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Top-Ranked Value ETFs to Focus on Fed Rate Hike Worries
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Wall Street has had a rough start to 2022 and has remained highly volatile due to a rise in benchmark 10-year Treasury yields. The yields rose as high as above 1.8% on Jan 10 after being at 1.51% on Dec 31. The Fed is expected to begin raising its benchmark interest rate in March. The Federal Reserve may take a more aggressive approach in raising interest rates. In fact, Goldman Sachs is expecting the Federal Reserve to increase interest rates four times this year, according to a CNBC article.
Going by the CME’s FedWatch Tool, market participants already expect and have priced about 79% probability for the first quarter-percentage-point hike to happen in May, as mentioned in a CNBC article. They also expect a nearly 50% probability of the central bank imposing four such hikes in 2022.
Growth sectors like the tech space have been feeling the pinch of rising bond yields as the same decreases the relative value of future earnings, making popular stocks seem overvalued. Tech companies also face hurdles in funding their growth and buying back stocks due to higher rates (per a CNBC article).
The year 2022 has been a kind start to value stocks. The Russell 1000 Value index has returned 1.5% so far in January. Investors looking for value investing can consider iShares S&P 500 Value ETF (IVE - Free Report) , Vanguard Mega Cap Value ETF (MGV - Free Report) , Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) , Invesco S&P 500 Enhanced Value ETF (SPVU - Free Report) , Vanguard S&P 500 Value ETF (VOOV - Free Report) and SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) .
Value ETFs in Focus
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 rebounding U.S. economy, the expectation of higher inflation and chances of Fed interest rate hikes. Moreover, value stocks seek to capitalize on market inefficiencies. They can deliver higher returns with lower volatility than their 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 provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies. With AUM of $24.91 billion, it charges 18 basis points (bps) in expense ratio. The fund carries a Zacks Rank #1 (Strong Buy) (read: Combat Fed Rate Hike Woes With These 5 Top-Ranked ETFs).
With AUM of $5.21 billion, Vanguard Mega Cap Value ETF tracks the performance of the CRSP US Mega Cap Value Index. It charges a fee of 7 bps and has a Zacks Rank #1 (read: ETF Areas to Consider for Rotating Out of Tech in 2022).
Schwab U.S. Large-Cap Value ETF’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 $10.68 billion, it charges 4 bps in expense ratio. The fund has a Zacks Rank #1.
Invesco S&P 500 Enhanced Value ETF is based on the S&P 500 Enhanced Value Index. With AUM of $150.1 million, it charges 13 bps in expense ratio. The fund carries a Zacks Rank #1 (read: 5 Top-Ranked ETFs to Buy At Bargain Prices).
SPDR Portfolio S&P 500 Value ETF 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 $13.46 billion, it charges 4 bps in expense ratio. The fund carries a Zacks Rank #1.
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Top-Ranked Value ETFs to Focus on Fed Rate Hike Worries
Wall Street has had a rough start to 2022 and has remained highly volatile due to a rise in benchmark 10-year Treasury yields. The yields rose as high as above 1.8% on Jan 10 after being at 1.51% on Dec 31. The Fed is expected to begin raising its benchmark interest rate in March. The Federal Reserve may take a more aggressive approach in raising interest rates. In fact, Goldman Sachs is expecting the Federal Reserve to increase interest rates four times this year, according to a CNBC article.
Going by the CME’s FedWatch Tool, market participants already expect and have priced about 79% probability for the first quarter-percentage-point hike to happen in May, as mentioned in a CNBC article. They also expect a nearly 50% probability of the central bank imposing four such hikes in 2022.
Growth sectors like the tech space have been feeling the pinch of rising bond yields as the same decreases the relative value of future earnings, making popular stocks seem overvalued. Tech companies also face hurdles in funding their growth and buying back stocks due to higher rates (per a CNBC article).
The year 2022 has been a kind start to value stocks. The Russell 1000 Value index has returned 1.5% so far in January. Investors looking for value investing can consider iShares S&P 500 Value ETF (IVE - Free Report) , Vanguard Mega Cap Value ETF (MGV - Free Report) , Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) , Invesco S&P 500 Enhanced Value ETF (SPVU - Free Report) , Vanguard S&P 500 Value ETF (VOOV - Free Report) and SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) .
Value ETFs in Focus
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 rebounding U.S. economy, the expectation of higher inflation and chances of Fed interest rate hikes. Moreover, value stocks seek to capitalize on market inefficiencies. They can deliver higher returns with lower volatility than their 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 - Free Report)
iShares S&P 500 Value ETF provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies. With AUM of $24.91 billion, it charges 18 basis points (bps) in expense ratio. The fund carries a Zacks Rank #1 (Strong Buy) (read: Combat Fed Rate Hike Woes With These 5 Top-Ranked ETFs).
Vanguard Mega Cap Value ETF (MGV - Free Report)
With AUM of $5.21 billion, Vanguard Mega Cap Value ETF tracks the performance of the CRSP US Mega Cap Value Index. It charges a fee of 7 bps and has a Zacks Rank #1 (read: ETF Areas to Consider for Rotating Out of Tech in 2022).
Schwab U.S. Large-Cap Value ETF (SCHV - Free Report)
Schwab U.S. Large-Cap Value ETF’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 $10.68 billion, it charges 4 bps in expense ratio. The fund has a Zacks Rank #1.
Invesco S&P 500 Enhanced Value ETF (SPVU - Free Report)
Invesco S&P 500 Enhanced Value ETF is based on the S&P 500 Enhanced Value Index. With AUM of $150.1 million, it charges 13 bps in expense ratio. The fund carries a Zacks Rank #1 (read: 5 Top-Ranked ETFs to Buy At Bargain Prices).
Vanguard S&P 500 Value ETF (VOOV - Free Report)
With AUM of $2.71 billion, the Zacks Rank #1 Vanguard S&P 500 Value ETF 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 - Free Report)
SPDR Portfolio S&P 500 Value ETF 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 $13.46 billion, it charges 4 bps in expense ratio. The fund carries a Zacks Rank #1.