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Value ETFs Waver as U.S. Markets Set to Notch Another Month of Gains

Value stock exchange traded funds were stuck in sideways action on Tuesday as a U.S. benchmark was on pace to end August with its seventh consecutive month of gains.

Technology stocks were among the laggards on Tuesday after a recent surge.

“It is hard to rationalize the surge that tech stocks have been seeing, while technology is a really good industry, its prices and valuations are really hard to keep up with and investors are looking for other areas with much higher upside,” Sandi Bragar, managing director at wealth management firm Aspiriant, told Reuters.

Meanwhile, the S&P 500 was still set to log its longest monthly winning streak since 2018 with a gain of about 3% for the month after Federal Reserve Chairman Jerome Powell said that the central bank will remain patient on its monetary policy.

“There continues to be a positive bias towards U.S. equities and investors are just holding back as we near the anticipated labor market data,” Arthur Weise, chief investment officer of Kingsland Growth Advisors, told Reuters.

However, some are still considering the rising infection rates of the COVID-19 Delta variant as an ongoing headwind that has tempered the outlook.

“You have seen people canceling vacations or not going out to restaurants” due to the Delta variant, Peter Langas, chief portfolio strategist at Bessemer Trust, told the Wall Street Journal. “There is this concern on the margin that we are seeing people pull back a bit. All of that comes into play in regards to where consumer confidence is going in the short term.”

ETF investors interested in a targeted approach to the value segment can look to the American Century STOXX U.S. Quality Value ETF (NYSEArca: VALQ). VALQ’s stock selection process includes a value score based on value, earnings yield, and cash flow yield, along with a sustainable income score based on dividend yield, dividend growth, and dividend coverage.

The American Century Focused Large Cap Value ETF (FLV) tries to achieve long-term returns through an investment process that seeks to identify value and minimize volatility. FLV holdings and value stocks usually trade at lower prices relative to fundamental value measures, like earnings and the book value of assets.

Lastly, the Avantis U.S. Small Cap Value ETF (AVUV), an actively managed ETF, seeks long-term capital appreciation. The fund invests primarily in U.S. small-cap companies and is designed to increase expected returns by focusing on firms trading at what are believed to be low valuations with higher profitability ratios.

For more news, information, and strategy, visit the Core Strategies Channel.

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