The market has started feeling September chills following the subdued Wall Street performance in the month so far. The Dow Jones Industrial Average has lost about 2.2% in its second consecutive negative week ending Sep 10. The S&P 500 and the Nasdaq Composite have also declined around 1.7% and 1.6%, respectively, for the week.
There are several factors that might be keeping investors on the edge. Surging Delta variant cases, rising inflation levels and the Fed meeting where it might announce its plan to taper bond purchases are raising worries.
The resurging cases might scare investors as they worry about the implementation of new lockdown measures to control the spread of the Delta variant, which is raising worries regarding the sustainability of economic recovery from the pandemic-led slump.
Several economic data releases are also weighing on investors’ minds. The U.S. economy added only 235,000 jobs in August 2021 (the lowest in seven months). The metric was far behind the forecast of 750,000 as a surge in COVID-19 infections probably kept companies from hiring and workers from actively looking for a job. Consumer confidence in the United States slipped to a six-month low in August.
Going on, Goldman Sachs (GS) has downgraded its economic outlook mentioning the highly-contagious Delta variant and diminishing fiscal stimulus support as major concerns (per a CNBC article). The investment bank now forecasts 5.7% annual growth for 2021 versus the 6.2% consensus. The firm has also trimmed its fourth-quarter GDP expectation to 5.5% from 6.5%, as stated in the same CNBC article.
There are still certain bright spots in the investing world that can help stimulate a market rally. President Joe Biden has outlined a very effective plan to increase the vaccination rate and control the outbreak. He has made it mandatory for federal employees to get the COVID-19 vaccination, per a CNBC article. The Biden government will also issue guidelines to the Labor Department for imposing vaccine mandates for employers with more than 100 employees or run weekly tests.
In this regard, Fundstrat’s Tom Lee has noted that “Ultimately, we see stocks finishing September strongly. Delta variant organically looks to be slowing... White House plan really brings hammer to containing COVID-19,” as mentioned in a CNBC article.
Value ETFs to Bet on
The year 2021 has been kind to value stocks. The Russell 1000 Value index has returned 16.6% so far in 2021. Investors have been upbeat about the accelerated coronavirus vaccine rollout, solid fiscal stimulus support and reopening of the U.S. economy, which may lead to faster U.S. economic recovery from the pandemic-led economic slowdown. These factors created a conducive environment for value investing.
It is worth noting here that value investing seems more lucrative given the improvement in corporate earnings growth and expectation of higher inflation. Moreover, value stocks seek to capitalize on market inefficiencies. They can deliver higher returns with lower volatility compared with the growth and blend counterparts. Additionally, value stocks are less exposed to trending markets and their dividend payouts offer a shield against market turbulence.
Against this backdrop, here are some top-ranked value ETFs that investors can consider betting on:
iShares S&P 500 Value ETF ( IVE Quick Quote IVE - Free Report)
The fund provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies. With AUM of $22.85 billion, it charges 18 basis points (bps) in expense ratio. The fund carries a Zacks Rank #2 (Buy) (read:
Best ETF Areas for Placing Your Bets in September). Vanguard Mega Cap Value ETF ( MGV Quick Quote MGV - Free Report)
With AUM of $4.55 billion, the fund tracks the performance of the CRSP US Mega Cap Value Index. It charges a fee of 7 bps and has a Zacks Rank #2 (read:
Value Stocks & ETFs to Buy Now). Schwab U.S. Large-Cap Value ETF ( SCHV Quick Quote SCHV - Free Report)
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index. With AUM of $9.82 billion, it charges 4 bps in expense ratio. The fund has a Zacks Rank #2 (read:
ETF Strategies to Profit From a Historically Weak September). Invesco S&P 500 Enhanced Value ETF ( SPVU Quick Quote SPVU - Free Report)
The fund is based on the S&P 500 Enhanced Value Index. With AUM of $143.2 million, it charges 13 bps in expense ratio. The fund carries a Zacks Rank #2 (read:
401(k) Balances at All-Time Highs: 6 ETFs to Buy). Vanguard S&P 500 Value ETF ( VOOV Quick Quote VOOV - Free Report)
With AUM of $2.34 billion, the Zacks Rank #2 fund tracks the performance of the S&P 500 Value Index. It charges a fee of 10 bps.
SPDR Portfolio S&P 500 Value ETF ( SPYV Quick Quote SPYV - Free Report)
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Value Index. With AUM of $12.52 billion, it charges 4 bps in expense ratio. The fund carries a Zacks Rank #2.