With the U.S. markets in an overall bull trend, it’s important to keep in mind the momentum of the value factor. ETF Trends CEO Tom Lydon was on hand to discuss value, and the investing plays that can be found there, with TD Ameritrade’s Nicole Petallides.
Looking at broad-based momentum in terms of small cap value stocks, Lydon noted how while value has been big for a long time after the S&P became really difficult to beat, many investors are now looking toward thematic ETFs, thinly-sliced sectors, and areas like value that have gone unloved over time.
Additionally, a lot of the small cap value stocks are really embracing the re-opening trade. These companies can be more nimble, and they can act quickly. One ETF in particular, the VictoryShares USAA Small-Cap Value Momentum ETF (USVM), has all of these elements wrapped inside of it. It can shift through the discipline of the index to those areas of the market that are starting to show, from a momentum standpoint, not only value characteristics but profitable areas like consumer discretionary and banks.
Looking at the inflows, it’s noted how amazing it is to see how much people want to work and put into the economy. For Lydon, there is a lot of optimism to be seen amongst investors. Current ETF inflows on pace to arrive at possibly $1 trillion in new assets by the end of 2021, an unprecedented figure.
As Lydon explains: “When you look at correlation to the average investor out there having a high correlation in their portfolios in the S&P. Now, being able to deconstruct their portfolios, folks have had more time to sort through their portfolios there at home, and ETFs have given up so many choices.”
“We’re going to have to get better at what we’re doing because 60-40 is not going to work the way it’s done for the last 30 years.”
In flows & out flows 👉 @TomLydon examines how the current economic backdrop is impacting opportunities in small caps and ETFs with @NPetallides:
— TD Ameritrade Network (@TDANetwork) April 19, 2021
Adding some more ETF options to corresponds with the times, there’s the iShares US Home Construction ETF (ITB), which helps with houses that are going to appreciate, along with neighbors who are providing their own upgrades as well.
Other great news recently came from the banks. Big banks made money on rates and investments in banking. Regional bank ETFs like the SPDR S&P Regional Banking ETF (KRE) are thriving.
Lydon notes that 200-day averages can reveal some major markets falling below their trendlines, at which point it could be prudent to take some money off the table.
He cautions that: “The long-term opportunities in fixed income are going to be challenged. There’s almost $5 trillion in money market funds currently, so a lot of people are concerned about rising rates and what that might do to their fixed income portfolio. We’re seeing people divest from the Barclays Agg and invest in alternative income strategies… where you’re overlapping, not only your equity allocation but a dividend or fixed income strategy on top of that. So, it’s going to be very challenging going forward from an income standpoint, and that’s really going to be critical for investors.”
For more market trends, visit ETF Trends.