The extended bull run the past decade saw growth stocks sprint past their value counterparts as investors piled their capital on growth-oriented equities like technology. However, that could all be changing and the current state of the market could reveal that a value comeback is on the horizon.
The disparity in performance is evident in exchange-traded funds like the iShares Edge MSCI USA Value Factor ETF (BATS: VLUE) and the iShares Edge MSCI USA Momentum Factor ETF (BATS: MTUM). The former has been trading higher in recent days as investors are shifting to a risk-off mode and looking at value-oriented equities to stave off losses during a market downturn.
“The rotation, despite it being a positive signal in terms of investor macro sentiment, is probably a net negative for the overall SPX in that super-cap tech will likely be caught up in the selling and these stocks dominate the index weighting,” said Adam Crisafulli, executive director at J.P. Morgan, said in a note.
Per a CNBC report, “The S&P 500 is up nearly 2% this month and is about 1.6% below its record high set in July amid optimism around U.S.-China trade relations. However, CNBC’s Jim Cramer urges investors to be cautious at these levels, especially after the rotation that took place Monday.”
We are overbought, so let’s be careful… I didn’t like the action –or the jailbreak–in high growth sellers and the rapid revision of low multiple stocks based on nothing. Don’t bite on the first decline
— Jim Cramer (@jimcramer) September 10, 2019
ETFs to Watch
For investors looking to capitalize on continued emphasis on growth, they can play the Direxion Russell 1000 Growth Over Value ETF (NYSEArca: RWGV). RWGV offers them the ability to benefit not only from growth opportunities potentially performing well, but from their outperformance compared to value. Conversely, if investors believe that value-oriented equities will outperform growth-oriented equities, RWVG provides a means to not only see value opportunities perform well, but as a way to capitalize on their outperformance compared to growth.
If they feel value could resurrect itself, they could also use the Direxion Russell 1000 Value Over Growth ETF (NYSEArca: RWVG). RWVG seeks investment results that track the Russell 1000® Value/Growth 150/50 Net Spread Index (the “index”). The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in securities that comprise the Long Component of the index or shares of exchange-traded funds (“ETFs”) on the Long Component of the index.
RWVG’s index measures the performance of a portfolio that has 150% long exposure to the Russell 1000® Value Index (the “Long Component”) and 50% short exposure to the Russell 1000® Growth Index (the “Short Component”).
For more market trends, visit ETF Trends.