With the S&P 500 hovering around its all-time high, short interest in the $357 billion SPDR S&P 500 ETF Trust SPY has spiked to the highest this year, according to IHS Markit Ltd. Data, as quoted on Bloomberg. About 4.8% of the fund’s shares is now out on loan. This compares with 2% less than two months ago and 1.7% at the start of the year.
“The surging short interest in the S&P 500 is in part due to skepticism that the rally can continue or at least that we are due for a pullback,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, as quoted on Bloomberg.
“We don’t think the bull market is in any danger of ending prematurely. But with a 10% or greater pullback happening on average once every two years (at least since 1980), we do believe a pullback of that magnitude is likely this year,” said chief investment officer at Independent Advisor Alliance. Having said this we would like to note that Wall Street should remain steady in the coming days given the economic recovery and growing vaccination.
Why Low P/E ETFs?
Wall Street has been rejoicing on news of declining new coronavirus cases as economic reopening trades have kept the optimism levels high. Going by data compiled by Johns Hopkins University, the seven-day average of new infections was about 26,000 as of May 23, per a CNBC article. The number of cases has slipped to the lowest level since June 2020.
Half of all U.S. adults are now fully vaccinated against COVID-19. President Joe Biden aims at administering at least one dose of a coronavirus vaccine to 70% of U.S. adults along with getting 160 million adults completely vaccinated by Jul 4, per a CNBC article. This has led to optimism in the market.
Hence, the market rally is not going to subside anytime soon. It is just that the overvalued stocks could be hurt if there is a market correction. Meanwhile, rising rate worries may hurt growth stocks like technology. But the huge long-term prospects for cutting-edge technology demands that tech stocks be in investors’ portfolio. So, investors fearing another correction in the near term, might want to opt for low P/E funds.
Below we highlight a few low P/E ETFs that could be apt in the current scenario. These ETFs have a lower P/E than the S&P 500 ETF SPY (25.16X). Concept-wise also, these ETFs offer good potential.
ETFs in Focus
First Trust Mid Cap Value AlphaDEX Fund (FNK) – 14.08X
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to pick stocks from the NASDAQ US 600 Mid Cap Value Index. The fund charges 70 bps in fees.
iShares U.S. Regional Banks ETF IAT – 12.72X
The underlying Dow Jones U.S. Select Regional Banks Index is a free-float adjusted market capitalization-weighted index which measures the performance of the regional bank sub-sector of the U.S. equity market. The fund charges 42 bps in fees.
Roundhill Acquirers Deep Value ETF DEEP – 12.20X
The underlying Acquirers Deep Value Index is constructed using an objective, rules-based methodology that begins with an initial universe that mirrors the companies listed on the S&P 500 Index. The fund charges 80 bps in fees.
Invesco Zacks Multi-Asset Income ETF CVY – 12.06X
The underlying Zacks Multi-Asset Income Index comprises domestic and international companies, including U.S.-listed common stocks, ADRs paying dividends, REITs, MLPs, closed-end funds and traditional preferred stocks. The fund charges 94 bps in fees and yields 2.48% annually.
First Trust Dow Jones Global Select Dividend Index Fund FGD – 12.01X
The underlying Dow Jones Global Select Dividend Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index. The fund charges 57 bps in fees. It yields 3.64% annually.
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Time for Low P/E ETFs as S&P 500 at All-Time Highs?
With the S&P 500 hovering around its all-time high, short interest in the $357 billion SPDR S&P 500 ETF Trust SPY has spiked to the highest this year, according to IHS Markit Ltd. Data, as quoted on Bloomberg. About 4.8% of the fund’s shares is now out on loan. This compares with 2% less than two months ago and 1.7% at the start of the year.
“The surging short interest in the S&P 500 is in part due to skepticism that the rally can continue or at least that we are due for a pullback,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, as quoted on Bloomberg.
“We don’t think the bull market is in any danger of ending prematurely. But with a 10% or greater pullback happening on average once every two years (at least since 1980), we do believe a pullback of that magnitude is likely this year,” said chief investment officer at Independent Advisor Alliance. Having said this we would like to note that Wall Street should remain steady in the coming days given the economic recovery and growing vaccination.
Why Low P/E ETFs?
Wall Street has been rejoicing on news of declining new coronavirus cases as economic reopening trades have kept the optimism levels high. Going by data compiled by Johns Hopkins University, the seven-day average of new infections was about 26,000 as of May 23, per a CNBC article. The number of cases has slipped to the lowest level since June 2020.
Half of all U.S. adults are now fully vaccinated against COVID-19. President Joe Biden aims at administering at least one dose of a coronavirus vaccine to 70% of U.S. adults along with getting 160 million adults completely vaccinated by Jul 4, per a CNBC article. This has led to optimism in the market.
Hence, the market rally is not going to subside anytime soon. It is just that the overvalued stocks could be hurt if there is a market correction. Meanwhile, rising rate worries may hurt growth stocks like technology. But the huge long-term prospects for cutting-edge technology demands that tech stocks be in investors’ portfolio. So, investors fearing another correction in the near term, might want to opt for low P/E funds.
Below we highlight a few low P/E ETFs that could be apt in the current scenario. These ETFs have a lower P/E than the S&P 500 ETF SPY (25.16X). Concept-wise also, these ETFs offer good potential.
ETFs in Focus
First Trust Mid Cap Value AlphaDEX Fund (FNK) – 14.08X
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to pick stocks from the NASDAQ US 600 Mid Cap Value Index. The fund charges 70 bps in fees.
iShares U.S. Regional Banks ETF IAT – 12.72X
The underlying Dow Jones U.S. Select Regional Banks Index is a free-float adjusted market capitalization-weighted index which measures the performance of the regional bank sub-sector of the U.S. equity market. The fund charges 42 bps in fees.
Roundhill Acquirers Deep Value ETF DEEP – 12.20X
The underlying Acquirers Deep Value Index is constructed using an objective, rules-based methodology that begins with an initial universe that mirrors the companies listed on the S&P 500 Index. The fund charges 80 bps in fees.
Invesco Zacks Multi-Asset Income ETF CVY – 12.06X
The underlying Zacks Multi-Asset Income Index comprises domestic and international companies, including U.S.-listed common stocks, ADRs paying dividends, REITs, MLPs, closed-end funds and traditional preferred stocks. The fund charges 94 bps in fees and yields 2.48% annually.
First Trust Dow Jones Global Select Dividend Index Fund FGD – 12.01X
The underlying Dow Jones Global Select Dividend Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index. The fund charges 57 bps in fees. It yields 3.64% annually.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>