AI continues to be the dominant theme driving equities higher, with the tech sector leading the way to the upside. With the intense levels of optimism surrounding AI, some worry we may be entering a tech bubble reminiscent of the dotcom era. While we won’t delve into the fundamentals of the AI hype today, we will provide some context on the health of the technology sector. With the market’s fate over the next few years likely hinging on technology, where does the sector stand?

Despite some recent concern, the technology sector has shown no signs of recent weakness, with the group returning to first place in DALI’s sector ranking. This marks the ninth time in since 2003 that technology ranked first in DALI, assuming some back-and-forth changes in March/April of 2017 are treated as one cluster. The average length of Technology’s time in first was 272 days but has lasted upwards of three years. During its time in first place, tech proxy XLK has averaged a return of 17.3%. Meanwhile, the two-year return from the start of its time in first has been positive 100% of the time with an average gain of 32.2%. All that to say, technology’s rise to first place has historically been constructive for the sector’s long-term returns.

While the technology sector has remained near or at the top of DALI’s sector rankings over the last few years, the magnificent 7 and other megacap names had been responsible for much of the upside during much of those years. One way to compare the performance of the “average” tech stock to the broader sector is by looking at the difference between equal weighted and cap weighted tech funds. From the end of 2022 to the start of 2025, the Technology Select Sector SPDR Fund (XLK) rose a total of 86.9%. Over that same period, the Invesco S&P Equal Weight Technology ETF (RSPT) rose 54%, meaning that the “average” tech stock underperformed the sector by over 30%. While a group can rise at the hands of just a few stocks, it tends to perform better when more stocks contribute to the upside. Thankfully, it’s been a different story for tech stocks this year, as XLK and RSPT are up 25% and 22.6%, respectively. Meanwhile, the two funds hold near-perfect fund scores, with XLK at 5.64 while RSPT is at 5.47, demonstrating the strength of both megacaps and the average tech stock.

The increase in breadth has also led to a notable uptick in participation indicators for the sector. The percentage of tech stocks trading in a positive trend, measured by ^PTECTECH, reached 47% after reversing back into Xs last month. While the overall number may sound unimpressive, that’s actually the highest the indicator has been since late 2021. If we were entering the a tech downturn in the immediate future, it would be unlikely for the sector to lead the market in relative strength while its participation reaches multi-year highs.

For context, PTECTECH reversed into Os in March of 2000 and fell below our current levels in April of that year, staying below 46% until July of 2003. Additionally, the overall levels for the indicator at its peak were in extremely elevated territory above 80%, with only 2021 seeing levels above 70% since then. While concerns about a bubble persist, current strength and participation metrics suggest resilience within technology for the time being. However, DALI and participation could be areas to keep an eye on if things start to burst.

This week marks the fifth anniversary of the inception of the NDW Tactical + Ladders Fixed Income Model (LADDERS.TR). The LADDERS model combines the State Street Fixed Income Model (SSFIXED.TR) with two “ladders” composed of BulletShares target maturity ETFs, one investment-grade (CORPLADDER.TR), the other high yield (HYLADDER.TR). The model weighting is 30% SSFIXED.TR, 30% HYLADDER, 40% CORPLADDER.

While long-term rates have come down from their recent highs, uncertainty remains. As we discussed yesterday, when the Fed cuts rates amid a relatively healthy economy/equity market, long-term yields have often been higher a year later. With that in mind, we thought this would be an opportune time to review the model and how its components – bond ladders and tactical fixed income strategies – can help navigate that uncertainty, which can be challenging for many traditional fixed income strategies.

The role of the model’s two bond ladders is to provide stability and a steady stream of income. The target maturity funds that make up the ladders hold individual bonds that each mature or are expected to be called in the same year. Each ladder has five equally weighted “rungs,” i.e., holds five ETFs with target maturities from one to five years. The ETFs in the ladders are held until maturity at which point the proceeds from the maturing fund are reinvested out to the furthest rung on the ladder. The model is rebalanced once per year when the current year’s BulletShares funds mature.

Because one-fifth of each ladder matures every year they produce a series of known cash flows, which can be a useful tool for investors, like retirees, that need to make regular withdrawals from their portfolio. Target maturity funds also protect against capital losses due to rising interest rates. If the ETFs are held to maturity, investors receive their share of the par value of the underlying bonds (after fees and expenses and excepting for any defaults). The ladder structure also has the effect of increasing the yield of the portfolio over time. All else being equal, five-year bonds have a higher yield than one-year bonds and after five years, the entire portfolio will be made up of bonds that were purchased when they had five years until maturity. Therefore, assuming rates remain constant, the yield of the “seasoned” portfolio should be higher than it was at inception. The individual funds within each ladder are not rebalanced as the goal is to hold them to maturity thereby mitigating the interest rate risk of the portfolio.

The State Street Fixed Income Model is the tactical portion of the model, and its role is to generate alpha. SSFIXED has an inventory of over 20 ETFs covering virtually every area of the fixed income market from convertible bonds to emerging market bonds to long-term Treasuries. The model utilizes a relative strength matrix to evaluate the inventory, identify areas of strength, and avoid areas of weakness in the market. Because of its highly differentiated inventory and tactical nature, SSFIXED’s yield can vary greatly depending on which funds are in the model portfolio at any given time and can exhibit higher volatility than more vanilla fixed income portfolios, which can be problematic for some investors. However, by combining SSFIXED with the laddered portfolios we can achieve a relatively consistent yield and dampen the overall portfolio volatility while retaining the opportunity for outperformance via SSFIXED’s tactical rotation. SSFIXED currently has exposure to senior loans, high yield bonds, emerging market bonds, and international corporates.

Each of the bond ladders can also be found as a stand-alone model on the models page, which allows for either or both ladders to be used in conjunction with other tactical strategies. It also allows the ladders and tactical strategies to be combined using weightings other than the 30-30-40 allocation of the LADDERS.TR model. For example, if you wanted a higher yield than the standard model provided, you could increase the weight of HYLADDER and reduce the weight of CORPLADDER. Tactical fixed income strategies are also available through separately managed accounts and can similarly be combined with a laddered bond portfolio for stable income. If you’re interested in learning more about SMA options, please contact Andy Hyer at (626)535-0630.

Year-to-date (through 10/8), the LADDERS model has gained 4.87% but lagged its benchmark, the iShares US Core Bond ETF (AGG.TR), which is up 6.4%. The tactical portion of the model has been primarily invested in international and non-core US fixed income and the corporate ladder has relatively low duration so AGG has benefited more from the decline in long-term yields this year. However, over the longer-term LADDERS remains well ahead of the benchmark. Over the trailing five years, roughly since its inception, the model has produced an annualized return of just over 2%, while AGG’s annualized five-year return is -0.37%. The model has also produced less than half the volatility of the benchmark as shown by its relative risk (RRISK) of 0.21 compared to AGG.TR’s RRISK of 0.49.

Since the model’s inception in 2020, we’ve gone from the COVID-era ultra-low rate environment through the most aggressive tightening of monetary policy in recent history. At some points, the tactical sleeve has been the primary driver of the model’s returns, while at other points it has leaned on the stability of its two ladders. The complementary pieces of the model have combined to provide alpha relative to the benchmark with lower overall volatility. 

This week marks our quarterly review of the best and worst-performing ETFs for the second quarter of 2025. Using the Security Screener on our platform, we refined our search within seven different classifications, applying liquidity screens for average volume and net assets, while continuing to exclude leverage or inverse ETFs. This provides a summary of which areas saw the most improvement over the past three months, and which areas saw the most weakness.

We have split the conversation today into two segments. The classifications for all ETFs and US sector ETFs are shown in the first segment. The second image shows the other asset classifications, including international equities, commodities, fixed income, and currencies. Each set of images has quarterly performance on the top and annual performance on the bottom. We have also provided some brief commentary on important observations to accompany each section.

All ETFs & US Sectors

Key Observations:

• Cryptocurrencies continue to have a stellar year, with Q3 being one of its strongest quarters yet. Ethereum led the way to the upside, as the iShares Ethereum Trust (ETHA) was the best performing fund last quarter.
• Meanwhile, metals and metal companies have lifted off even higher in Q3 following incredibly strong starts to the year. The improvement of metals has seen the top five funds by YTD performance all come from metal miners.
• Income focused areas continue to be some of the weakest funds both this quarter and this year. Meanwhile, medical companies took a hit last quarter, seeing several funds among the bottom ten.

International Equities, Commodities, Fixed Income, & Currencies

Key Observations:

• It was a mostly positive quarter for bond funds, as only one major ETF fell last quarter. Meanwhile, convertible bonds have led the way to the upside across both Q3 and the broader year, with iShares Convertible Bond ETF ICVT gaining 11.5% last quarter.
• The dollar had an alright Q3, seeing many foreign currencies among the worst performers this quarter. Despite a rising dollar this quarter, we saw solid performances from both commodities and international equities. 
• Strength within the commodity space continues to be dominated by metals, with gold, silver, copper and platinum all among the top six this quarter and YTD.
• International equities saw broad based strength, but the group was helped the most by emerging markets, with EEM rising over 10%. Meanwhile, China, Vietnam, and Peru hold the top spots among Q3 performers.

Daily Option Ideas for October 9, 2025