{"id":2784,"date":"2021-10-19T00:55:33","date_gmt":"2021-10-19T00:55:33","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=2784"},"modified":"2021-10-19T01:00:32","modified_gmt":"2021-10-19T01:00:32","slug":"market-forecasts-for-4th-quarter-2021-and-beyond","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/market-forecasts-for-4th-quarter-2021-and-beyond\/","title":{"rendered":"Market Forecasts for 4th Quarter 2021 and Beyond"},"content":{"rendered":"

The ETF reports on ValuEngine for funds that follow market benchmarks provide a side benefit in writing market analyses.\u00a0 They are a window to the implicit forecasts for 1-, 3-, 6- and 12-month forecasts VE models are making for each benchmark\u2019s ETF portfolio.\u00a0 This is because the ratings and projections combine bottom-up constituent analysis with analyses of the historical price movements of the ETF in different market environments.\u00a0\u00a0\u00a0<\/span><\/p>\n

The benchmark indexes chosen for this feature are:<\/span><\/p>\n

    \n
  1. The S&P 400 MidCap Index representing US MidCap (MDY)<\/span><\/li>\n
  2. The Russell 2000 Index representing US Small Cap (IWM)<\/span><\/li>\n
  3. The Russell 1000 Large Cap Growth Index (IWF)<\/span><\/li>\n
  4. The Russell 1000 Large Cap Value Index (IWD)<\/span><\/li>\n
  5. The Nasdaq-100, constructed as an index using the top 100 non-financial stocks with primary listing on the Nasdaq, but now regarded as the premier US Big Tech Index (QQQ) <\/span><\/li>\n
  6. The S&P 500 Index representing US Large Cap (IVV)<\/span><\/li>\n<\/ol>\n

    This summary table contains all five indexes and ETFs that hold them. It also includes historical, valuation and informational data for reference.\u00a0 Today\u2019s focus is on the remainder of 2021, the 3-month forecast and the 12-month period ending September 30. 2022.\u00a0 On the chart, this is listed as the ValuEngine forecast for 1-year indicating the next 12 months.\u00a0\u00a0<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
    <\/td>\nMDY<\/b><\/td>\nIWM<\/b><\/td>\nIWF<\/b><\/td>\nIWD<\/b><\/td>\nQQQ<\/b><\/td>\nIVV<\/b><\/td>\n<\/tr>\n
    Market Index Being Tracked<\/span><\/td>\nS&P Midcap<\/b><\/td>\nRussell 2000 Small Cap<\/b><\/td>\nRussell Large Cap Growth<\/b><\/td>\nRussell Large Cap Value<\/b><\/td>\nNasdaq 100\u00a0<\/b><\/td>\nS&P 500<\/b><\/td>\n<\/tr>\n
    ValuEngine Rating<\/span><\/td>\n2<\/b><\/td>\n3<\/b><\/td>\n5<\/b><\/td>\n2<\/b><\/td>\n4<\/b><\/td>\n3<\/b><\/td>\n<\/tr>\n
    VE Forecast 1-mo. Price Return<\/span><\/td>\n-0.3%<\/span><\/td>\n-0.2%<\/span><\/td>\n0.0%<\/b><\/td>\n-0.3%<\/span><\/td>\n 0.0%<\/b><\/td>\n-0.2%<\/span><\/td>\n<\/tr>\n
    VE Forecast 3-mo. Price Return<\/b><\/td>\n-0.1%<\/span><\/td>\n0.2%<\/span><\/td>\n1.6%<\/b><\/td>\n0.4%<\/span><\/td>\n1.6%<\/b><\/td>\n1.0%<\/span><\/td>\n<\/tr>\n
    VE Forecast 6-Mo. Price Return<\/span><\/td>\n0.3%<\/span><\/td>\n0.8%<\/span><\/td>\n3.9%<\/b><\/td>\n1.6%<\/span><\/td>\n3.7%<\/span><\/td>\n2.8%<\/span><\/td>\n<\/tr>\n
    VE Forecast 1-yr. Price Return<\/b><\/td>\n-3.8%<\/span><\/td>\n-2.5%<\/span><\/td>\n0.1%<\/b><\/td>\n-3.8%<\/span><\/td>\n0.0%<\/span><\/td>\n-1.9%<\/span><\/td>\n<\/tr>\n
    Historic 6 mo. Price Return<\/span><\/td>\n0.2%<\/span><\/td>\n-1.8%<\/span><\/td>\n9.3%<\/b><\/td>\n3.1%<\/span><\/td>\n8.0%<\/span><\/td>\n6.6%<\/span><\/td>\n<\/tr>\n
    Historic 1-Yr. Price Return\u00a0<\/span><\/td>\n37.2%<\/span><\/td>\n40.7%<\/b><\/td>\n25.1%<\/span><\/td>\n31.7%<\/span><\/td>\n27.6%<\/span><\/td>\n27.5%<\/span><\/td>\n<\/tr>\n
    Historic 5-Yr Ann. Price Return<\/span><\/td>\n10.9%<\/span><\/td>\n11.3%<\/span><\/td>\n19.3%<\/span><\/td>\n7.9%<\/span><\/td>\n22.1%<\/b><\/td>\n13.9%<\/span><\/td>\n<\/tr>\n
    Volatility<\/span><\/td>\n19.6%<\/span><\/td>\n21.5%<\/span><\/td>\n16.3%<\/span><\/td>\n16.8%<\/span><\/td>\n16.9%<\/span><\/td>\n15.2%<\/b><\/td>\n<\/tr>\n
    Sharpe Ratio (3-Year)<\/span><\/td>\n0.54<\/span><\/td>\n0.53<\/span><\/td>\n1.19<\/span><\/td>\n0.47<\/span><\/td>\n1.31<\/b><\/td>\n0.89<\/span><\/td>\n<\/tr>\n
    Beta<\/span><\/td>\n1.20<\/span><\/td>\n1.25<\/span><\/td>\n1.02<\/span><\/td>\n1.04<\/span><\/td>\n1.01<\/span><\/td>\n1.00<\/b><\/td>\n<\/tr>\n
    # of Stocks<\/span><\/td>\n400<\/span><\/td>\n2000<\/span><\/td>\n504<\/span><\/td>\n847<\/span><\/td>\n100<\/span><\/td>\n500<\/span><\/td>\n<\/tr>\n
    Undervalued by VE %*<\/b><\/td>\n55%<\/span><\/td>\n63%<\/b><\/td>\n47%<\/span><\/td>\n49%<\/span><\/td>\n43%<\/span><\/td>\n40%<\/span><\/td>\n<\/tr>\n
    P\/B Ratio<\/span><\/td>\n2.8x<\/span><\/td>\n2.7x<\/b><\/td>\n14.2x<\/span><\/td>\n2.7x<\/b><\/td>\n9.3x<\/span><\/td>\n4.7x<\/span><\/td>\n<\/tr>\n
    P\/E Ratio<\/span><\/td>\n25.9x<\/b><\/td>\n171.7x<\/span><\/td>\n41.6x<\/span><\/td>\n27.9x<\/span><\/td>\n35.7x<\/span><\/td>\n28.6x<\/span><\/td>\n<\/tr>\n
    Div. Yield<\/span><\/td>\n1.0%<\/span><\/td>\n0.9%<\/span><\/td>\n0.5%<\/span><\/td>\n1.6%<\/b><\/td>\n0.5%<\/span><\/td>\n1.3%<\/span><\/td>\n<\/tr>\n
    Expense Ratio<\/span><\/td>\n0.23%<\/span><\/td>\n0.19%<\/span><\/td>\n0.19%<\/span><\/td>\n0.19%<\/span><\/td>\n0.20%<\/span><\/td>\n0.03%<\/span><\/td>\n<\/tr>\n
    Index Provider<\/span><\/td>\nS&P Dow Jones<\/span><\/td>\nFTSE Russell Indices<\/span><\/td>\nFTSE Russell Indices<\/span><\/td>\nFTSE Russell Indices<\/span><\/td>\nNasdaq<\/span><\/td>\nS&P Dow Jones<\/span><\/td>\n<\/tr>\n
    Index<\/span><\/p>\n

    Scheme<\/span><\/td>\n

    		Mkt. Cap Weighting<\/span><\/td>\nMkt. Cap Weighting<\/span><\/td>\nMkt. Cap Weighting<\/span><\/td>\nMkt. Cap Weighting<\/span><\/td>\nMkt. Cap Weighting<\/span><\/td>\nMkt. Cap Weighting\u00a0<\/span><\/td>\n<\/tr>\n
    ETF Sponsor<\/span><\/td>\nSPDRs by SSgA<\/span><\/td>\n iShares by Blackrock<\/span><\/td>\n iShares by Blackrock<\/span><\/td>\niShares by Blackrock<\/span><\/td>\nInvesco<\/span><\/td>\niShares by Blackrock<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n


    \nIn order to frame our forecasts, let\u2019s look at the ValuEngine ranks summarizing our models\u2019 views on the expected price appreciation of IVV, an ETF built to replicate performance of the S&P 500 Index.\u00a0 This is the most common benchmark for active management and the focus of most market forecasts.\u00a0 IVV has a rating of 3 thus predicting average performance among the ETFs in our universe during the next six months.\u00a0 Given its bellwether status as the market\u2019s proxy, a rating of 3 is the norm for IVV.\u00a0 The ValuEngine market forecasts for IVV \u2013 and thus the S&P 500 – will vary from negative to positive depending on our models\u2019 assessments of the current environment.<\/span><\/p>\n

    Focusing on the S&P 500 column in the four rows containing our forecasts, our models expect the market to navigate choppily from a mildly down month of October to a decent run between November and March, ending the 4<\/span>th<\/span> quarter up a bit and continuing to rise modestly in January through March of 2022.\u00a0 So, the forecast for the next six months is positive with a projected gain of nearly 3%.\u00a0 However, with a 12-month forecast of -2%, even after that 3% gain, our models generally indicate a continuation of the back-and-forth.\u00a0 \u00a0<\/span><\/p>\n

    Are there segments of the market for which the ValuEngine models have a more positive outlook?\u00a0 Yes, but the results may be surprising.\u00a0 Many major strategists have been very vocal about their expectations that value will outperform growth for the rest of this year and the following 12 months.\u00a0 One particularly iconic one predicted that small- and mid-cap will significantly outperform large cap.\u00a0\u00a0<\/span><\/p>\n

    Our forecasts strongly disagree.\u00a0 IWD is a sizable ETF based upon Large Cap Value Index components\u00a0 determined by value factors such as book-to-price; dividend yield; payout ratio; and earnings-to-price ratio.\u00a0 This ETF has a 2 rating, predicting underperformance.\u00a0 Looking down the ETF\u2019s column in the table, IWD has the worst 1-month, 3-month, 6-month and year-ahead projections in the table.\u00a0\u00a0<\/span><\/p>\n

    The forecasts for the Midcap ETF, MDY, are very similar.\u00a0 IWM, the Russell 2000 Index most often used as the proxy for small cap stocks, is rated to perform a bit closer in line with the market with a 3 rating.\u00a0 The 1-year forecast for IWM is -2.5%, not great but more in line with the S&P 500 forecast of -1.9% than the forecast for IWD and MDY which are both close to -4%.\u00a0\u00a0<\/span><\/p>\n

    For value and non-mega-stock enthusiasts, I will point out that on a traditional valuation basis, ValuEngine agrees that many of the stocks in these segments are undervalued.\u00a0 We currently rate 63% of small cap stocks in IWM and 55% of the midcap stocks in MDY as undervalued. This compares with just 40% of stocks in IVV rated as undervalued.\u00a0 Moreover, as selection sets for active managers, both MDY and IWM have plenty of stocks that may be timely now.\u00a0 Examples in IWM Include 4-rated AMC Entertainment (AMC) and Intella Theraputics (NTLA).\u00a0 A midcap stock in MDY we like is 4-rated SolarEdge Tech. (SEDG).\u00a0 Finally, both MDY and IWM have Price\/Book valuations considerably lower than IVV.\u00a0\u00a0<\/span><\/p>\n

    Last week\u2019s blog referenced our continued positive outlook for large-cap technology stock index ETFs as represented by QQQ and XLK, the Select Sector Technology SPDR.\u00a0 Both still have above average ratings of 4.\u00a0 QQQ has a 3-month forecast of +1.5% and a 6-month forecast of 3.7% both higher than the forecasts for S&P 500-based IVV.\u00a0<\/span><\/p>\n

    There is one segment-defining ETF that rates even higher.\u00a0 That is IWF, representing the Large Cap Growth as measure by the Russell 1000 Growth Index.\u00a0 IWF is rated 5, in the top tier for projected performance in the next six-to-twelve months. The underlying index selects components based on three fundamental factors: EPS Growth; Return on Equity and Dividend Growth and currently has just over 500 components.\u00a0 With a 51% weighting in technology stocks, IWF is even more tech-heavy than IVV (39%) but less so than QQQ (60%).\u00a0 Interestingly, IVV is the only ETF we measure that has experienced less recent price volatility than IWF.\u00a0\u00a0\u00a0<\/span><\/p>\n

    Strategists correctly point out the risks inherent in buying growth stocks with the market at all-time highs and record valuations on most traditional ratios.\u00a0 Yet, no one know when that inflection point will be.\u00a0 Our models indicate that for IWF and large cap tech stocks, that correction may still be one year away.\u00a0\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    The ETF reports on ValuEngine for funds that follow market benchmarks provide a side benefit in writing market analyses.\u00a0 They are a window to the implicit forecasts for 1-, 3-, 6- and 12-month forecasts VE models are making for each benchmark\u2019s ETF portfolio.\u00a0 This is because the ratings and projections combine bottom-up constituent analysis with … Read more<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2784"}],"collection":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/comments?post=2784"}],"version-history":[{"count":4,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2784\/revisions"}],"predecessor-version":[{"id":2788,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2784\/revisions\/2788"}],"wp:attachment":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/media?parent=2784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/categories?post=2784"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/tags?post=2784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}