Business as usual meme8/27/2023 ![]() ![]() On the other hand, iShares MSCI USA Momentum Factor ETF MTUM outperformed ITOT by more than 6 percentage points over the past year. By the end of January, that discount had narrowed to 6%. VLUE finished October trading 21% below its fair value. As a result, the value stocks in VLUE's portfolio have begun to look like less of a bargain. Over the past three months, it outperformed ITOT by 7 percentage points. But VLUE has been scratching its way back. For example, iShares MSCI USA Value Factor ETF VLUE lagged ITOT by more than 13 percentage points over the 12 months through January. The dispersion of returns and valuation spreads among single-factor strategic-beta ETFs speaks to the forces that have defined stock markets of late. These ETFs have gathered nearly $27 billion in net new assets in the past three months after having been largely ignored by investors for most of 2020. Just over $10 billion flowed into these funds last month. ![]() ETFs in the large-, mid-, and small-value Morningstar Categories found more buyers in January. Investors have taken note of value stocks' resurgence. The Morningstar US Small Value Index gained nearly 31% over the trailing three months, while the Morningstar US Large Growth Index was up by about 13%. The performance spread between small-cap value and large-cap growth stocks over this same three-month period approximated the broader small versus large gap. IJR spent most of 2020 trading at a considerable discount. IShares Core S&P Small-Cap ETF IJR gained 6.17% and ended the month trading at a 5% premium to its Morningstar fair value estimate. While large caps languished, small caps were still sizzling. Emerging-markets stocks, embodied here by iShares Core MSCI Emerging Markets ETF IEMG, gained nearly 3% in January, landing 3% above fair value. Foreign developed stocks, proxied by iShares Core MSCI EAFE ETF IEFA, slipped 0.74% and were trading a shade below fair value at month's end. Foreign stocks don't appear as fully valued. Stock Market ETF ITOT, were trading 7% above their fair value, as measured by the fund's Morningstar price/fair value estimate. stocks, represented here by iShares Core S&P Total U.S. Investors in a blended global market portfolio lost 0.43% during the month. Stocks Look a Bit Rich Exhibit 1 features January performance figures for a sampling of ETFs with Morningstar Analyst Ratings serving as proxies for major asset classes. Here, I will take a closer look at how major asset classes performed last month, where investors were putting their money, and which segments of the market looked cheap and dear at month's end-all through the lens of ETFs. After allocating a record $88.1 billion to equity ETFs in November and another $43.8 billion in December, investors poured $43.7 billion into these funds in January. Bond exchange-traded funds captured the majority of inflows for much of 2020, but recently flows have favored stocks. ![]()
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