As the victorious Boston Red Sox hoisted the 2018 World Series trophy on Sunday, investors got accustomed to even more red in U.S. equities during the month of October as Monday’s trading session saw the Dow Jones Industrial Average gain 300 points early in the day before falling by over 200 points at the close of the markets.
Needless to say, October hasn’t been kind to U.S. stocks as the technology sector, in particular, has gotten trounced. The S&P 500 has been playing a game of “Follow the Leader ” with the Nasdaq Composite, heading into correction territory with as much as a 10% slide last week from its 52-week high.
“October has provided plenty of drama this year,” said John Stoltzfus, the chief investment strategist at Oppenheimer & Co. “It could prove to be the best buying opportunity investors have had in some time.”
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Nonetheless, some market experts feel that despite what the much-heralded FANG (Facebook, Amazon, Netflix, Google) stocks do, the U.S. capital markets will continue to thrive. According to economist Mohamed El-Erian of Allianz, the latest sell-offs doesn’t signal that the party is over for U.S. equities, but a venue change–one where value continues to come to the forefront and the growth-momentum plays of the decade-long bull run take a step back.
“I don’t think the party is over. I think what we are seeing is a transition in regimes,” El-Erian told CNBC. “One from where markets were comforted by ample, predictable liquidity to now having to recognize that divergent fundamentals are going to be the driver of asset prices.”
If volatility continues to fuel the rest of 2018 and beyond, the markets can expect to see more value-oriented plays as investors become more defensive with their portfolios and cycle out of growth-fueled investments.
“When momentum starts to flatten out or not continue in its existing incline, value starts making more sense because you can still get the growth by purchasing or investing in equities that basically are on sale,” said Kevin Miller, chief executive officer of Minnesota-based E-Valuator Funds. “That’s why at this point in time value will be a preferred spot to be.”
This could include a shift towards more utilities-focused ETFs, and as such, here are three large cap value plays investors should consider, especially in today’s times of volatility.
1. First Trust Utilities AlphaDEX ETF (NYSEArca: FXU)
2. Invesco S&P 500 Equal Weight Utilities ETF (NYSEArca: RYU)
3. JHancock Multifactor Utilities ETF (NYSEArca: JHMU)
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