Performance Commentary

Highlights

• Portfolios overweight large cap U.S. stocks topped one-year results.
• A large cap U.S. tilt paired with municipal bonds propelled three-year leaders Fidelity Go, SoFi, and Wealthfront.
• The same mix kept Fidelity Go, Wealthfront, and Zacks Advantage ahead over seven years.
• International developed equities outpaced U.S. stocks in Q1, yet a domestic focus remains a performance driver longer term.

Backdrop

The S&P 500 Index declined 4.3% in the first quarter of 2025, the largest quarterly decline since the third quarter of 2022. The Index’s lackluster start to 2025 after consecutive years of outperformance was driven by a mix of headwinds to economic growth and policy uncertainty. In domestic markets, value stocks outperformed growth stocks, posting a gain for the quarter. Small capitalization stocks underperformed their large capitalization counterparts. Quarterly market movements were influenced by shifts in policy associated with the new presidential administration, which took office on January 20, 2025. February was particularly volatile as markets adjusted to policy uncertainties, alongside softening economic data throughout the quarter. Tariffs and government spending cuts dominated the domestic headlines while geopolitical uncertainty resulted in strong investor demand for international equities. The Federal Reserve Open Market Committee (FOMC) held interest rates unchanged at both of its meetings, finishing the quarter with a federal funds target rate range of 4.25% - 4.50%. The U.S. Economy remained resilient, even in the wake of the short-term volatility. Corporate earnings were strong, though analysts have begun to re-rate forecasts a bit due to tariffs.

International equities outperformed domestic equities in the first quarter of 2025. The MSCI EAFE Index gained 7.03% in the quarter, while the MSCI Emerging Markets Index returned 2.97%. Europe saw a strong equity rally following Germany’s relaxation of debt rules to fuel defense spending, and the fiscal spending driving rearmament of Europe resulted in strong quarterly outperformance versus the world.

In fixed-income markets, a key development in the first quarter was the ongoing normalization of the yield curve. Short-term yields continued their downward trajectory, contributing to a notable outperformance of Treasuries relative to equities as investors sought stability amid market volatility. The 10-year Treasury yield fell by over 0.30% in the period from 4.57% up to 4.23%. In a positive quarter for bonds across the board, high-yield corporates slightly outperformed their investment-grade counterparts.

Large‑Cap Tilt and Short‑Duration Credit Drive One‑Year Performance for SigFig, Betterment Climate Impact SRI, and Stash

SigFig, Betterment Climate Impact SRI, and Stash finished the past twelve months at the top of the robo advisor performance rankings. Each portfolio leaned heavily into large-cap, growth-oriented U.S. equities while keeping bond duration short and credit exposure selective. Those choices proved decisive in a year when mega-cap dominance and resilient consumer spending offset a softer economic backdrop.

Large caps again outpaced small caps. The Russell 1000 Index gained 7.80%, whereas the Russell 2000 Index fell 4.02%. Betterment Climate Impact SRI devoted 83% of its equity sleeve to large-cap stocks, well above the peer average near 69%. SigFig and Stash both held 74%, benefiting from outperformance of large cap equities.

Growth stocks retained a narrow lead over value. The Russell 3000 Growth Index gained 7.17%, slightly outperforming the Russell 3000 Value Index’s 6.64% return. Betterment Climate Impact SRI allocated 30% to growth, SigFig 29%, and Stash 28%, all several percentage points above the typical robo weight. Their above-average exposure to technology and communication services benefited from strong investor enthusiasm around artificial intelligence, contributing to performance.

Domestic equities outperformed developed markets once again, as shown by the S&P 500 Index returning 8.23%, topping the MSCI EAFE Index’s 5.60% gain. The leading portfolios kept roughly 60% of equity assets in the United States, positioning them to capitalize on the strong domestic performance.

In the fixed-income arena, corporate bonds outperformed municipal bonds over the past year, with the Bloomberg US Corporate Bond Index returning 4.90% compared to the Bloomberg Municipal Bond Index return of 1.22%. High yield bonds also outperformed investment grade, as the Bloomberg US Corporate High Yield Index returning 7.69%, well above the previously mentioned Bloomberg US Corporate Bond Index’s return of 4.90%. One of the fixed income winners for this period, Wells Fargo, dedicated 31.31% of its fixed-income holdings to high yield, far exceeding the average of 4.75%. This substantial allocation to high-yield corporates helped boost overall returns, driven by higher coupon income and strong performance in a risk-on environment.

Domestic Equities and Municipal Bonds Propel Three-Year Results for Fidelity Go, SoFi, and Wealthfront

Over the past three years, Fidelity Go, SoFi, and Wealthfront delivered the strongest returns in the robo advisor universe. Each portfolio combined an overweight to large-cap U.S. stocks with a bond sleeve dominated by municipal securities, a mix that proved advantageous in a period defined by steady domestic equity leadership and uneven fixed income markets.

Domestic stocks beat international shares by a wide margin. The S&P 500 returned 9.03% annually, while the MSCI EAFE gained 6.68% and the MSCI Emerging Markets Index added only 1.84%. Fidelity Go kept 69% of its equity exposure in U.S. companies, Wealthfront 76%, and SoFi 76%—all above the typical robo allocation near 66%. This tilt toward U.S. markets captured the exceptional performance in technology and communication services, and consumer sectors that powered the S&P 500.

Large-cap strength persisted once again. The Russell 1000 Index earned an annualized 8.63%, far ahead of the 0.49% return for the Russell 2000 Index. The top performers in this time period all had above average allocations to large-caps: Fidelity Go with 77%, SoFi with 80%, and Wealthfront with 76%, each outstripping the peer average of roughly 70%. Limited small-cap exposure shielded their portfolios from the volatility and softer earnings that weighed on smaller companies.

Growth stocks maintained a performance edge over value, with the Russell 3000 Growth Index up 9.62% versus 6.24% for the Russell 3000 Value Index. This gap between the performance of growth and value is not as pronounced has it has been in recent three-year trailing periods. SoFi’s 31% growth allocation exceeded the average 27% weight and added upside, while Fidelity Go and Wealthfront held 25% stakes in growth stocks that still benefited from the relative strength of large-cap growth leaders.

In the fixed income space, municipal bonds offered better returns than corporate bonds. The Bloomberg Municipal Bond Index returned 1.53% over the period, outperforming the Bloomberg US Corporate Bond Index’s 1.14% loss. All three top-performing portfolios incorporated municipal bonds into their allocations, benefiting from their tax-exempt status and relatively resilient performance.

Domestic Equity Exposure Supports Fidelity Go, Wealthfront, and Zacks Advantage Over Seven Years

Fidelity Go, Wealthfront, and Zacks Advantage topped the robo advisor performance ranking for trailing seven-year period. Each portfolio concentrated on large cap U.S. stocks while relying on a bond sleeve anchored by municipal securities, a mix that held up well through several market cycles.

U.S. shares led global markets. The S&P 500 produced a 13.21% annualized return, far ahead of the MSCI EAFE’s 5.96% and the MSCI Emerging Markets Index’s 1.97%. Zacks Advantage stood out with 81% of equity assets in domestic stocks, while Wealthfront held 73% and Fidelity Go 69%. This domestic tilt allowed the portfolios to benefit from the sustained strength of leading U.S. sectors, particularly technology, communication services, and consumer-oriented companies that have powered the extended market expansion.

Large-cap equities continued to dominate, which outperformed small caps during this time period. The Russell 1000 Index, representing large-cap equities, delivered a 12.92% annualized return, notably higher than the Russell 2000 Index’s 5.37%. Fidelity Go had one of the highest large-cap allocation at 77%, while Zacks Advantage and Wealthfront recorded large-cap exposures of 67% and 71%, respectively, roughly in line with the overall average of 69%.

Growth stocks continued to outpace value, with the Russell 3000 Growth Index returning 15.37% against 8.92% for the Russell 3000 Value Index. Wealthfront held 35% in value and 24% in growth but still outperformed, benefiting from the resilience of mega-cap U.S. companies. Fidelity Go and Zacks Advantage split growth and value more evenly at roughly 25-30% each, proving that broad exposure to large U.S. companies was more important than a heavy growth tilt.

Municipal bonds provided stability within fixed income allocations. Over the seven-year period, the Bloomberg Municipal Bond Index returned 2.07% annually, outperforming the Bloomberg U.S. Aggregate Bond Index at 1.57%, though trailing the 4.94% return of high-yield corporates. Fidelity Go allocated 91% of its bond portfolio to munis, Zacks Advantage 97%, and Wealthfront 80%. These tax-advantaged securities helped cushion the impact of rising interest rates that weighed on long-duration Treasuries.

By combining a persistent tilt toward large-cap domestic equities with a disciplined municipal bond core, Fidelity Go, Zacks Advantage, and Wealthfront captured the upside of a long U.S. bull market while keeping risk in check. This approach helped solidify their standing as the leading robo advisors over the past seven years.