Value ETFs Shine as the Economy Maintains Its Broad Recovery
Value stocks and related exchange traded funds led the equity market's push higher Thursday after data revealed lower weekly jobless claims and a rally in the energy sector on rising crude oil prices.
Reflecting an ongoing recovery in the economy, initial claims for state unemployment benefits dipped by 51,000 to a seasonally adjusted 364,000 for the week ended June 26, a new coronavirus pandemic low, while layoffs also declined to a 21-year low in June, Reuters reports.
“This morning’s beat on jobless claims is a real bright spot,” Cliff Hodge, chief investment officer at Cornerstone Wealth, told Reuters. “Staying below that big-round-number 400,000 level could bolster confidence in risk-taking during the dog days of summer.”
Looking ahead, investors will be watching for Friday’s nonfarm payrolls report, which could guide the Federal Reserve's outlook on its accommodative policies.
Market observers are also waiting on the second quarter earnings season in the coming weeks to see whether this year's gains can continue through the next six months.
“You can make a case for the market being expensive, but I don’t think we’re headed for any major correction. Could we see a pullback as we wait for the earnings? That’s a possibility,” Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters.
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 measures of value, 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.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.