Finding Value in Stocks, Despite Omicron, to Close the Year
Value stocks have fallen out of favour recently, with investors decreasing positions, after a strong start to the year.
The short-term impact of the Omicron variant may present an opportunity to re-engage the value trade and position portfolios for the long-term trend of economic recovery.
SPDR® offers a range of ETFs tracking Exposure Select indices for investors seeking to take advantage of value stocks, while using a ‘light quality touch’ in stock selection.
Equity markets have responded negatively since the emergence of the new Omicron variant of the COVID-19 virus. The anticipated response of global governments to the spread of this new variant may cause both consumer and producer activity to decrease in the short term. This development has forced investors to re-consider their long equity positions heading into year end. The short-term volatility in stocks presents an opportunity for investors if the longer-term recovery trends remain in place (i.e. increased consumer activity, resolution of labour and supply chain dislocations).
At this time last year, investors were significantly underweight value stocks. The pandemic forced low interest rate policies from central banks and accelerated structural trends, such as remote working. These factors contributed to growth stocks being perceived as relatively safe positions. The news that a COVID vaccine would soon be widely available triggered months of relative outperformance in the value trade1, as value stocks were seen as a way to play the recovery of economic activity.
Investors are once again underweight value. The preference for high quality growth stocks has driven the price of their earnings higher in recent years (see Figure 1). While investors have benefitted from higher return on equity in growth stocks (see Figure 2), we fear that these trends may slow or reverse in 2022.
The catalyst for a reversal could be if central banks pursue a normalising of interest rate policy, driving long-term interest rates higher. This is already being signalled by the US Federal Reserve, which recently announced a potential acceleration in the reduction of asset purchases and planned rate hikes to combat the strong inflation statistics.
Figure 1: Relative Price to Earnings (Last 10 years)
Figure 2: Relative Return on Equity (Last 10 years)
As investors prepare for the end 2021, with an eye toward positioning for Q1 2022, it would be prudent to weigh both the short-term risks of Omicron volatility and the longer-term trend of economic recovery. If the long-term recovery is not significantly interrupted, then the short-term volatility presents a significant opportunity for investors to benefit from reducing the underweight in value stocks and positioning for upside potential. We would recommend investors use quality to their advantage, by considering a selective approach to playing value stocks.
How does an Exposure Select strategy help investors play Value while avoiding traps?
Investors using value strategies to take advantage of cheap stocks need to protect their portfolios against stocks that are cheap for a reason. Value Exposure Select strategies can allow investors to access strong value factor exposure, while seeking to avoid value traps by using a light quality touch. To learn more about our range of value ETFs, please visit our Smart Beta Investment Ideas page.
1 The SPDR® MSCI World Value UCITS ETF outperformed the MSCI World Index by approximately 7.2% in Q1 2021. Source: FactSet as of 1 January 2021 to 31 March 2021.
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For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.F: +49 (0)89-55878-440.
For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.
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For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIIDs as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. Telephone: +49 (0)89-55878-400. Facsimile: +49 (0)89-55878-440.
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Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16.
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IL EST POSSIBLE QUE LES SPDR ETF DE SSGA NE VOUS SOIENT PAS DISPONIBLES OU NE VOUS CONVIENNENT PAS. LES OPINIONS/INFORMATIONS PRÉSENTÉES SUR CE SITE NE SAURAIENT CONSTITUER UN CONSEIL EN INVESTISSEMENT OU UN CONSEIL D’ORDRE FINANCIER, JURIDIQUE, RÉGLEMENTAIRE, COMPTABLE OU FISCAL. EN CAS DE DOUTE, DEMANDEZ L'AVIS D'UN CONSEILLER INDÉPENDANT. LES INFORMATIONS ET OPINIONS PRÉSENTÉES SUR CE SITE NE SAURAIENT CONSTITUER UNE SOLLICITATION OU UNE OFFRE D’ACHAT OU DE VENTE DE PARTS DES FONDS OU DE TOUT AUTRE INSTRUMENT FINANCIER.
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Les SPDR ETF ne peuvent être offerts et vendus que dans les juridictions où cela est autorisé conformément aux dispositions légales en vigueur.
Informations relatives au Mexique
Les informations figurant dans ce document ne constituent en aucun cas une offre de titres financiers et ne sauraient être considérées comme telles. Les Fonds mentionnés dans ce document ne sont et ne seront pas agréés en vertu de la Mexican Securities Market Law (Ley del Mercado de Valores). Ils ne peuvent faire l’objet d’aucune offre publique, pas plus qu’ils ne peuvent être vendus sur le territoire des États-Unis d’Amérique. Il est interdit de distribuer publiquement les documents informatifs liés aux fonds susmentionnés sur le territoire du Mexique, tout comme il est interdit d’y échanger des parts des Fonds.
OPCVM SPDR ETFs
SPDR ETFs Europe I Plc et SSGA SPDR ETFs Europe II Plc émettent les ETF SPDR et sont une société d’investissement à capital variable et à compartiments assortis d’une responsabilité séparée. La Société est structurée comme un Organisme de placement collectif en valeurs mobilières (OPCVM) conformément à la législation irlandaise et agréée en qualité d’OPCVM par la Banque centrale d’Irlande.
Ce site web s'adresse uniquement aux investisseurs qualifiés, tels que définis par l'article 10 (3) et (3ter), de la loi suisse sur les placements collectifs de capitaux (« LPCC ») et son ordonnance d'application. Certains fonds peuvent ne pas être enregistrés pour la distribution publique auprès de l'Autorité fédérale de surveillance des marchés financiers (FINMA), qui agit en tant qu'autorité de surveillance en matière de fonds de placement, ou peuvent ne pas avoir désigné de représentant et d'agent payeur suisse. Pour les fonds qui ont désigné un représentant et un agent payeur, les investisseurs intéressés peuvent obtenir les prospectus, les statuts, les DICI ainsi que les derniers rapports annuels ou semestriels disponibles gratuitement auprès du représentant et agent payeur suisse, State Street Bank International GmbH, Munich, succursale de Zurich, Beethovenstrasse 19, 8027 Zurich, ou sur le site https://www.ssga.com, ainsi qu’auprès du distributeur principal en Suisse, State Street Global Advisors AG (« SSGA AG »), Beethovenstrasse 19, 8027 Zurich. Pour les fonds qui n'ont pas désigné de représentant ni d'agent payeur en Suisse, veuillez noter que les fonds sont ouverts aux investisseurs qualifiés, à l'exclusion des investisseurs qualifiés bénéficiant d'une clause d'exclusion (« opting-out ») conformément à l'art. 5(1) de la loi fédérale suisse sur les services financiers (« FinSA ») et sans aucune relation de gestion de portefeuille ou de conseil avec un intermédiaire financier conformément à l'article 10(3ter) de la LPCC (« Investisseurs Qualifiés Exclus »). Pour obtenir plus d'informations et les documents relatifs au fonds, veuillez contacter SSGA AG.
Vous devez vous procurer et lire le prospectus et le document d'information clé pour l'investisseur (DICI) de SPDR avant d’investir. Ils sont disponibles en cliquant ici. Ceux-ci comprennent des informations complémentaires concernant les fonds SPDR, y compris des informations relatives aux coûts, aux risques et où les fonds sont autorisés à la vente.
ETFs SPDR américains
La distribution des intérêts des ETF SPDR américains en Suisse sera exclusivement faite à des investisseurs qualifiés et s'adressera uniquement à ceux-ci, tels que définis par l'article 10(3) et (3ter), de la loi suisse sur les placements collectifs de capitaux (« LPCC ») et son ordonnance d'application. Par conséquent, les ETF SPDR américains ne sont pas enregistrés pour une distribution publique auprès de l'Autorité fédérale de surveillance des marchés financiers (« FINMA »). Certains fonds peuvent ne pas avoir désigné de représentant et d'agent payeur suisse. Pour les fonds avec un représentant et un agent payeur suisse, les investisseurs intéressés peuvent obtenir les documents juridiques liés aux ETFs SPDR américains gratuitement auprès du représentant et agent payeur suisse, State Street Bank International GmbH, Munich, succursale de Zurich, Beethovenstrasse 19, 8027 Zurich, ou sur le site https://www.ssga.com, ainsi qu’auprès du distributeur principal en Suisse, State Street Global Advisors AG (« SSGA AG »), Beethovenstrasse 19, 8027 Zurich. Pour les fonds sans représentant ni agent payeur suisse, veuillez noter que les fonds sont ouverts aux investisseurs qualifiés, à l'exclusion des investisseurs qualifiés ayant une clause d’exclusion (« opting-out ») conformément à l'art. 5(1) de la loi fédérale suisse sur les services financiers (« FinSA ») et sans relation de gestion de portefeuille ou de conseil avec un intermédiaire financier conformément à l'article 10 (3ter) de la LPCC (« Investisseurs Qualifiés Exclus »). Pour obtenir plus d'informations et les documents relatifs au fonds, veuillez contacter SSGA AG.
Avant d’investir, il convient d’analyser les objectifs d’investissement, les risques, les frais et les dépenses des fonds. Pour obtenir un prospectus contenant ces informations et d'autres, téléchargez le ici ou adressez-vous à votre conseiller financier. Lisez-le attentivement avant d'investir.