By Patturaja Murugaboopathy
(Reuters) – As U.S. stock prices get hammered on worries that President Donald Trump’s trade and other policies could slow the economy, investors are moving cash to value funds which seem less likely to suffer in downturns than growth stocks.
According to Lipper data, U.S. growth exchange-traded funds (ETFs) experienced outflows of $3.6 billion this month, while U.S. value ETFs recorded inflows of $1.8 billion.
Value funds, which primarily consist of stocks in sectors such as banks, energy and utilities, act as a buffer against market volatility by investing in stable, cash-rich, and undervalued stocks that are less affected by economic fluctuations.
Investors are seeking these attributes as Trump’s intensifying tariff disputes with Canada, Mexico, and China increase global market volatility and heighten inflation and economic growth concerns.
Early this year, growth sectors built on last year’s strong returns amid optimism about the tech industry and artificial intelligence.
However, the Magnificent Seven (Mag 7) and other tech stocks have been at the fore of the recent selloff as investors move away from high-growth names due to concerns over overvaluation and the economy.
Goldman Sachs said the shift from cyclical to defensive stocks in the U.S. market demonstrates that growth rate expectations are falling slightly below their economists’ forecasts, with upcoming data and policy changes likely to guide further such rotations.
According to LSEG Lipper data, U.S. value stocks currently have a forward price-to-earnings ratio of 17.6, representing a 41% discount to growth stocks’ P/E of 30.1. This discount is still greater than the 10-year average of 37.5%.
Leading the inflow into U.S. value funds, the AAM S&P 500 High Dividend Value ETF, Acquirers Small and Micro Deep Value ETF, and American Century Focused Large Cap Value ETF saw significant inflows of $603 million, $513 million, and $388 million, respectively.
Among growth funds, the iShares Russell Top 200 Growth Index Fund, iShares S&P 500 Growth ETF, and Invesco NASDAQ 100 ETF led with outflows of $763 million, $548 million, and $418 million, respectively.
Chris Marangi, co-chief investment officer of value funds at Gabelli Funds, said value stocks are attractive, particularly in small to mid-cap companies which benefit more from deregulation and tax cuts and less from negatives such as tariffs.
“Also, it may no longer be the case that Mag 7 is a safe haven,” he said.
(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan and Gareth Jones)
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