Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Macro analyst Ben Ryan. Click here to learn more about the Early Look.
Over the last year, Quantitative Value (QVAL) has crushed the Russell 1000 Value Index and is almost keeping pace with the Russell 1000 Growth Index which has been a core “growth accelerating” exposure of ours since we introduced our Q1 2017 themes:
1Yr Performance of Index ETFs:
- Quantitative Value (QVAL): +34%
- Russell 1000 Growth (IWF): +37%
- Russell 1000 Value (IWD): +17%
The Russell 1000 “Value” index is constructed with Price-to-Book and Forward Earnings Growth Rate factors and ~70% of the Russell 1000 index members are included under the “value” or “growth” umbrellas.
Exposure to the Russell 1000 Value index takes on a tremendously higher amount of interest rate sensitivity than the aforementioned “Value” ETF which holds no Financials or REITs. Banks are the most heavily weighted industry group in the Russell 1000 Value Index at 15%. The bottom line is that these two “value” factor exposures are a world apart.
