Top-Ranked Value ETFs To Add To Your Portfolio

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The year 2021 has started off on a good note for the value stocks. In the pandemic-stricken 2020, investors had shown increased inclination toward growth stocks that were gaining from record-low interest rates. However, an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the pandemic-led economic slowdown. These factors are creating a conducive environment for value stocks to outperform their growth counterparts this year.

Importantly, value stocks beat growth stocks by the highest margin since 2001 in February 2021, according to Bank of America (per a Business Insider article). Bank of America also believes that although the shift to value stocks had begun with rising 10-year U.S. Treasury Note yields, the outperformance is here to stay in the ongoing year led by a host of other tailwinds. In this regard, analysts have also said that “although rising rates triggered the rotation, we see a host of other reasons to prefer value over growth, including the profit cycle, valuation, and positioning that can drive further outperformance," as stated in the above-mentioned article.

If this was not enough, Steve Chiavarone, portfolio manager, equity strategist and vice president at Federated Hermes believes that cyclical stocks belonging to the value investing category are projected to witness 250% earnings growth in the second quarter, according to a CNBC article.

Also, the Federal Reserve has raised its economic growth outlook considering the vaccine and stimulus optimism and expects higher inflation this year. The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020, per a CNBC article. It has also raised the economic growth forecast from 3.2% to 3.3% for 2022. Moving on, growth is likely to cool down to 2.2% in 2023. The Fed has predicted longer-run growth measure at 2.3% (read: Ride the Latest Fed Minutes Optimism With These ETFs).

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