, additions have improved to a place of leadership and could be ideas to consider.

Invesco DWA Momentum ETF (PDP)

The stock-selection process behind the Invesco Dorsey Wright Momentum ETF (PDP) is simple yet robust. Every quarter, we apply the Relative Strength process to compare approximately 1,000 large and mid-cap US stocks and select the strongest 100 names. The quarterly reconstitution process's goal is to weed out the weak names and realign the portfolio toward strength. As mentioned before, with this most recent reconstitution and rebalance, we removed 45 stocks and added 45 new stocks, which we've compiled in the tables below. Several observations:

• Technology stocks maintain their position as the largest weighted sector, adding an additional 5% with the most recent trades.
• Consumer cyclical stocks lost the largest percentage of allocation over the last quarter, dropping from 18% to 9%.
• Energy lost all of its allocation with Q3 changes (-4%) as the sector remains a point of weakness from a momentum standpoint.
• Alphabet (GOOGL) was a notable addition to the portfolio as it stormed back to new highs through the third quarter. COST was a notable removal.

Invesco DWA SmallCap Momentum ETF ([DWAS)

The stock-selection process used in DWAS is like PDP. Every quarter, we apply the Relative Strength process to compare approximately 2,000 US-listed small-cap stocks and select the strongest 200 names. With this most recent reconstitution and rebalance we pushed the portfolio towards strength by removing 100 stocks and adding 100 new stocks, which we've outlined in the table below. However, and perhaps unique to DWAS, not all stocks that were removed are technically weak. We have received this question in the past, so we want to address it here.

One reason for these removals is due to stocks exceeding the market cap filter. High-momentum stocks should, ideally, increase in market cap which means that sometimes a name will exceed the small-cap maximum at the end of a quarter. This is not the norm, but worth keeping in mind when reviewing the changes. Several takeaways:

• Healthcare names earned the largest additional percentage with the most recent change. While the broader sector is still weak, Biotechnology (which are typically smaller names) have been standouts.
• Financial names shed the largest allocation this quarter, dropping 10% to account for now 19% of the total portfolio.
• Industrial representatives are still a large overweight within the fund, accounting for roughly 23% of the total portfolio. Real estate and utilities standout as low weight sectors.  

Disclosures:

This article is intended for Financial Professional Use Only.

Management and other expenses can have a material impact on performance when compounded over time. Past performance, hypothetical or actual, does not guarantee future results. In all securities trading there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown.

Click here for more information from Invesco on the Invesco DWA Momentum ETF (PDP): https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=PDP

Click here for more information from Invesco on the Invesco DWA SmallCap Momentum ETF (DWAS): https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=ETF-DWAS

Dorsey, Wright & Associates, LLC is owned by Nasdaq, Inc. and we have affiliates who also provide financial services, research, information, and act as Brokers/Dealers to a wide variety of clients. Our affiliates use the information we create to create indexes, which are then used to create Exchange Traded Funds. These things create a potential conflict of interest in that we may have an incentive to promote or use the products and services of our affiliates and business partners. A number of Dorsey Wright representatives are registered with and hold securities licenses with the affiliate broker-dealers. In this capacity, they assist with the marketing and distribution of Exchange Traded Products.

Each week the analysts at NDW review and comment on all major asset classes in the global markets. Shown below is the summary or snapshot of the primary technical indicators we follow for multiple areas. Should there be changes mid-week we will certainly bring these to your attention via the report.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email james.west@nasdaq.com.

Data represented in the table below is through 9/30/2025:

Portfolio View - Commodity Indices

Cryptocurrency Update

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For more cryptocurrency content, read Monday's feature article HERE. 

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