Money seems to be moving into value, and away from momentum. You’ll recall my last blog where I noted that the Russell 2000 small capped index (IWM) was on the verge of popping. The IWM ETF can represent stocks that offer some level of “value” – mainly when markets have focused on large capped stocks. But what about “true” value stocks–including the large capped arena?
How do they compare to the momentum stocks – like the technology and growth stocks – which have dominated over much of the bull market? Let’s have a look!
You can see on the iShares VLUE (US Value stocks) ETF has been in the early stages of a breakout move.
In fact, the S&P 500 has been entirely influenced by value stocks of late. Check out that breakout on the iShares S&P 500 value stock ETF. This is impressive indeed.
Comparably, the iShares MSCI International Value ETF (IWFV-LSE) is also breaking out – albeit early stage. Note that I chose to use this London Stock Exchange (LSE) listed ETF chart over the US-exchange listed chart. That’s because the USD fell over the past couple of months against most currencies. That move made the US listed International or European stocks outperform their actual stock performance when prices were converted to the USD. By looking at the IWFV chart, we get to see how the stocks did with less of the USD’s decline “helping out” on the relative performance. Make sense?
Now let’s take a look at the momentum stocks. Recall that right up until early 2018 – this has been a momentum market. Here in North America – it was all about the tech giants and a few other select big names. Now, they are (largely) treading water -per this blog that I wrote a couple of weeks ago
The iShares US momentum ETF (MTUM-US) is moving sideways against a rising market.
The iShares MSCI International momentum ETF (IWFM-LSE) – is also showing weakness. While still contained within its uptrend, it is rounding down while most world indices are picking up some speed. This implies weakness within the recent momentum players vs. the broader markets. Again, I used the iShares product trading on the LSE. In this way, we compare apples to apples. Much like the US momentum ETF, international markets are not rewarding momentum stocks lately.
Perhaps we should be tearing the value-based ETF’s apart for our stock ideas. If the market is starting to rotate into low PE, PB, etc types of value plays, who are we to argue?
As always, I don’t have all the answers, and I encourage you to comment with your own thoughts below. I hope this blog stimulated some exploration on your side!
Keith at the Orlando Moneyshow
Date: February 7, 2020, 5:30 pm – 6:15 pm at the Orlando Omni resort.
Here is a 1-minute video describing the talk.