By Christine Idzelis
Happy Thursday! This is markets reporter Christine Idzelis covering ETF Wrap this week for MarketWatch’s Mark DeCambre.
For this edition, I spoke with Todd Rosenbluth, head of ETF and mutual fund research at CFRA, about investors’ “meaningful swing toward value and away from growth that coincides with the likelihood of rising interest rates becoming a reality.” According to Rosenbluth, “what’s inside your value ETF might surprise you.”
I also caught up with Morgan Creek’s CEO Mark Yusko about his firm’s new SPAC Arbitrage ETF, which he says is designed to give investors an alternative to cash amid today’s challenges of low interest rates and hot inflation.
As per usual, send tips or feedback. You can also follow me on Twitter at @cidzelis and find Mark at @mdecambre .
|Top 5 gainers of the past week||%Performance|
|ProShares Bitcoin Strategy ETF /zigman2/quotes/230440344/composite BITO||18.4|
|Amplify Transformational Data Sharing ETF /zigman2/quotes/204122720/composite BLOK||5.9|
|ETFMG Prime Junior Silver Miners ETF /zigman2/quotes/207797470/composite SILJ||4.9|
|SPDR S&P Metals & Mining ETF /zigman2/quotes/209640763/composite XME||4.8|
|U.S. Global Jets ETF /zigman2/quotes/207744796/composite JETS||4.4|
|Source: FactSet, through Wednesday, Feb. 9, excluding ETNs and leveraged products . Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greate r|
…and the bad
|T op 5 decliners of the past week||%Performance|
|Communication Services Select Sector SPDR Fund /zigman2/quotes/204079482/composite XLC||-8.1|
|Vanguard Communication Services ETF /zigman2/quotes/210494949/composite VOX||-6.6|
|Fidelity MSCI Communication Services Index ETF /zigman2/quotes/208532887/composite FCOM||-6.5|
|First Trust Natural Gas ETF /zigman2/quotes/209055321/composite FCG||-4.0|
|Vanguard Extended Duration Treasury ETF /zigman2/quotes/205711909/composite EDV||-3.7|
Value ETF surprises?
Value stocks have been in vogue for investors in exchange-traded funds this year, amid heightened anticipation the Federal Reserve will begin battling hot inflation by lifting its benchmark interest rate from near zero.
In 2022 investors have poured about $2 billion into S&P 500 Value Index-based ETFs as of Feb. 4, while pulling a similar amount from S&P 500 Growth funds, according to Todd Rosenbluth, head of ETF and mutual fund research at CFRA.
“It’s a meaningful swing toward value and away from growth that coincides with the likelihood of rising interest rates becoming a reality,” said Rosenbluth, in a phone interview. “People tend to think of certain sectors being more value oriented,” such as financials, energy and consumer staples, he said.
But “what’s inside your value ETF might surprise you,” Rosenbluth wrote in a note this week, saying the S&P 500 Value and Russell 1000 Value indexes own stocks across all 11 sectors under the Global Industry Classification Standard.
And value ETFs are not all built the same.
For example, the iShares S&P 500 Value ETF /zigman2/quotes/206097129/composite IVE +0.57% holds stakes in Visa Inc. /zigman2/quotes/203660239/composite V -0.42% and Mastercard Inc. /zigman2/quotes/207581792/composite MA -0.08% , increasing its exposure to the information technology sector relative to the iShares Russell 1000 Value ETF /zigman2/quotes/206232959/composite IWD +0.45% , which does not share those holdings, according to his note.
“Technology tends to be considered a growth sector,” Rosenbluth told MarketWatch. “It’s just making sure you know what you’re getting.”
Nothing’s “wrong” with seeking bets on “value-oriented” technology stocks, he said but explained that some investors may be aiming to reduce tech sector exposure in their portfolios. Or, investors keen on financials may want to compare the sector’s weightings among value ETFs, according to Rosenbluth.
The iShares S&P 500 Value ETF recently had a smaller position in financials compared to the iShares Russell 1000 Value ETF, but larger stakes in the consumer discretionary, consumer staples and tech sectors, the CFRA note shows.
The iShares Russell 1000 Value ETF is more than twice the size of its iShares S&P 500 Value ETF based on assets under management and has nearly double the number of holdings, according to Rosenbluth’s note.