4 ETFs That Could Soar as the Fed Cuts Rates This Year

The Federal Reserve suggested that it will cut interest rates twice this year for a total reduction of 0.50%. These rate cuts make it more affordable for consumers and companies to borrow money and can boost consumerism. 

Those catalysts are huge, and it explains why stock market participants pay so much attention to the Fed’s meetings. It seems like rate cuts are a certainty in the second half of 2025, and if you want outsized returns when that happens, you may want to give these four ETFs a closer look.

Roundhill Magnificent Seven ETF (MAGS)

The Roundhill Magnificent Seven ETF (BATS:MAGS | MAGS Price Prediction) only contains seven stocks. Its full focus on the Magnificent Seven stocks has resulted in outperformance since its inception. This ETF is for the investors who believe that the winners keep on winning, and with artificial intelligence still in its early innings, those winners may indeed keep on winning.

MAGS has a 0.29% expense ratio and $2.3 billion in total assets. The fund equally distributes its assets across all of the Magnificent Seven stocks and rebalances its portfolio at the end of each quarter. Investors who believe big tech companies will continue to grow and that artificial intelligence is a valuable long-term tailwind may want to monitor this ETF.

iShares Semiconductor ETF (SOXX)

If you believe in artificial intelligence as an investment but want more diversification than MAGS, the iShares Semiconductor ETF (NASDAQ:SOXX) should be on your watch list. This fund has 31 equity holdings and pours 58% of its capital into its top 10 holdings. 

Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), and Broadcom (NASDAQ:AVGO) are the top three positions, and they make up more than 22% of the fund’s total assets. Advanced Micro Devices is the worst performer of these three stocks, with its 175% return over the past five years. With Advanced Micro Devices the “slowest” of the top three picks, it’s no wonder SOXX has an annualized return of 23.3% over the past decade.

Vanguard Growth Index Fund ETF (VUG)

The Vanguard Growth Index Fund (NYSEARCA:VUG) offers more diversification than the other two funds while still giving you the potential to beat the market. VUG has historically outperformed with its annualized 15.7% r return over the past decade. The fund’s 0.04% expense ratio is a nice cherry on top, which means you’re keeping almost all of your gains.

The tech-heavy fund is filled with Magnificent Seven stocks in its top 10 holdings, and half of the fund’s total assets are in tech. That’s still the most diversification we have seen at this stage, with some sectors like consumer cyclical and communication services individually making up more than 10% of the fund’s total assets. 

Invesco S&P 500 Top 50 ETF (XLG)

The Invesco S&P 500 Top 50 ETF (NYSEARCA:XLG) is suitable for investors who believe that less is more. When you invest in the S&P 500, you’re getting a lot of deadweight companies that don’t do much for the index. While these companies typically make up a low percentage of the index, all of those small companies add up and translate into a lot of missed opportunities. 

XLG eliminates most of those companies by only holding the 50 largest companies that trade on the S&P 500. This investing criteria has been a winning strategy in the long run based on the fund’s annualized 15.1% return over the past decade. It also comes with a 0.80% yield and a 0.20% expense ratio.