As more investors were tepid on growth, value took center stage during the month of September while emerging markets shied away from the spotlight, according to the latest edition of Direxion Investments’ Relative Weight Spotlight.
As market volatility took hold of the capital markets in the summer time, investors got more strategic with their capital allocation by focusing on the value factor. The serendipitous bull run fueled by growth and momentum took a back seat while value stepped up to the plate.
Other moves in September included a shift to cyclicals over defensive sectors.
“Investors took advantage of these performance trends by adding $2.04 billion to value ETFs and redeeming $0.18 billion from growth ETFs, which increased from the trends seen in August,” the post noted. “However, growth ETFs maintain a sizable $5.15 billion lead over value ETFs through the first nine months of the year. Sector flows have been muted this year, but investors showed a clear preference for cyclicals in September by adding $1.48 billion, while defensive sectors experienced $0.19 of outflows.”
No Love for Emerging Markets
A flight to safety also meant that investors were less apt to take on risk by seeking opportunities outside of developed markets. While the Federal Reserve was instituting rate cuts, the dollar maintained its resolve and hurt EM in the process.
It didn’t help that U.S. and China escalated their trade tensions in September before coming back to the negotiating table in October.
“Emerging markets continued to struggle as the PBOC has not announced any significant easing and the US Dollar continues to be on a tear,” the post said. “Europe and Japan did better considering their positive relationships to rising yields and large weights to banks. However, ETF investors did not follow suit and plowed $14.95 billion into US-focused ETFs compared to $1.27 billion to international ETFs and actually added a modest $0.36 billion to emerging market ETFs.”
Relative Tools of the Trade
ETFs to play include the Direxion Russell 1000 Growth Over Value ETF (NYSEArca: RWGV) and the Direxion Russell 1000 Value Over Growth ETF (NYSEArca: RWVG). For investors looking for continued upside in growth-oriented equities over value-oriented equities, RWGV offers them the ability to benefit not only from growth opportunities potentially performing well, but from their outperformance compared to value.
If investors believe that resolutions to the big issues impacting sentiment today are in motion, the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE) provides a means to not only see developed markets perform well, but a way to access a convergence/catch-up in performance of DM relative to EM.
For more relative market trends, visit our Relative Value Channel.