March 2, 2021
The recent spike in yields and growing inflation concerns have weighed on equity markets. This new environment could be ripe for value and small cap ETFs.
Gargi Chaudhuri, Head of US iShares Markets & Investments Strategy, argued that the recent developments are a result of a new normalization.
“Within equities, we expect that ETFs tilted towards value and cyclicals will continue to benefit as rates move higher and the yield curve steepens – with over $8bn of ETF inflows to the value factor corroborating this view,” Chaudhuri said in note, remarking on asset flows so far in 2021.
“The reopening in the second half of the year will continue to fuel the reflation theme, but nominal interest rates are not expected to return to pre-pandemic levels,” Chaudhuri added.