{"id":32860,"date":"2023-07-07T21:33:46","date_gmt":"2023-07-08T01:33:46","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/are-red-hot-factor-funds-vulnerable-to-ongoing-rate-hikes\/"},"modified":"2023-07-07T21:33:49","modified_gmt":"2023-07-08T01:33:49","slug":"are-red-hot-factor-funds-vulnerable-to-ongoing-rate-hikes","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=32860","title":{"rendered":"Are Red-Hot Factor Funds Vulnerable To Ongoing Rate Hikes?"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture>  <\/picture><figcaption> <\/figcaption><\/figure>\n<\/p>\n<p><em>Update: See the Labor Dept\u2019s payrolls data for a comparison vs. ADP\u2019s estimate at chart at end of this article.<\/em><\/p>\n<p>Yesterday\u2019s news that US companies accelerated hiring in June strengthens confidence that the Federal Reserve will continue to<span class=\"paywall-full-content invisible\"> lift interest rates to tame inflation. In turn, equity risk factors with the strongest gains this year may be vulnerable if a renewed run of hawkish monetary policy unfolds.<\/span><\/p>\n<p class=\"paywall-full-content invisible\">Using a set of ETF proxies shows that Invesco S&amp;P 500 High Beta ETF (SPHB) is currently leading the field so far in 2023 with a strong 21.1% return, as of Thursday\u2019s close (July 6).<\/p>\n<p class=\"paywall-full-content invisible\">The iShares S&amp;P 500 Growth ETF (IVW) is a close second via a 20.1% rally. The broad US stock market, by comparison, is up 15.9%, based on SPDR S&amp;P 500 (SPY).<\/p>\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/07\/saupload_ytd.07jul2023.png\" alt=\"Invesco S&amp;P 500 High Beta ETF (&lt;a href=\" https:=\"\" title=\"Invesco Exchange-Traded Fund Trust II - Invesco S&amp;P 500 High Beta ETF\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<p class=\"paywall-full-content invisible\">For a handful of equity<span class=\"paywall-full-content invisible no-summary-bullets\"> factors, the risk of red ink has already arrived for 2023. Although most risk factors are posting year-to-date gains, high dividend yield (<\/span>VYM<span class=\"paywall-full-content invisible no-summary-bullets\">) and momentum (<\/span>MTUM<span class=\"paywall-full-content invisible no-summary-bullets\">) are the exceptions. Both funds have been stumbling all year, alternating between modest\/flat results and losses.<\/span><\/p>\n<figure class=\"regular-img-figure paywall-full-content invisible no-summary-bullets\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/07\/saupload_factor.etfs_.ytd_.barplot2023-07-07.png\" alt=\"US equity factors\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Market expectations have been pointing toward another quarter-point rate hike at the next FOMC meeting on July 26, following a pause at June\u2019s meeting, based on Fed funds futures.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The main change after yesterday\u2019s hot jobs data: the crowd is now considering a higher chance that the Federal Reserve will continue to lift rates later in the year. Although the implied probabilities still favor a one-and-done forecast, confidence has faded that rates will peak after the July 26 meeting.<\/p>\n<figure class=\"regular-img-figure paywall-full-content invisible no-summary-bullets\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/07\/saupload_ff.futures.probs_.2023-07-07.png\" alt=\"Fed funds target rate\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<p class=\"paywall-full-content invisible no-summary-bullets\">A key variable is how today\u2019s US payrolls report for June from the Labor Department compares. As of this writing (roughly 90 minutes ahead of the 8:30 am eastern release), economists are looking for a softer but still solid increase in hiring, according to Econoday.com\u2019s consensus point forecast.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">If the numbers show a strong upside surprise, in line with the ADP report, the hawkish outlook for Fed policy will strengthen, creating more headwinds for the highest-flying equity factors.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Shortly after this article was originally published, the Labor Dept. reported that its estimate of US private payrolls rose modestly in June, far below ADP\u2019s estimate:<\/em><\/p>\n<figure class=\"regular-img-figure paywall-full-content invisible no-summary-bullets\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/07\/saupload_payrolls2.07jul2023.png\" alt=\"ADP payrolls\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Original Post<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Editor&#8217;s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4615832-are-red-hot-factor-funds-vulnerable-to-ongoing-rate-hikes?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Update: See the Labor Dept\u2019s payrolls data for a comparison vs. ADP\u2019s estimate at chart at end of this article. Yesterday\u2019s news that US companies accelerated hiring in June strengthens confidence that the Federal Reserve will continue to lift interest rates to tame inflation. In turn, equity risk factors with the strongest gains this year [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":32861,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-32860","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Are Red-Hot Factor Funds Vulnerable To Ongoing Rate Hikes? | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Update: See the Labor Dept\u2019s payrolls data for a comparison vs. ADP\u2019s estimate at chart at end of this article. 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