Hello, YieldAlley readers! In this issue:
Actively Managed Stock Funds Underperform
Strong Retail Sales and AI Earnings Lift Stocks as Inflation Expectations Hit Multi-Year Highs
Free $10 GrubHub eGift Card for Xfinity Rewards Members
SpaceX’s IPO Would Make It a Top 10 Company Globally
And more!
NEWS
Standout Stories
🤔 What It’s Like to Retire in America After a Divorce (WSJ)
📚 Here are the college majors that new grads regret the most, according to a recent survey (CBS)
🏝️ How Do You Retire at 55? (A Wealth of Common Sense)
🤑 Is Your Cautious Retirement Spending Doing More Harm Than Good? (Morningstar)
✈️ Americans Are Losing Confidence in Having Enough for Retirement (WSJ)
MARKET THOUGHTS
Strong Retail Sales and AI Earnings Lift Stocks as Inflation Expectations Hit Multi-Year Highs
ECONOMY
U.S. retail sales surged 1.7% in March, the strongest monthly gain since early 2023, driven by a 15.5% jump in gas station sales. Excluding gas stations, sales still rose a solid 0.6%, and the control group measure (which feeds into GDP calculations) climbed 0.7%. January and February readings were also revised higher, suggesting the economy entered the year on stronger footing than initially reported. The University of Michigan's April Consumer Sentiment Index slipped 3.5 points to 49.8, with one-year inflation expectations jumping to 4.7% from 3.8% in March and long-run expectations rising to 3.5%, the highest level since October 2025. S&P Global's Flash Composite PMI rose to a three-month high of 52.0 in April, with manufacturing reaching a nearly four-year high, though output prices climbed at their fastest pace in nearly four years as supply delays worsened and firms passed through higher costs.
STOCKS
Most major U.S. equity indexes finished the week higher, with the technology-heavy Nasdaq Composite leading gains, closing at 24,836.60 for a weekly advance of 368 points. The S&P 500 rose 39 points to close at 7,165.08, while the Russell 2000 added 10 points to finish at 2,786.99. The S&P MidCap 400 edged down slightly to 3,641.31, and the Dow Jones Industrial Average declined 217 points to close at 49,230.71. Corporate earnings provided support, with 84% of the roughly 20% of S&P 500 companies that had reported beating estimates and a blended year-over-year earnings growth rate of 15.1%, putting the index on pace for a sixth consecutive quarter of double-digit earnings growth. AI demand, infrastructure spending, and geopolitical developments related to the U.S.-Iran conflict and a midweek ceasefire extension were the primary drivers of sentiment throughout the week.
FIXED INCOME
U.S. Treasuries posted negative returns as yields rose across most maturities over the course of the week, reflecting persistent inflation concerns and elevated geopolitical uncertainty. Investment-grade corporate bonds and high yield bonds also declined, though both sectors held up better than Treasuries on a relative basis. Market reactions to headlines surrounding the Strait of Hormuz were more muted than in prior weeks, and the midweek ceasefire extension appeared to leave investors skeptical of a near-term resolution. Credit markets remained resilient overall, with corporate bonds continuing to outperform government debt in a week characterized by mixed signals on growth and inflation.
INCOME BUILDING TIP
Decades of Data Show That Actively Managed Stock Funds Underperform
The shift away from active investing has been one of the most consequential trends in personal finance over the last 40 years. In the 1980s, actively managed funds controlled roughly 95% of invested assets. By 2024, that share had fallen to around 35%, with the rest flowing into index funds and ETFs. That shift wasn't driven by marketing. It was driven by performance data that has been building since the 1960s, and it keeps pointing in the same direction.
The research on equity funds is consistent and hard to argue with. One of the earliest major studies examined over 120 stock mutual funds and found that roughly 60 to 70% of professional managers underperformed the market, with the average shortfall running about 1 to 1.5 percentage points per year after accounting for risk. Later work using more sophisticated models put the average underperformance closer to 1.8% annually. SPIVA, which tracks active manager performance against benchmark indexes, found that in most calendar years fewer than half of all equity fund managers beat the S&P 500. In categories like large cap growth, the results are even more lopsided -- in some periods, virtually 100% of active large cap growth managers are outperformed by the index.
What that looks like in practice: if you're holding an actively managed U.S. stock fund charging 0.75% per year, and a comparable S&P 500 index fund charges 0.05%, you're starting the year 0.70% in the hole before your manager makes a single trade. On a $150,000 stock portfolio, that's over $1,000 per year just in the fee gap, not counting any underperformance in actual stock picks. Compounded over 20 years, the difference is substantial. Most managers don't make it back.
There's also a hidden distortion that makes active stock funds look better than they are. Funds that perform poorly tend to close or merge into other funds, disappearing from the historical record. Studies have found roughly 3 to 4% of funds fail each year, and they're disproportionately the worst performers. If you only look at funds that exist today and trace their history backward, you're already looking at a survivorship-filtered group -- and the data still shows widespread underperformance.
The practical check: pull up every actively managed stock fund you hold, look at the expense ratio, and compare the 10-year return to its benchmark index. For most investors, that comparison will make a strong case for switching.
INCOME BUILDING
Cash Rates
Government Money Market Funds (7-Day Yields)
SNVXX (Schwab Government Money Fund - Investor Shares): 3.38%
SPAXX (Fidelity Government Money Market Fund): 3.29%
TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 3.53%
VMFXX (Federal Money Market Fund): 3.58%
Brokered CD Rates (6-Month Rate)
Charles Schwab: 3.89%
E*Trade: —
Fidelity: 3.85%
Merrill Edge and Merrill Lynch: —
Vanguard: 3.90%
ETFs (30-Day Yields)
SGOV (iShares 0-3 Month Treasury Bond ETF): 3.55%
BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 3.51%
USFR (WisdomTree Floating Rate Treasury Fund): 3.61%
TFLO (iShares Treasury Floating Rate Bond ETF): 3.61%
DEALS AND BONUSES
Free $10 GrubHub eGift Card for Xfinity Rewards Members
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Offer Details
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Our Thoughts
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Picture of the Week
