ETF Investors Are Starting to Shift Toward Value
This article was originally published on ETFTrends.com.
After years of leading the pack, growth stocks have taken a hit in this year's selling, and ETF investors are turning to the value style as a suitable alternative.
For example, the iShares Russell 1000 Value ETF (IWD) has been among the most popular plays in recent weeks, attracting close to $1.1 billion in net inflows over the past week and $2.5 billion in the past month, according to XTF data.
In comparison, the large-cap growth-oriented iShares Russell 1000 Growth ETF (IWF) saw $824 million in new inflows over the past month while the the large-cap blend iShares Russell 1000 ETF (IWB) experienced $814 in net inflows.
As the U.S. stock market selling intensifies, strategists have advised investors to buy value over growth, which Bank of America Merrill Lynch technical analysts including Stephen Suttmeier argued is in a "corrective phase," Bloomberg reports. Suttmeier expects growth to underperform value into late 2019.
Warnings About Value Investing
However, some warned of the knee-jerk reaction to turn to value since the style heavily weighted toward potentially troubled areas of the markets. For example, IWD includes a 27% tilt toward the financial sector, so the fund may not be as defensive as one may expect given the problems surrounding banks in the current environment.
The financial sector was the worst performing of 11 main segments of the S&P 500 last week, falling off 3.5%., which contributed to a 1.8% decline for IWD, or double that of IWF.
“There’s that visceral reaction that sends investors to value, and then there’s a rethinking of that,” Kristina Hooper, chief global market strategist at Invesco Ltd., told Bloomberg. “You may see investors move some of that money to other places, factoring in, for example, that financials may not look like a strong opportunity in the near term.”
Nevertheless, the value style did hold up or at least did not do as poorly as the other areas. Over the past three months, IWD fell 10.1% while IWF dropped 13.6% and IWB decreased 11.9%.
For more information on the ETF industry, visit our ETF performance reports category.
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