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The year 2018 was tumultuous for Wall Street, thanks to renewed global growth worries, Fed’s policy tightening, fears of peaking U.S. economic growth, trade war tensions and the government shutdown in the United States. SPDR S&P 500 ETF (SPY - Free Report) (down 9.9%),SPDR Dow Jones Industrial Average ETF (DIA - Free Report) (down 9.54%) and Nasdaq-100 based Invesco QQQ Trust (QQQ - Free Report) (down 5.8%) — all ended the year in the red (read: 10 Top-Ranked ETFs That Crushed the Market in 2018).
Still, growth stocks outperform value ones in 2018 with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) losing 3.4% in the past year (as of Jan 2, 2018) compared with 11.9% one-year losses seen in SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) .
But with most of the concerning factors remaining in place, investors have every reason to be in two minds in 2019. Market experts are advising caution despite the slot rebounds in the United States and Japan. The markets have been in decent shape at the end of 2019 probably “in the absence of more bad news.”
Global economic news and indications have been mixed. In China, industrial profits declined in November for the first time in three years, reinforcing global growth fears. All these make the longevity of the latest Wall Street rally unlikely (read: Most Loved and Hated ETFs of 2018).
Why Value ETFs?
A pool of global worries leads us to believe that U.S. stocks are expected to be stable in the near term but choosing a value investment is a great idea at the current level given a myriad of tensions including uncertainty regarding the trade war and slowdown in developed economies in Japan and the Euro zone as well as political uncertainty pertaining to Brexit.
Investors should note that value funds may have underperformed the growth ones in a rising rate environment in 2018, but rates in the United States are likely to remain low in 2019 as the Fed will cut the speed of its policy tightening momentum.
Against this scenario, below we highlight a few value ETFs from the global perspective that have lost a little in the past month (as of Jan 3, 2019) and beat S&P 500 (down 12.3%).
Invesco S&P International Developed High Dividend Low Volatility ETF – Down 1.7%
The S&P EPAC Ex-Korea Low Volatility High Dividend Index comprises 100 securities in the S&P EPAC Ex-Korea LargeMidCap Index that have historically provided high dividend yields with lower volatility over the past 12 months. It has double-digit weight in Japan (18.03%) and Australia (12.2%). The fund charges 30 bps and yields 4.87% annually (read: New International ETF Enters Market).
WBI Bull|Bear Rising Income 2000 ETF – Down 1.9%
The fund seeks long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions. Its expense ratio is 1.08%. The fund’s objective is to seek value and high-quality fundamentals.
Xtrackers MSCI EAFE High Dividend Yield Hedged Equity ETF (HDEF - Free Report) – Down 1.9%
The fund looks to give investors exposure to high-quality international equities across developed market countries, excluding the United States and Canada. Financials (21.45%), Health Care (15.05%), Consumer Discretionary (13.30%), Materials (11.29%) and Utilities (10.73%) are the top five sectors of the fund. The fund charges 20 bps in fees and yields 3.56% annually.
First Trust STOXX European Select Dividend Index Fund (FDD - Free Report) – Down 2.3%
The underlying index of the fund consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index. It charges 60 bps and yields 5.07% annually (read: A Dividend ETF Investing Guide).
Fidelity International Value Factor ETF (FIVA - Free Report) – Down 2.3%
The underlying index of the fund reflects the performance of stocks of large and mid-capitalization developed international companies that have attractive valuations. Japan takes the top spot (23.90%), followed by United Kingdom (14.29%). Financials (19.7%), Industrials (15.17%), Health Care (11.14%) and Consumer Staples (10.92%) are the top four sectors of the fund.
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Is 2019 a Year for Value ETFs?
The year 2018 was tumultuous for Wall Street, thanks to renewed global growth worries, Fed’s policy tightening, fears of peaking U.S. economic growth, trade war tensions and the government shutdown in the United States. SPDR S&P 500 ETF (SPY - Free Report) (down 9.9%),SPDR Dow Jones Industrial Average ETF (DIA - Free Report) (down 9.54%) and Nasdaq-100 based Invesco QQQ Trust (QQQ - Free Report) (down 5.8%) — all ended the year in the red (read: 10 Top-Ranked ETFs That Crushed the Market in 2018).
Still, growth stocks outperform value ones in 2018 with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) losing 3.4% in the past year (as of Jan 2, 2018) compared with 11.9% one-year losses seen in SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) .
But with most of the concerning factors remaining in place, investors have every reason to be in two minds in 2019. Market experts are advising caution despite the slot rebounds in the United States and Japan. The markets have been in decent shape at the end of 2019 probably “in the absence of more bad news.”
Global economic news and indications have been mixed. In China, industrial profits declined in November for the first time in three years, reinforcing global growth fears. All these make the longevity of the latest Wall Street rally unlikely (read: Most Loved and Hated ETFs of 2018).
Why Value ETFs?
A pool of global worries leads us to believe that U.S. stocks are expected to be stable in the near term but choosing a value investment is a great idea at the current level given a myriad of tensions including uncertainty regarding the trade war and slowdown in developed economies in Japan and the Euro zone as well as political uncertainty pertaining to Brexit.
Investors should note that value funds may have underperformed the growth ones in a rising rate environment in 2018, but rates in the United States are likely to remain low in 2019 as the Fed will cut the speed of its policy tightening momentum.
Against this scenario, below we highlight a few value ETFs from the global perspective that have lost a little in the past month (as of Jan 3, 2019) and beat S&P 500 (down 12.3%).
Invesco S&P International Developed High Dividend Low Volatility ETF – Down 1.7%
The S&P EPAC Ex-Korea Low Volatility High Dividend Index comprises 100 securities in the S&P EPAC Ex-Korea LargeMidCap Index that have historically provided high dividend yields with lower volatility over the past 12 months. It has double-digit weight in Japan (18.03%) and Australia (12.2%). The fund charges 30 bps and yields 4.87% annually (read: New International ETF Enters Market).
WBI Bull|Bear Rising Income 2000 ETF – Down 1.9%
The fund seeks long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions. Its expense ratio is 1.08%. The fund’s objective is to seek value and high-quality fundamentals.
Xtrackers MSCI EAFE High Dividend Yield Hedged Equity ETF (HDEF - Free Report) – Down 1.9%
The fund looks to give investors exposure to high-quality international equities across developed market countries, excluding the United States and Canada. Financials (21.45%), Health Care (15.05%), Consumer Discretionary (13.30%), Materials (11.29%) and Utilities (10.73%) are the top five sectors of the fund. The fund charges 20 bps in fees and yields 3.56% annually.
First Trust STOXX European Select Dividend Index Fund (FDD - Free Report) – Down 2.3%
The underlying index of the fund consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index. It charges 60 bps and yields 5.07% annually (read: A Dividend ETF Investing Guide).
Fidelity International Value Factor ETF (FIVA - Free Report) – Down 2.3%
The underlying index of the fund reflects the performance of stocks of large and mid-capitalization developed international companies that have attractive valuations. Japan takes the top spot (23.90%), followed by United Kingdom (14.29%). Financials (19.7%), Industrials (15.17%), Health Care (11.14%) and Consumer Staples (10.92%) are the top four sectors of the fund.
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 >>