For those investors seeking profit now, rather than after a market recovery, growth-oriented exchange traded funds (ETFs) appear to be outpacing the value. One of the biggest reasons this is happening is because of inflation. Large-cap value companies take a hit from rising input costs when inflation hits.
Joanne Von Alroth for Investor’s Business Daily explains that companies can only pass these expenses off to the consumers so much before the prices become too high.
The recent credit tightening is also passing along the higher prices to consumers. Health-care and pharmaceutical companies will also play a big role in value-oriented companies taking the upper hand. The upcoming election will also help to stabilize the lean because the growth gap will close.
When there is more time to put towards tax and spending policies, it will signal the end of the credit tightening, and a shift toward value will come on.
Compare and contrast:
- iShares Morningstar Large Cap Growth Index Fund (JKE), down 8.7% year-to-date
- iShares Morningstar Large Cap Value Index Fund (JKF), down 16.6%
- SPDR Dow Jones Wilshire Large Cap Growth Index (ELG), down 7.1%
- SPDR Dow Jones Wilshire Large Cap Value Index Fund (ELV), down 13.1%
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.