Bet On Value ETFs To Tap An Uneven Market

Wall Street has shown a superb rally since hitting lows since late March on a surging technology sector, massive stimulus flowing into the economy, hopes of potential of COVID-19 vaccines, and pickup in economic activities due to easing of lockdown measures.

However, the rally halted last week as fears of a new wave of coronavirus infections have emerged given that some states, which have lifted lockdown orders, have seen rising cases. Florida is seeing an average of more than 1,600 new cases per day, and Arizona and North Carolina are experiencing an average of more than 1,200 new cases per day.

Additionally, the Fed’s bleak outlook on the economy also unnerved investors. The central bank said that the impacts of the COVID-19 pandemic would last for the next couple of months and cautioned that some of the millions of jobs that have been lost during the viral outbreak may never return. It warned that the U.S. economy will contract by 6.5% in 2020 before rebounding 5% next year, and the unemployment rate will fall to 9.3% by the end of this year. Though the unemployment rate is down from 13.3% in May, it will be substantially above the 3.5% rate recorded in February, which was a near 50-year low. Notably, the three major indices suffered their biggest weekly losses since Mar 20 last week.

The fears have been outweighed by the new Fed easing policies. The central bank would begin buying individual corporate bonds under its Secondary Market Corporate Credit Facility, an emergency lending program that to date has purchased only exchange-traded funds. Further, the Trump administration is preparing a nearly $1 trillion infrastructure proposal to spur the world’s largest economy back to life. The White House spending plan would be mostly for traditional infrastructure such as roads and bridges but also for 5G wireless infrastructure and rural broadband.

The move has led to a rebound in the stock market in the latest trading session and bolstered investors’ confidence. In such a scenario, value investing seems appealing to investors. 

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