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Will 2024 be the year for value ETFs?

After growth ETFs saw significant gains in 2023, value ETFs could become the leading investment opportunity in 2024. VettaFi Head of Research Todd Rosenbluth joins Yahoo Finance Live's Rachelle Akuffo to highlight several ETF trends forecasted to come in the new year, including crypto optimism behind the approval for spot bitcoin (BTC-USD) ETFs.

"We do think more value-oriented strategies are likely to do better in 2024," Rosenbluth says. "Financials, energy, consumer staples — those are sectors that have held up better. They do relatively well in a different interest rate environment that we're likely to see in 2024."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

RACHELLE AKUFFO: While there was strong demand for fixed income ETFs in 2023 and S&P 500 based ETFs led that charge, our next guest says last year investors were focused on higher quality investments in the ETF space, and this year could be one of the most dynamic years for ETF investors.


So how do you pivot your portfolio from here to get the most out of this space? As part of our ETF report brought to you by Invesco QQQ, let's bring in Todd Rosenbluth, VettaFi Head of Research, to discuss this more. Welcome back to the show, and of course, a happy new year to you. So this pivotal year for ETFs, what will it look like?

TODD ROSENBLUTH: Well, we had, as you mentioned, a really strong year in 2023. Equity ETFs led the charge in the fourth quarter. We had $100 billion back to back for overall ETF space in November and December. We think it's going to be different, as you mentioned, in 2024 for a couple of reasons.

One, we perhaps will dive deeper into it. We're likely to have the first of many spot Bitcoin ETFs begin trading in the coming days and weeks and we're very excited about that at VettaFi and then also, we think as the federal reserve is going to be adjusting its policy, we could see more value oriented strategies will do better than they did in 2023 because of the shift in the environment.

RACHELLE AKUFFO: So I do want to get to the spot Bitcoin ETFs. We've seen a number that are expected to get approved, obviously still haven't had anything confirmed yet. The so-called Cointucky Derby, can't claim credit for that, saw it online. But of the ones that are going to be coming out, because they're likely to be approved as a group, how do you decipher which are the best paths to follow, which are the best investments to follow in that space?

TODD ROSENBLUTH: Right. So what's interesting about the spot Bitcoin ETF that we at VettaFi I think are likely to come to market in the coming days and weeks and certainly by February when we have the Exchange Conference, we'll have multiple products that are trading, you've got ways to choose ETFs based on fees.

We have a couple of providers that have come out and talked about how low cost or the fact that they're making fees free for the initial six months or so before the ETF hits a certain threshold. You also have some of the established providers like Bitwise and Grayscale which has a trust that could be converted into an ETF. Those are some of the players.

And you've got established asset managers like Fidelity and BlackRock and VanEck that are part of the mix here. So lots to focus on, and we at VettaFi are excited. In fact, we have a crypto symposium taking place-- coming up next week. Folks can visit to learn more.

RACHELLE AKUFFO: We'll certainly be taking a look at that. I mean, we did see, obviously, some of the tokens themselves selling off on some mixed reports as to whether or not the SEC was going to approve these Bitcoin ETFs but for people who have been looking at perhaps less riskier options, of course, the Magnificent Seven, the ones that have performed the best in 2023.

How are they going to perform as we're, sort of, starting to see some questions, potentially, about valuations given what we've seen with that downgrade from Apple by Barclays?

TODD ROSENBLUTH: Yeah, we had a great year for growth stocks in general in 2023 and some of the more growth oriented ETFs like Vanguard Growth VUG and the iShares Russell 1000 value and growth-- I'm sorry, iShares Russell 1000 growth ETF had 40% gains for the year. So we do think more value-oriented strategies are likely to do better in 2024 financials, energy consumer staples.

Those are some of the sectors that have held up better. They do relatively well in a different interest rate environment that we're likely to see in 2024, and we're excited to see that investors have those options. They can look at iShares Russell 1000 value or the Vanguard value ETF to be able to pivot their portfolio, take some of the profits that they had in 2023 and rotate into 2024.

And we could see dividend-oriented strategies do well also. So there's one that we like SDOG, the ALPS sector dividend dog ETF. S-D-O-G. It just recently went through its annual rebalance focusing on the highest dividend yielding stocks across 10 different sectors. It's really a good ETF to take a closer look at.

RACHELLE AKUFFO: Always appreciate your tips. Todd Rosenbluth, Head of Research at VettaFi, thank you so much for joining me this morning.