Value's for Chumps as Market Puts Momentum ETFs Into Overdrive

For investors piling into the U.S. stock market, the investment choice is simple: ride the winners.

The S&P 500 Index has stormed into 2018 with a gain of nearly 5 percent as high flying tech and health-care shares keep rising. Investors chasing that momentum have pulled nearly $2.5 billion from one of the biggest value exchange-traded funds, a pace that would deliver a monthly record if it’s maintained.

The flows data on the iShares Russell 1000 Value ETF show that investors continue to chase performance as the equity bull market nears its ninth anniversary, with little patience for companies whose shares are thought to be undervalued by the market.

“As you get to this blow-off phase of the market, if you consider it a blow-out phase or more of a euphoria stage, you are probably going to see more of that -- where everyone is going into the momentum trade,” Don Riley, chief investment officer at Wiley Group, said by phone from Pennsylvania. “The money flows have been going to where the performance has been, and that’s what you’re seeing here.”

The BlackRock fund has gained more than 3 percent this year, but that’s less than half the 7 percent the iShares Edge MSCI USA Momentum Factor ETF has returned tracking stocks that have performed the best over the past six to 12 months.

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