Earnings season is about to get started in earnest, and a lot of eyes will be watching – from the impact of the Fed’s rate hikes to the potential for a recession, there are some big questions hanging over earnings. Investors will be looking to the earnings themselves, though, which may merit taking a look at a low-fee earnings-weighted ETF like the WisdomTree U.S. LargeCap Fund (EPS).
Friday saw several big banking names drop earnings, including the likes of Wells Fargo (WFC), Bank of America (BAC), BlackRock (BLK), JPMorgan Chase (JPM), and UnitedHealth Group (UNH). The overall season is anticipated to be a complicated one, defined by sector divergence — the energy sector may do well, for example.
Retailers are anticipated to continue to struggle as they did for much of 2022, but airlines, on the other hand, are seeing higher earnings-per-share projections when comparing this quarter to the same quarter a year prior — despite bad news for Southwest (LUV) this month. Overall, with an earnings recession expected to offer investors a reality check, it could be time to look to a strategy that has an earnings factor built into its approach.
EPS uses reported earnings to determine which firms are in its underlying index, the WisdomTree U.S. LargeCap Index. The earnings-weighted ETF does have a slight value tilt as a result of its specific approach, and it does have the potential of leaning towards or away from given sectors if they struggle in earnings.
Charging just eight basis points for its exposures, the low-fee earnings-weighted ETF has outperformed both its ETF Database Category Average and its Factset Segment Average over one and three month periods, returning 2.1% and 12.5% respectively. The strategy has also added $2 million in net inflows over the last month.
Earnings season news stories can paint quite a topsy-turvy picture for investors, with a lot of noise to parse. As such, a strategy that is attuned to earnings may be one to consider for the next few weeks, with EPS a candidate to fill that role.
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