Barron's: Barron's Best Fund Families — Barron's

In ranking mutual and exchange-traded funds, our aim is to measure manager skill, independent of expenses beyond annual management fees. That is why we calculate returns before any 12b-1 fees are deducted. Similarly, fund loads, or sales charges, aren't included in our calculation of returns.

Each fund's performance is measured against all of the other funds in its LSEG Lipper category, with a percentile ranking of 100 being the highest and one the lowest. This result is then weighted by asset size relative to the fund family's other assets in its general classification. If a family's biggest funds do well, that boosts its overall ranking, and vice versa.

To be included in the ranking, a firm must have at least three funds in the general equity category, one in world equity, one in mixed equity such as a balanced or target-date fund, two taxable bond funds, and one national tax-exempt bond fund.

Single-sector and country equity funds are factored into the rankings as general equity. We exclude all index funds, but include actively managed ETFs and so-called smart-beta ETFs, which are passively managed but created from active strategies.

Finally, the score is multiplied by the weighting of its general classification, as determined by the Lipper universe of funds. The category weightings for 2024 were general equity, 39.1%; mixed asset, 21.6%; world equity, 15.3%; taxable bond, 20.1%; and tax-exempt bond, 3.9%.

The category weightings for the five-year results were general equity, 39%; mixed asset, 21.7%; world equity, 15.3%; taxable bond, 19.9%; and tax-exempt bond, 4%. For the 10-year list, they were general equity, 40%; mixed asset, 22.1%; world equity, 14.8%; taxable bond, 19.2%; and tax-exempt bond, 3.9%. The weightings may not total 100 due to rounding.

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By Sabrina Escobar

Investors hoping that retail earnings would provide more clarity about consumer sentiment might find themselves both disappointed and further confused.

Many big-box U.S. retailers reported fourth-quarter earnings in the past two weeks. As expected, their 2024 holiday results were solid. Their outlook for the current year was more muddled.

In earnings calls, management teams from Walmart, Home Depot, and Lowe's all said they aren't seeing any meaningful changes in the consumer-spending environment and that spending remains healthy. Yet all three companies issued full-year guidance well below Wall Street's forecasts. To be sure, companies want to set a low, achievable bar for this year's results. But executives also appear to be baking in at least some degree of demand uncertainty over the next few months.

They may be right to do so, given a "significant increase in evidence" that consumer sentiment and behavior are changing — and not for the better, said David Schick, vice chairman and think-tank group head at Stifel.

Indeed, this year's economic data, to date, are cause for concern. Job growth was weaker than expected in January; the consumer price index spiked, and retail sales slumped. Uncertainty about how the Trump administration's policies — particularly tariffs — will affect the economy has weighed on consumer sentiment and fanned inflation expectations.

Friday the Bureau of Economic Analysis released personal consumption expenditures for January. The report reaffirmed trends major retailers hinted at: Although household balance sheets are still on a healthy footing, people are curtailing spending and squirreling away funds for a rainy day.

Disposable personal income rose $194.3 billion, 0r 0.9%, from December, but consumption dipped $30.7 billion, or 0.2%, from the prior month, driven by a drop in spending on durable goods.

Americans' personal saving rate, which measures savings as a percentage of disposable income, rose to 4.6% in January from 3.5% in December. While this would appear to be a good news, the increase in the savings rate might also reflect "mounting concerns" about the state of the economy, noted Scott Helfstein, Global X's head of investment strategy.

"The consumer may go into a wait and see mode, assessing the relative benefits and drawbacks of current public policy decisions around taxes and tariffs," Helfstein said.

The pullback in spending will likely weigh on gross domestic product growth in the first quarter, wrote Bill Adams, chief economist for Comerica Bank. The bigger question is whether January's results were a one-time problem, he added.

"Some consumers nixed spending in January due to fears of job losses, tariffs raising the cost of living, and the immigration crackdown," Adams wrote. "But many more probably only delayed spending, since winter weather swept much of the Sunbelt and discouraged nonessential trips to car dealerships and open houses."

The strong growth in personal income growth suggests balance sheets are still fundamentally healthy, which could support a recovery in spending and economic growth throughout the rest of the year, Adams wrote. Yet investors should expect retailers to continue erring on the side of caution when issuing guidance. Companies like Target, Best Buy, Nordstrom, and Macy's are scheduled to report fourth-quarter earnings next week.

Retailers aren't the only ones keeping a close eye on consumer spending patterns. Federal Reserve officials are likely to factor in signs of a slowdown in setting monetary policy at the next Federal Open Market Committee meeting on March 18-19. Traders are betting the committee won't start cutting rates again until June, but their forecast could change if economic growth stalls in the coming months.

"All told, the combination of sticky inflation and a potential growth scare, which is evident in this [PCE] report, will likely present a worrisome monetary-policy conundrum for the Fed," said Olu Sonola, head of U.S. economic research at Fitch Ratings. "The outlook gets even murkier as the threat of tariffs permeates business and consumer confidence. We may be entering a deer in the headlights moment for the Fed."

Investors, and the Fed, will know more after next week's retail earnings reports.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Activity in China's sprawling manufacturing sector expanded in February, a surprise upswing despite fresh hits from U.S. tariffs, underscoring the economy's resilience after Beijing's stimulus pivot since last fall.

The official manufacturing purchasing managers index came in at 50.2 in February, compared with 49.1 in January and the 49.9 forecast by economists polled by The Wall Street Journal, according to data released Saturday by the National Bureau of Statistics. The 50 threshold separates expansion from contraction.

China's factory activity tumbled into contractionary territory in January as factories suspended operations days ahead of the Lunar New Year holiday. As PMI is a survey that asks firms to compare their business conditions with the previous month, it is often tricky to interpret the readings in the first two months of the year given the long holiday, said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, when commenting on the PMI print.

"My sense is that the economy is stable, but we need to wait for more data releases on retail sales and industrial production to confirm," Zhang said.

Saturday's readings came after President Trump announced this week an extra 10% tariff on imports from China over its role in the fentanyl trade, a move that economists say is set to dent China's manufacturing activity and hammer exports' role as a key driver of growth.

While many Chinese manufacturers thought they could survive the 10% in additional tariffs imposed in early February, the fresh tariff increase that is set to take effect Tuesday represented a doubling of the pain and more challenges ahead as many businesses' already razor-thin profit margins could be squeezed even further.

Despite rising hopes for stimulus surprises, some analysts say Beijing is unlikely to deliver a significant package soon as Chinese leaders are taking more time to gauge the impact of a so-called Trade War 2.0 with the U.S.

Recent signs of green shoots in the $18 trillion economy, including the expansion of factory activity in February, also reduced the urgency for Chinese decisionmakers to increase policy support in the near term, economists say.

China's crisis-hit housing market also showed signs of stabilization after years of decline. New-home sales from China's 100 biggest property developers rose 1.2% in February to 188 billion yuan ($25.8 billion) from a year earlier, according to private data provider China Real Estate Information Corp. That compared with a 3.2% decline in January.

While Nomura recently revised up their 2025 growth forecast for China to 4.5% from 4.0% in light of a series of positive indicators signaling economic recovery, they also highlight forthcoming challenges on the horizon.

"We see much stronger growth headwinds later this year, as U.S.-China tensions are likely to rapidly escalate once Trump shifts his focus to China and the payback from the trade-in program and export frontloading starts to take hold," said Nomura's economists in a recent note.

For them, the extra tariffs announced this week are a wake-up call that Trump's softer-than-expected stance on China might be short-lived.

While attention is now on any tit-for-tat trade retaliation from Beijing, investors are also awaiting China's annual legislature session next week when senior officials will unveil the official 2025 growth goal for the world's second-largest economy. Many analysts expect the target to be maintained at 2024's "around 5%" growth, a lofty goal which they say would need more forceful policy support to achieve.

Chinese leaders are also expected to offer more details of a broad stimulus plan that includes ramped-up government borrowing to boost tepid domestic demand and fend off persistent disinflationary pressures.

Data released Saturday also showed the production subindex rose to 52.5 in February, compared with 49.8 in January. The subindex for total new orders rose to 51.1 in February, compared with 49.2 in January, while the gauge for new export orders remained in contractionary territory for the tenth straight month, but rose to 48.6, compared with 46.4 in January.

Meanwhile, China's nonmanufacturing PMI, which covers both service and construction activity, also climbed slightly to 50.4 from 50.2 in January, said the statistics bureau.

The subindex tracking service activity dropped to 50.0 in February from 50.3 in January, while the construction subindex rose to 52.7 from January's 49.3.

Write to Singapore editors at singaporeeditors@dowjones.com

This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron's.

Consumers Catch a Chill

THINK economic and financial analysis ING Feb. 28: This morning's U.S. data flow includes very soft U.S. consumer spending numbers for January, falling 0.5% month on month in real terms, significantly below the -0.1% forecast. This is a really important story for first-quarter GDP growth as, even if we get a 0.4% month-over-month rebound in February and a 0.3% increase in March, the U.S. would record first-quarter consumer spending growth of just 1.6% annualized — the weakest since the second quarter of 2023.

We already knew that retail sales fell. This was possibly cold-weather induced with some marginal impact from the Los Angeles fires, but there was an assumption that services spending would partially offset that. In the end, it didn't, which shows the U.S. economy started 2025 on a weak footing. This suggests that the steep fall in consumer confidence, which peaked in November when Donald Trump won the election, may be translating into cooler spending.

James Knightley

Mag 7 Meltdown

Quick Takes Yardeni Research Feb. 27: The S&P 500 is down 4.6% from its record high on Feb. 19 and well below its 50-day moving average. It might revisit its 200-day moving average on this pullback.

Much of the selloff since last Wednesday's record high has been led by momentum stocks, especially the Magnificent Seven. Despite the soft patch of economic data and policy uncertainty, there has also been a rotation trade away from the Magnificent Seven and into the S&P 493 in recent weeks, as we expected at the start of this year. This rotation can be seen in the recent decline of the forward P/E of the Magnificent Seven and the ascent of the forward P/E of the S&P 493.

In any event, stock investors have turned very cautious in recent days. American Association of Individual Investors bears surged to 60.6% last week, the highest since the trough of the 2022 bear market. The AAII bull/bear ratio plunged to 0.32, also as pessimistic as at the trough of the 2022 bear market. We view this widespread pessimism as bullish from a contrarian perspective.

Ed Yardeni

Quality Stocks Overseas

Insights GMO Feb. 27: Many of the most successful businesses today are American, but not all of them.

The return to long-term shareholders is driven mainly by a company's success in terms of growing earnings per share and dividends paid to shareholders. Quality investors aim to exploit the long-term fundamental success of the best businesses by participating in their growth and payout.

While technology stocks have dominated in recent years, many of the leading businesses are domiciled outside of the U.S. The world's most sophisticated manufacturer of semiconductors is Taiwan Semiconductor Manufacturing. The most seasoned luxury brands — think Louis Vuitton and Richemont's Cartier — are mainly European. The world's scale catering firm, Compass Group, is headquartered in London.

Such businesses often have strong long-term records of capital allocation that, combined with their natural competitive advantages, have often resulted in enviable earnings-per-share growth and dividend records, and thus strong shareholder returns.

Tom Hancock, Anthony Hene, Ty Cobb

Housing Market Headaches

Economics Research Renaissance Macro Holdings Feb. 27: Housing demand remains weak. Pending home sales sank in January, falling 4.6% following a 4.1% drop in December. At 70.6, the level of the pending home sales index is at an all-time low. A sale is listed as pending when a seller accepts a sales contract on a property. Thus, pending home sales tend to lead existing-home sales by roughly one to two months. The decline this month, which was based primarily in the South and Midwest, is a bad sign for residential investment in the current quarter as brokers' commissions drop.

Stepping back, the main issue facing housing is that the math doesn't add up for most — mortgage rates are too high, and incomes are slowing. As a result, inventories are climbing in major markets; I'd expect price concessions heading into the critical spring selling season.

Neil Dutta

D.C. Job-Cut Tally

Special Commentary Wells Fargo Feb. 27: Federal government employment makes up a relatively small portion of total payrolls in the U.S. (1.5%). Excluding the Postal Service, federal employment growth accounted for only 4,000 of the 168,000 net jobs added over the past 12 months.

Thus far, the Trump administration's efforts to shrink federal payrolls have occurred through three channels: a 90-day hiring freeze, deferred resignations, and layoffs.... Our best guess is that between the hiring freeze and recent layoffs, total federal employment will decline by 25,000 to 50,000 over the next few months. This would be in addition to the 75,000 or so workers who enrolled in the deferred resignation program and will roll off the federal government's payroll on Sept. 30. There are likely to be further indirect effects to U.S. payroll employment in the private sector from businesses that contract with the federal government. These will be harder to disentangle in the data, and our initial suspicion is that this drag on job growth will be modest.

From a timing perspective, we anticipate that federal payrolls will decline by about 5,000 to 10,000 in the February jobs report. Larger drags are likely in the March and April data, as the hiring freeze coincides with a pickup in layoffs that has started to emerge in jobless-claims filings. We expect some near-term upward pressure on the unemployment rate but for the effects to be small.

Sarah House, Michael Pugliese, Aubrey Woessner

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This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

                                  High        Low      Close     Change 
                                  ----        ---      -----     ------ 
  S&P SmallCap 600 Index      1,363.84   1,344.34   1,363.73      11.93 
  S&P MidCap 400 Index        3,095.50   3,051.43   3,095.15      30.24 
  S&P 100 Index               2,904.58   2,836.48   2,901.77      50.24 
  S&P 500 Index               5,959.40   5,837.66   5,954.50      92.93 
 
 
Source: FactSet 
 

The WSJ Dollar Index is down 0.77 point or 0.75% this month to 101.74

• Largest one-month point and percentage decline since Sept. 2024
• Down for two consecutive months
• Down 1.01 points or 0.99% over the last two months
• Largest two-month point and percentage decline since Sept. 2024
• This week it is up 0.95 point or 0.95%
• Largest one-week point and percentage gain since the week ending Nov 15, 2024
• Snaps a three-week losing streak
• Today it is up 0.27 point or 0.27%
• Up for three consecutive trading days
• Up 1.12 points or 1.12% over the last three trading days
• Largest three-day point and percentage gain since Thursday, Dec. 19, 2024
• Up seven of the past nine trading days
• Off 3.24% from its record close of 105.14 hit Tuesday, Sept. 27, 2022
• Highest closing value since Wednesday, Feb. 12, 2025
• Off 1.80% from its 52-week high of 103.61 hit Friday, Jan. 10, 2025
• Up 6.75% from its 52-week low of 95.31 hit Friday, Sept. 27, 2024
• Rose 3.31% from 52 weeks ago
• Year-to-date it is down 1.01 points or 0.99%

Data based on 5 p.m. ET values

Source: Tullett Prebon and Dow Jones Market Data