As CPI Report Expectations Darken, Look to Value ETF Opportunities
This week’s July CPI report looms over markets, with so much uncertainty already bubbling up under portfolios. Investors have options, however, for an outlook that sees inflation continue to resist efforts to tame it. Value ETF strategies, for example, may outperform in times of growing inflation. The American Century U.S. Quality Value ETF (VALQ), for example, may do well combining ETF tax efficiency and a dedicated, quality value view.
Key Takeaways:
- VALQ’s relatively competitive fee may help it appeal as a source of return amid potentially stubborn inflation.
- The strategy has returned 17.3% over the last one year period per ETF Database data.
- It has done so while largely avoiding the concentration risk found in growthier, broad market funds.
VALQ charges a 29 basis point (bps) fee for its approach. The strategy tracks the American Century U.S. Quality Value Index. That index screens stocks for quality, value, and income. VALQ aims to balance stocks showing sustainable income with solid value stocks. Specifically, the strategy focuses on a tight slice of the market, combining those quality and value views to craft its portfolio.
The value ETF has performed well over the long term and could be poised to spike this year if the CPI report shows worsening inflation. The fund has returned 17.3% over the last twelve months and 14.65% over the last three years. That three year performance in particular, per ETF Database data, has seen the ETF beat its ETF Database Category average. That Large Cap Value Equities category average came in at just 14.2% over three years.
With stocks already highly valued, and concentration risk looming, VALQ can help diversify portfolios. The strategy right now includes the kind of classic value segments like financials and communications companies. That includes names like Charles Schwab (SCHW) and Verizon Communications (VZ), up 6.4% and 16.6% YTD, respectively.
See more: How KORP’s Corporate Bond Yields Have Beaten the Benchmark
Together, the quality value ETF could prove a useful strategy to add if the CPI report augurs tougher inflation ahead. The fund’s steady performance and usefulness as a diversifier may make it one to watch in the weeks and months ahead.
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VettaFi LLC (“VettaFi”) is the index provider for VALQ for which it receives an index licensing fee. However, VALQ is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VALQ.
