Earnings season proper has well and truly arrived this week as the big tech names like Microsoft (MSFT) start to report how they’ve started the year. With the Fed’s inflation fight still looming large, the results have interested more than only stock watchers. Amid banking crises and earnings releases, the Fed is still on track for another 25 basis point (bps) hike according to WisdomTree Investments’ senior investment strategy advisor, Professor Jeremy Siegel.
Siegel, emeritus professor of finance at the Wharton School, shared his most recent thoughts on the Fed and the market situation in a Monday note. Several economic indicators dropping in the last week or so have cleared up the inflation picture for the end of Q1, and according to Siegel, unless there’s some really bad news in the interim, the Fed is probably going for another hike.
The bigger question, though, is whether or not another 25 bps hike will also include details on the path of additional rates, or hints towards a pause. Among other relevant data points, the week of April 24th has so far included the February S&P Case-Shiller Home Price Index data, which saw home price declines moderate, suggesting that prices have remained stubbornly durable.
Siegel also underlined that jobless claims, income and spending, and ISM reports are also due before the May Fed meeting, with the lagging effect of that banking crisis and prior rate hikes still yet to hit.
As for what that means for stocks and the ETFs that invest in them, and whether to “Sell in May and Go Away,” as an old investors’ adage goes, Siegel pointed out that Fed’s hawkishness is set to keep stocks from getting much stronger entering a traditionally hot season for markets.
As such, investors may want to turn to some ETFs that are positioned for the Fed’s war of attrition against inflation. Per recent research from WisdomTree, value has only just entered its performance cycle, with previous factor rotations between value and growth lasting more than just a year.
As such, value strategies could be worth looking at, with options like the WisdomTree International AI Enhanced Value Fund (AIVI ) and the WisdomTree U.S. AI Enhanced Value Fund (AIVL ) a solid pair of actively-managed options. AIVI and AIVL have each outperformed their respective ETF Database Category and Factset Segment averages according to VettaFi, returning 8.3% and 5.3% respectively for 58 and 38 basis points.
Suffice to say, another rate hike by the Fed, and what indications the Fed might give about its plans for the rest of the year, are key factors to watch. For those investors who agree with Professor Siegel’s takes and are watching the same factors, value-focused ETFs are one option to consider.
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