Investors are facing quite a bit of uncertainty this year, and with the Fed’s next Federal Open Market Committee (FOMC) meeting coming in just days, rising rate and recessionary concerns are looming on top of persistent inflation. One factor that proved its worth last year and could offer some welcome resilience this year could be value investing, with an AI-backed value ETF like the WisdomTree U.S. AI Enhanced Value Fund (AIVL).
While global stock market capitalization dropped 20% last year, value stocks were relative outperformers. The MSCI World Value Index outdid its growth sibling by 21%, with the rising rate environment playing a key role there. With rising rates still on the agenda for the Fed, value’s historical resilience during periods of interest rate volatility make it a factor worth revisiting.
Add in how value has done so far this year, and the picture becomes yet more appealing. Small and mid-cap value ETFs have returned well over the last month, with returns of 7% and 6% respectively, according to YCharts. Large value strategies, meanwhile, have seen the most inflows of all ETF categories on YCharts, with $10.3 billion over one month — more than double the next-largest equity ETF category.
An AI-backed value ETF empowers a traditional value view on the markets with a quantitative model; in this case, AIVL uses a proprietary model to support its active approach. The ETF’s AI approach considers fundamentals and market sentiment to pick between 60 and 190 stocks, capped at 6% per security. Charging 38 basis points, AIVL has outperformed its FactSet segment average over the last three months with returns of 10.1%.
A lot of investors are flocking to growthier, riskier options right now while pricing in rate cuts later this year. Should the Fed’s rate hikes be a bit sterner than markets are anticipating, a value look like AIVL should perhaps be on investors’ watchlists in the weeks to come.
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