The last few months of the year are looming large over many market watchers, not least of whom are the Fed chair and board of governors. While the signs of a rate cut are increasing, that may not be enough to energize anemic market numbers. Such a move could help drop recession odds further, but how should investors react to slowing overall growth?
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American Century Investments analysts explored a slowing growth outlook in a recent analysis piece. The trio of portfolio managers and firm leaders examined a few scenarios for the next few months based on the firm’s research. While the team identified a turn towards stagflation as unlikely, it offered solutions for that and potential surprise growth.
First and foremost, however, amid dropping recession odds, a slowdown may be the most likely scenario. What kind of ETFs and investment solutions can stand out not only in that situation but also in even more stagnant situations.
An ETF like the American Century U.S. Quality Value ETF (VALQ) could help with its focus on quality, value-oriented stocks. VALQ charges a 29 basis point fee for its approach. The fund tracks an index with a combination of value and current income-providing stocks. Specifically, the strategy invests in large- and midcap firms with attractive value, quality, and income numbers.
That has helped the quality value ETF return 5.9% YTD with even stronger performance long term. VALQ has returned 12.9% over the last five years according to ETF Database data. That outperformed the fund’s ETF Database Category and FactSet Segment averages in that time. Those numbers came in at 9.6% and 6.3%, respectively.
A quality focus can help identify those companies poised to do well even amid slowing growth. What’s more, the fund’s value focus can do well if markets cycle towards other sectors than tech.
“Quality companies with higher profitability and healthy balance sheets may offer attractive potential,” the firm’s analysts wrote. “Investors tend to favor quality companies in more defensive sectors, such as utilities, health care and consumer staples. Additionally, we think select dividend-paying stocks that tend to provide consistent income streams are attractive.”
Offering solid companies with some longer-term stability, VALQ may intrigue. Recession odds are down, but in slowing economic periods, quality can tell.
VettaFi LLC (“VettaFi”) is the index provider for VALQ, for which it receives an index licensing fee. However, VALQ is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VALQ.
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