Value ETFs bounce back as markets recover from Monday’s session
U.S. markets surged on Tuesday as economically sensitive sectors and value-style exchange-traded funds rebounded from the coronavirus-induced precipitous sell-off in the previous session.
“Yesterday’s narrative that bled throughout the weekend was a bit of a risky scenario around increasing COVID cases,” Charlie Ripley, senior investment strategist for Allianz Investment Management, told Reuters. “I don’t think investors are so worried about the cases themselves. It is government officials and their reaction, where we might find ourselves in a situation where restrictive measures are put in place again, that hold back growth in the long run.
Cyclical sectors took a hard hit on Monday as the economic reopening of trade unraveled over fears that the more contagious variant of the Covid-19 delta could push the government to impose another lockdown. However, the steep sell may also have presented a buying opportunity for others with a longer view of the markets.
“When you get a massive sell off like the one yesterday, there will definitely be investors who see this as an opportunity to invest for the longer term,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management. The Wall Street Journal. “Especially where the 10 years [Treasury] the returns are gone, this still indicates the default position for investors as long stocks, as there are simply very few other options. “
ETF investors interested in a targeted approach to the value segment can look to the American Century STOXX US Quality Value ETF (NYSEArca: VALQ). VALQ’s stock selection process includes a value score based on value, earnings yield and cash flow yield, as well as a sustainable income score based on dividend yield, dividend growth and dividend coverage.
the American Century Focused Large Cap Value ETF (FLV) attempts to achieve long-term returns through an investment process that seeks to identify value and minimize volatility. FLV holdings and value stocks typically trade at lower prices than fundamental measures of value, such as earnings and book value of assets.
Finally, the Avantis US Small Cap Value ETF (AVUV), an actively managed ETF, seeks long-term capital appreciation. The fund invests primarily in small cap US companies and is designed to increase expected returns by focusing on companies that trade at what are thought to be low valuations with higher profitability ratios.
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