Value stocks and related exchange traded funds rallied Friday as economically sensitive sectors advanced in response to the strong July job numbers that helped assuage fears of a slowdown in the economic recovery.
According to the Labor Department, non-farm payrolls rose by 943,000 over July amid growing demand in more labor-intensive services industries, Reuters reports. In comparison, economists anticipated 870,000 job additions.
“It’s exactly the kind of report that the market wanted, in that it is strong,” Seema Shah, chief strategist at Principal Global Investors, told Reuters. “It suggests that a labor market recovery is in play but also not so strong that it’s going to push forward the timings of the Fed tapering. That is goldilocks, that perfect mix of strong but not too strong.”
The equity markets were also maintaining their momentum after data showed a further dip in U.S. unemployment claims last week, along with the ongoing strong corporate earnings season.
Looking ahead, the markets are now waiting on a meeting of Federal Reserve leaders in Jackson Hole, Wyoming later in August to examine the central bank’s current monetary policy.
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.
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