The ongoing battle between value and growth could see the former take advantage over the latter if a certain bond indicator turns in its favor. Retired money manager Bill Gross said that tech giants like Amazon will eventually end their strong rally if inflation-adjusted bond yields can rebound from their record low.
Gross noted that the “the dominance of Amazon, Microsoft and other technology giants throughout this year’s stock-market slump and recovery won’t last if inflation-adjusted bond yields rebound from their record low,” per a MarketWatch report.
The report also noted that “the former head and founder of bond fund manager Pimco argued the tight-knit relationship between inflation-adjusted yields and the performance of stocks with rapidly expanding earnings was a key reason why high-flying tech companies and other growth stocks extended their dominance over value shares in 2020.”
“Would I bet the farm on this correlation in the future? Well, maybe 40 acres worth,” said Gross.
Exchange-traded fund (ETF) investors looking to bet on Gross’s prediction can use the iShares MSCI EAFE Value ETF (BATS: EFV). EFV seeks to track the investment results of the MSCI EAFE Value Index composed of developed market equities, excluding the U.S. and Canada, that exhibit value characteristics.
Bond ETF Action
Additionally, investors looking to get in on the corporate bond action, they can consider the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment-grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
For a high yield option to squeeze out that extra yield albeit more risk, take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
For more market trends, visit ETF Trends.
