5 Great Value ETFs To Buy As Inflation Fears Grip Markets

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As rising commodity prices have sparked inflation fears, investors are rotating out of the high-growth areas into the low-valued stocks. This is especially true as value stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued by the market.

Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. Additionally, value stocks are less susceptible to trending markets and their dividend payouts offer safety in times of market turbulence. Currently, the stock market is being hit by resurging coronavirus cases in Asia, which could dampen the global economic recovery.

Investors should note that the U.S. economy is running hot given the rapid pace of vaccinations, massive stimulus, and large infrastructure spending. This has ignited fears of inflation. The consumer price index for April jumped 4.2% from the year-ago level, representing the sharpest increase since September 2008 and raising concerns that the U.S. economy is overheating.

Moreover, the improvement in corporate earnings growth bodes well for the value stocks. The overall earnings picture for Q1 emerged as one of all-around strength and momentum. Earnings for the 92% of the S&P 500 companies that have reported Q1 results are up 45.8% on 9.0% higher revenues, with 86.1% beating EPS estimates and 76.8% beating revenue estimates. Earnings and revenue growth are tracking above the group’s recent trend, including the pre-pandemic period.

In fact, the overall Q1 total earnings are on track to reach a new all-time quarterly record. Further, estimates for the current and coming quarters are steadily going up — a trend that has been in place since last summer. The positive revisions trend is likely to accelerate in the coming months as we start looking past the pandemic.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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