Value ETFs Maintain Their Momentum as Markets Scale New Peaks

Value stock exchange traded funds pushed higher on Wednesday, with the broader U.S. equity market knocking on another record high and traders waiting on the Federal Reserve’s annual symposium later this week.

The Federal Reserve’s annual Jackson Hole symposium starts Thursday, and investors hope to glean fresh insights from Fed Chairman Jerome Powell on the direction of the central bank’s fiscal-stimulus tightening and inflation outlook, the Wall Street Journal reports.

“It is wait-and-see because we’re getting to the point where we think we’ll get some definitive information on tapering,” Daniel Morris, chief market strategist at BNP Paribas Asset Management, told the WSJ. “On one hand, we’ve had the signaling on tapering, but on the flip side, you see people looking at a deceleration in activity.”

Investors are vacillating between bets on whether or not the Fed will proceed with tapering its bond purchases in the months ahead due to the rise in new COVID-19 cases and signs that the economic recovery is slowing.

“While we don’t expect anything, the market is vulnerable to either some sort of talk about tapering or some sort of interpretation of his remarks about tapering,” Julian Emanuel, chief equity and derivatives strategist at BTIG, told Reuters.

“It’s a very fluid push and pull between the risks of the virus intensifying, given that there are certain assumptions about how the economy is going to unfold over the balance of the year and inflation which we believe it may not be as transitory as it believes it to be,” Emanuel added.

The equity markets remained in a risk-on mood after regulatory approval of the Pfizer and BioNTech COVID-19 vaccine, which could potential fuel the pace of the U.S. vaccination efforts. However, some concerns over the duration of vaccines’ efficacy has weighed on the outlook for global economic recovery.

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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