SPDR S&P MidCap 400 ETF Trust

MDY

Market cap $23.6B

On this episode of the “ETF of the Week” podcast, VettaFi's Head of Research, Todd Rosenbluth, discussed the Invesco S&P MidCap Momentum ETF (XMMO) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF.

SPDR MidCap 400 ETF Trust (MDY) offers strong historical returns, outperforming the S&P 500 since 1991 but with higher volatility and risk. MDY's structural soundness is solid, with high liquidity and a low expense ratio, but its risk-adjusted returns and yield are underwhelming. Despite decent up-market participation, MDY's elevated beta and poor downside protection make it unsuitable for most investment styles.

I'm downgrading SPDR S&P MIDCAP 400 ETF Trust from "Buy" to "Hold" due to weak technicals despite attractive long-term valuation. MDY has underperformed major indices, returning just 2.6% since October 2024 and lagging the S&P 500 by 12 percentage points. Short-term risks include negative momentum, a break below key moving averages, and bearish technical signals, suggesting further downside is likely.

If you're interested in broad exposure to the Mid Cap Blend segment of the US equity market, look no further than the SPDR S&P MidCap 400 ETF (MDY), a passively managed exchange traded fund launched on May 4, 1995.

Many have said that midcap stocks are a “sweet spot” of market capitalization. They deliver both growth potential — typically associated with smaller companies — and profitability — usually seen in larger companies.

U.S. equity markets notched another series of record highs this week, surging into the weekend after surprisingly dovish commentary from Federal Reserve Chair Powell, who hinted at imminent rate cuts. Powell used his final Jackson Hole speech as Fed Chair to deliver a clear policy pivot, an unexpected reversal after months of insistence that tariff-related inflation warranted a hawkish framework. Markets were equally relieved by the policy-focused nature of Powell's speech amid speculation that the address may be used instead as a potential defiant sermon on central bank independence.

If you're interested in broad exposure to the Mid Cap Blend segment of the US equity market, look no further than the SPDR S&P MidCap 400 ETF (MDY), a passively managed exchange traded fund launched on May 4, 1995.

U.S. equity markets fell sharply this week, while benchmark interest rates retreated to three-month lows, after revised employment data showed that job growth was far weaker than initially reported. The BLS payrolls report showed softer-than-expected hiring in July and the steepest two-month downward revisions to jobs growth since 2020, raising concern that the Fed may be "behind the curve." The downward revisions came days after Fed Chair Powell used it as the primary evidence for "solid" labor markets, which justified the FOMC's decision to keep rates in "restrictive" territory.

I rate MDY a hold due to its underperformance versus the S&P 500 and other mid-cap ETFs, with only a 2% YTD gain. MDY's broad diversification limits upside, as strong performers are diluted by numerous slow-growth and unprofitable holdings. Despite favorable conditions for mid-caps, strategy-focused ETFs like VOT, XMMO, and IWP offer better targeted exposure and superior returns.

We've been marveling at the performance of U.S. large-cap stocks since that early April low. We've also been tracking whether small-caps are finally going to keep up pace with their larger counterparts.