By Mark DeCambre
Thank god its Thursday! The Nasdaq Composite posted its first correction since March and equity benchmarks were trying to stage a mini rally, at last check on Thursday.
Is this the beginning of the end or the end of the beginning? We asked some pros in exchange-traded funds, and markets broadly, to walk us through a game plan for the stomach-churning drops and the neck-snapping rallies.
Don’t fret! Low-cost ETFs are still one of the best ways to gain exposure to the markets while avoiding single-stock risk, but we’ll walk you through some strategies and help to identify what has been working and what hasn’t since the start of the year.
Read: What is an ETF? We’ll explain.
|Top 5 gainers of the past week||%Performance|
|iShares MSCI Russia ETF||-14.1|
|VanEck Russia ETF||-13.3|
|ARK Genomic Revolution ETF /zigman2/quotes/206454610/composite ARKG||-12.6|
|ARK Innovation ETF /zigman2/quotes/204808965/composite ARKK||-11.6|
|ARK Fintech Innovation ETF /zigman2/quotes/205650811/composite ARKF||-11.1|
|Source: FactSet, through Wednesday, Jan. 19, excluding ETNs and leveraged products . Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greate r|
…and the good
|Top 5 decliners of the past week||%Performance|
|U.S. Oil Fund LP /zigman2/quotes/203483736/composite USO||4.8|
|Global X Copper Miners ETF||3.9|
|iShares Global Energy ETF /zigman2/quotes/200230708/composite IXC||3.4|
|iShares MSCI Brazil ETF /zigman2/quotes/208893627/composite EWZ||3.2|
|Aberdeen Standard Physical Silver Shares ETF /zigman2/quotes/207011629/composite SIVR||3.1|
Value in vogue
ETF Wrap caught up with Bloomberg ETF analyst Eric Balchunas on Thursday and he walked us through the landscape in funds, with the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -1.96% in correction, and choppy trade in the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.77% , and the broad-market S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.30% becoming more the norm so far in January.
His message was pretty clear: value is the place where investors this year feel that they need to be, and he predicted that the shift taking shape in the value factor, an area of the market hat has taken a back seat to growth and highflying technology stocks since the 2008 financial crisis, thus far in 2022, may be the real deal.
“This isn’t a flash in the pan,” Balchunas said. “Value [investors] are saying that it’s time and I am committed,” the Bloomberg Intelligence analyst said.
And it isn’t merely about the performance of value over growth that Balchunas is highlighting. Thus far, 32% of the net inflows this year, or $5.6 billion of $17.6 billion, have been directed to value factor ETFs.
And the allocation has been diverse. More than 80 value ETFs drew net inflows, led by biggies Vanguard Value ETF /zigman2/quotes/209486178/composite VTV -0.74% and the iShares S&P 500 Value ETF /zigman2/quotes/206097129/composite IVE -0.96% .
The year-to-date outperformance is besides the point but still notable, with the comparable iShares S&P 500 Growth ETF /zigman2/quotes/208542267/composite IVW -1.54% looking at an over 7 percentage point gap between itself and the IVE (see attached of the iShares Value ETF’s performance versus growth so far this year). That is the largest outperformance over the first 13 days of the year on record (based on data back to 2001), according to Dow Jones Market Data.
And international value, ETFs focused on the factor outside of the U.S., also are buzzing. The iShares MSCI EAFE Value ETF /zigman2/quotes/208047217/composite EFV -0.52% is up 4.8% so far this year and within the top three of funds attracting investors, Balchunas said.
Growth on the other hand is getting smacked around, but the bulk of that pain is being felt in the Invesco QQQ Trust /zigman2/quotes/208575548/composite QQQ -2.02% , which is down 6.4% so far in 2022 and has seen about $3.3 billion come out of the ETF, representing a chunk of the $6.5 billion that has flowed out of growth factor funds so far this year.