"DES holds nearly $2 billion in assets and delivers a 2.5% yield by investing in dividend-paying small-cap companies. With just 3% exposure to information technology and heavy weightings in financials (25.6%), consumer discretionary (14.4%), and utilities (9.3%), the fund is positioned opposite the mega-cap tech stocks that have driven markets for years. The fund's 0.38% expense ratio and moderate 28% portfolio turnover make it tax-efficient."
"Small-cap stocks are sensitive to interest rates, and Federal Reserve policy will be the primary driver of DES performance in 2026. Small companies typically carry more floating-rate debt than large-caps and rely heavily on bank financing. When rates fall, their borrowing costs decline immediately. The Fed cut rates three times in late 2025, bringing the federal funds rate down from its peak. Market expectations point to one or two additional cuts in 2026, potentially bringing rates to 3% to 3.25% by year-end."
DES is a WisdomTree ETF holding nearly $2 billion that yields 2.5% by focusing on dividend-paying small-cap companies. The fund limits technology exposure to 3% while overweighting financials (25.6%), consumer discretionary (14.4%), and utilities (9.3%). A 0.38% expense ratio and roughly 28% portfolio turnover enhance tax efficiency. Small-cap sensitivity to interest rates makes Federal Reserve policy the key performance driver in 2026, since many small firms carry floating-rate debt and rely on bank financing. Market expectations for additional rate cuts to about 3%–3.25% could lower borrowing costs, boost earnings growth, and support DES’s holdings.
Read at 24/7 Wall St.
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