Has the Market Bottomed? Low P/E ETFs to Bounce Back

The year 2022 as a whole could easily be attributed to the Russia-Ukraine war, red-hot inflation and rising-rate worries. No wonder, such worries caused an upheaval in the market this year. Overall, the S&P 500 is down 17.5% this year. The Nasdaq Composite is off 25.6%, the Dow Jones has lost about 14.4% while the Russell 2000 has skidded 18.4% year to date (as of Sep 13, 2022).

According to Ari Wald, head of technical analysis at Oppenheimer, we’re on the cusp of a turnaround right now, as quoted on TipRanks, published on Yahoo Finance. “Our analysis indicates September weakness is marking a final leg lower in the bear cycle, and a bullish opportunity for long-term investors,” Wald recently explained.

“In the post-war era, the majority of bear cycles have been long-and-shallow or short-and-sharp. We’ve only counted four long-and-deep declines (1968, 1973, 2000, and 2007), and believe market conditions are stronger now than they were in those outlier periods.”

Against this backdrop, below we highlight a few ETFs that have a low P/E and thus are prone to bounce back faster than their peers.

ETFs in Focus

First Trust Financials AlphaDEX ETF FXO – P/E 8.01X; Zacks Rank #2 (Buy)

Financials stocks had unperformed the broader indexes earlier this year due to concerns that the Fed’s aggressive tightening campaign to tame inflation would push the economy into a recession. Results reported by six biggest US banks suggested that the economy could manage a “soft landing” while the Fed raises rates. Bank stocks have rebounded since mid-June as some investors believe that much of the bad news is already priced in and valuations look attractive at current levels (read: Financials ETFs: Can the Rebound Continue?).

Invesco S&P 500 Enhanced Value ETF SPVU – P/E 8.22X; Zacks Rank #1 (Strong Buy)

The underlying S&P 500 Enhanced Value Index tracks the performance of stocks in the S&P 500 Index that have the highest value score. Value stocks fare better in a rising rate environment, which is the current scenario of U.S. economy.

First Trust NASDAQ Oil & Gas ETF FTXN – P/E 9.27X; Zacks Rank #1

The underlying Nasdaq US Smart Oil & Gas Index is a modified factor weighted index, designed to provide exposure to US companies within the oil and gas industry. Oil prices increased considerably on Sep 5 as OPEC+ producers agreed a small oil output cut. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, decided to cut production targets by about 100,000 barrels per day from October. Energy analysts had mostly expected the group to stick with its production policy.

SPDR S&P Biotech ETF XBI – P/E 12.39X; Zacks Rank #2

The Biotech sector has been in a sweet spot for quite some time now. Biotech stocks were huge beneficiaries of the pandemic as many of these companies were developing new vaccines and treatments for Covid-19, leading to a surge in IPOs, venture capital investments and merger and acquisitions (read: How Are Biotech ETFs Reacting to Q2 Earnings Releases?).

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SPDR S&P Biotech ETF (XBI): ETF Research Reports
 
First Trust Financials AlphaDEX ETF (FXO): ETF Research Reports
 
Invesco S&P 500 Enhanced Value ETF (SPVU): ETF Research Reports
 
First Trust NASDAQ Oil & Gas ETF (FTXN): ETF Research Reports
 
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