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Top-Ranked Value ETFs to Buy Amid Uncertainty Around Rate Cut
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Wall Street has touched a series of record highs this year but uncertainty surrounding the Fed rate cuts has been weighing on investors’ sentiment. Inflation is running hotter than expected, sparking concerns about the Fed interest rates cut in June. Per CME's FedWatch tool, the market has trimmed the odds of a cut of at least 25 bps at its June meeting to 62.9%, down from 81.7% a week ago (read: Ride the S&P 500 Wave With These ETFs).
The uncertainty has raised the appeal for value investing. This is because value investing involves buying stocks or other financial assets that are believed to be undervalued or trading below their intrinsic worth. Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. Value stocks are less susceptible to trending markets and their dividend payouts offer safety in times of market turbulence.
While there are many options available in this space, investors could tap the trends with popular ETFs having a Zacks Rank #1 (Strong Buy) or #2 (Buy). Vanguard Value ETF (VTV - Free Report) , iShares Russell 1000 Value ETF (IWD - Free Report) , iShares S&P 500 Value ETF (IVE - Free Report) , SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) and Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) look like compelling choices.
Among the latest data, wholesale prices accelerated at a faster-than-expected pace in February. The producer price index, which measures pipeline costs for raw, intermediate and finished goods, jumped 0.6% in the month, higher than the 0.3% forecast by Dow Jones and 0.3% increase in January. Meanwhile, consumer inflation was hot as costs for gasoline, shelter, airfare and car insurance rose. The Consumer Price Index grew at an annual rate of 3.2% in February, marginally up from a 3.1% increase in January. Economists also expected an increase of 3.1% (read: Dividend ETFs to Consider Amid Hot Inflation Data).
Last week, the Federal Reserve Chair Jerome Powell told a U.S. Senate committee that the central bank is “not far" from being confident that inflation is declining toward the 2% target, which would make rate cuts possible. However, Powell noted that policymakers still need “greater confidence” in its continued decline before cutting rates.
Further, the improving economy backed by increased consumer confidence, rising wages and higher spending results in increased industrial activity and a pickup in consumer demand, thereby lifting value stocks. The forthcoming U.S. presidential election and conflicts in Ukraine and Gaza have resulted in some worries, which also make value stocks a better bet at present.
Vanguard Value ETF targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. It holds 350 stocks in its basket, with each accounting for less than 4% of the assets. Vanguard Value ETF has AUM of $115.1 billion and charges 4 bps in annual fees. The product trades in a volume of 2.4 million shares per day on average.
iShares Russell 1000 Value ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies. It tracks the Russell 1000 Value Index and holds 847 well-diversified stocks in its basket. iShares Russell 1000 Value ETF has amassed $54.9 billion in its asset base and trades in an average daily volume of 2 million shares. It charges 19 bps in annual fees.
With AUM of $32.9 billion, iShares S&P 500 Value ETF follows the S&P 500 Value Index, holding 444 stocks in its basket. It is widely spread across components, with none accounting for less than 3.8% of the assets. iShares S&P 500 Value ETF trades in a volume of 1 million shares per day on average and charges 18 bps in annual fees.
SPDR Portfolio S&P 500 Value ETF tracks the S&P 500 Value Index, charging investors 4 bps in annual fees. It holds 444 stocks in its basket, with each accounting for no more than 3.8% of the assets. SPDR Portfolio S&P 500 Value ETF has amassed $20.8 billion in its asset base and sees an average daily volume of 3 million shares (read: S&P 500 ETF (SPY) Approaches $500B AUM Landmark).
Schwab U.S. Large-Cap Value ETF follows the Dow Jones U.S. Large-Cap Value Total Stock Market Index, which includes the components ranked 1-750 by full market capitalization and classified as "value" based on a number of factors. It holds 507 stocks in its basket, with none making up for more than 3.5% share. Schwab U.S. Large-Cap Value ETF has AUM of $10.8 billion and charges 4 bps in annual fees. It trades in an average daily volume of 465,000 shares.
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Top-Ranked Value ETFs to Buy Amid Uncertainty Around Rate Cut
Wall Street has touched a series of record highs this year but uncertainty surrounding the Fed rate cuts has been weighing on investors’ sentiment. Inflation is running hotter than expected, sparking concerns about the Fed interest rates cut in June. Per CME's FedWatch tool, the market has trimmed the odds of a cut of at least 25 bps at its June meeting to 62.9%, down from 81.7% a week ago (read: Ride the S&P 500 Wave With These ETFs).
The uncertainty has raised the appeal for value investing. This is because value investing involves buying stocks or other financial assets that are believed to be undervalued or trading below their intrinsic worth. Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. Value stocks are less susceptible to trending markets and their dividend payouts offer safety in times of market turbulence.
While there are many options available in this space, investors could tap the trends with popular ETFs having a Zacks Rank #1 (Strong Buy) or #2 (Buy). Vanguard Value ETF (VTV - Free Report) , iShares Russell 1000 Value ETF (IWD - Free Report) , iShares S&P 500 Value ETF (IVE - Free Report) , SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) and Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) look like compelling choices.
Among the latest data, wholesale prices accelerated at a faster-than-expected pace in February. The producer price index, which measures pipeline costs for raw, intermediate and finished goods, jumped 0.6% in the month, higher than the 0.3% forecast by Dow Jones and 0.3% increase in January. Meanwhile, consumer inflation was hot as costs for gasoline, shelter, airfare and car insurance rose. The Consumer Price Index grew at an annual rate of 3.2% in February, marginally up from a 3.1% increase in January. Economists also expected an increase of 3.1% (read: Dividend ETFs to Consider Amid Hot Inflation Data).
Last week, the Federal Reserve Chair Jerome Powell told a U.S. Senate committee that the central bank is “not far" from being confident that inflation is declining toward the 2% target, which would make rate cuts possible. However, Powell noted that policymakers still need “greater confidence” in its continued decline before cutting rates.
Further, the improving economy backed by increased consumer confidence, rising wages and higher spending results in increased industrial activity and a pickup in consumer demand, thereby lifting value stocks. The forthcoming U.S. presidential election and conflicts in Ukraine and Gaza have resulted in some worries, which also make value stocks a better bet at present.
Top ETF Picks
Vanguard Value ETF (VTV - Free Report)
Vanguard Value ETF targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. It holds 350 stocks in its basket, with each accounting for less than 4% of the assets. Vanguard Value ETF has AUM of $115.1 billion and charges 4 bps in annual fees. The product trades in a volume of 2.4 million shares per day on average.
iShares Russell 1000 Value ETF (IWD - Free Report)
iShares Russell 1000 Value ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies. It tracks the Russell 1000 Value Index and holds 847 well-diversified stocks in its basket. iShares Russell 1000 Value ETF has amassed $54.9 billion in its asset base and trades in an average daily volume of 2 million shares. It charges 19 bps in annual fees.
iShares S&P 500 Value ETF (IVE - Free Report)
With AUM of $32.9 billion, iShares S&P 500 Value ETF follows the S&P 500 Value Index, holding 444 stocks in its basket. It is widely spread across components, with none accounting for less than 3.8% of the assets. iShares S&P 500 Value ETF trades in a volume of 1 million shares per day on average and charges 18 bps in annual fees.
SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report)
SPDR Portfolio S&P 500 Value ETF tracks the S&P 500 Value Index, charging investors 4 bps in annual fees. It holds 444 stocks in its basket, with each accounting for no more than 3.8% of the assets. SPDR Portfolio S&P 500 Value ETF has amassed $20.8 billion in its asset base and sees an average daily volume of 3 million shares (read: S&P 500 ETF (SPY) Approaches $500B AUM Landmark).
Schwab U.S. Large-Cap Value ETF (SCHV - Free Report)
Schwab U.S. Large-Cap Value ETF follows the Dow Jones U.S. Large-Cap Value Total Stock Market Index, which includes the components ranked 1-750 by full market capitalization and classified as "value" based on a number of factors. It holds 507 stocks in its basket, with none making up for more than 3.5% share. Schwab U.S. Large-Cap Value ETF has AUM of $10.8 billion and charges 4 bps in annual fees. It trades in an average daily volume of 465,000 shares.