The growing momentum behind value-oriented exchange traded funds could continue to pick up speed.
This upcoming Tuesday will mark the 12-month anniversary of the MSCI AC World Value Index’s eight-year low, reflecting a key timeframe that many quantitative models use to screen for what momentum shares to purchase, Bloomberg reports.
Further ahead, May 6 would be the six-month anniversary of the relative low for value stocks compared to their growth and momentum counterparts. The value style began to outperform shortly after Joe Biden won the election.
“There is a significant overlap emerging between deep value stocks and momentum stocks – there are a number of autos, banks, materials, and energy stocks which are screening as both value and momentum,” Bernstein strategist Sarah McCarthy said in a note Wednesday. “This is the holy grail of quant and value investing.”
The Biden win and another round of stimulus measures spurred increased demand for economically sensitive equities and value stocks that benefit from a broader economic recovery. The switch has helped lift underpriced value shares and lower high-flying technology stocks, which have dominated momentum investment strategies over the past decade.
Momentum is the rate of acceleration of a security’s price or the pace at which the price is changing. The momentum trade is a way to capitalize on the growing traction behind an ongoing trend as it is picks up speed.
There are a number of ways to play the value style through ETF strategies. For example, the iShares S&P 500 Value ETF (NYSEArca: IVE) provides a simple tilt toward value stocks in the S&P 500. The iShares Edge MSCI USA Value Factor ETF (VLUE) specifically targets the value factor. Additionally, the Invesco S&P 500 Value With Momentum Portfolio (BATS: SPVM) follows the S&P 500 stocks that have the highest value and momentum scores.
For more information on the markets, visit our current affairs category.