Buy Top-Ranked Value ETFs for Outperformance

Wall Street has been experiencing huge volatility, primarily driven by President Trump's aggressive tariff policies and escalating U.S.-China tensions. The International Monetary Fund (IMF) slashed its economic growth outlook in the wake of trade tensions. In such a scenario, value ETFs present a strategic investment opportunity. Their focus on fundamentally strong companies positions them well to navigate ongoing volatility and potential shifts in trade policies.

While there are many options available in this space, investors could tap the current trends with popular ETFs having a Zacks Rank #1 (Strong Buy) or #2 (Buy). Vanguard Value ETF VTV, iShares Russell 1000 Value ETF IWD, iShares S&P 500 Value ETF IVE, SPDR Portfolio S&P 500 Value ETF SPYV and Schwab U.S. Large-Cap Value ETF SCHV look like compelling choices. These funds have a solid Zacks ETF Rank #1 (Strong Buy) or #2 (Buy), suggesting their outperformance in the coming months.

Value investing involves buying stocks or other financial assets that are believed to be undervalued or trading below their intrinsic worth. Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. Value stocks are less susceptible to trending markets and their dividend payouts offer safety in times of market turbulence. Historically, value stocks have outperformed growth stocks during periods of market recovery. 

Trade Gyrations

The announcement of a 10% universal tariff on imports, coupled with additional country-specific tariffs — most notably a 145% levy on Chinese goods — triggered a sharp market downturn. Major indices like the S&P 500 and Dow Jones Industrial Average experienced substantial losses, entering bear market territory early in the month. However, the latest developments suggest a potential stabilization (read: 5 ETFs Scaling New Highs Amid Market Turmoil). 

U.S. Treasury Secretary Scott Bessent recently stated that the tariff standoff with China is "unsustainable" and expressed confidence that a deal between the two nations could eventually be reached. However, he acknowledged the lack of active diplomatic negotiations. This sentiment was echoed by President Trump, who signaled a major U-turn on his trade war with China, stating that the high tariffs on Chinese goods will "come down substantially." 

Additionally, a Politico report revealed that the White House is nearing agreements with Japan and India on trade.

Growth Fears Persist

The U.S. economy is slowing down due to tumbling consumer confidence and rising inflation expectations. Consumer sentiment dropped to its lowest level since 2022 in April as the expected inflation level hit its highest since 1981, per the latest survey of the University of Michigan. Fed Chair Jerome Powell warned that trade tensions could spur inflation and slow down economic growth, creating a stage for stagflation. 

Several analysts project an increased chance of a recession with growing indications that economic activity is slowing down (read: Buffer ETFs Attract Billions as Investors Seek Shelter from Market Turmoil).

IMF Cuts Growth Forecast 

The International Monetary Fund (IMF) cut its economic growth forecasts for the United States and other countries, citing uncertainty over trade policy and weaker demand. It slashed its U.S. economic growth forecast by 0.9 percentage point to 1.8% for 2025 and by 0.4 percentage point to 1.7% for 2026.

The IMF warned that the United States is confronting an increased risk of recession as it downgraded its outlook for all G7 nations, along with other major economies, including China, India, Brazil and South Africa.

Top ETF Picks

Vanguard Value ETF (VTV)

Vanguard Value ETF targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. It holds 331 stocks in its basket, with each accounting for less than 4% of the assets. Vanguard Value ETF has AUM of $125.8 billion and charges 4 bps in annual fees. The product trades in a volume of 4.3 million shares per day on average.

iShares Russell 1000 Value ETF (IWD)

iShares Russell 1000 Value ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies. It tracks the Russell 1000 Value Index and holds 870 well-diversified stocks in its basket. iShares Russell 1000 Value ETF has amassed $58.6 billion in its asset base and trades in an average daily volume of 3 million shares. It charges 19 bps in annual fees.  

iShares S&P 500 Value ETF (IVE)

With AUM of $34.8 billion, iShares S&P 500 Value ETF follows the S&P 500 Value Index, holding 398 stocks in its basket. It is pretty well spread across components, with each accounting for no more than 7.2% of the assets. iShares S&P 500 Value ETF trades in a volume of 1 million shares per day on average and charges 18 bps in annual fees (read: SPY, IVV, VOO Battle for Top ETF Crown Amid S&P 500 Swings).

SPDR Portfolio S&P 500 Value ETF (SPYV)

SPDR Portfolio S&P 500 Value ETF tracks the S&P 500 Value Index, charging investors 4 bps in annual fees. It holds 398 stocks in its basket, with each accounting for no more than 7.2% of the assets. SPDR Portfolio S&P 500 Value ETF has amassed $23.7 billion in its asset base and sees an average daily volume of 4 million shares. 

Schwab U.S. Large-Cap Value ETF (SCHV)

Schwab U.S. Large-Cap Value ETF follows the Dow Jones U.S. Large-Cap Value Total Stock Market Index, which includes the components ranked 1-750 by full market capitalization and classified as "value" based on a number of factors. It holds 528 stocks in its basket, with none making up for more than 4.3% share. Schwab U.S. Large-Cap Value ETF has AUM of $11.3 billion and charges 4 bps in annual fees. It trades in an average daily volume of 2.3 million shares.

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This article originally published on Zacks Investment Research (zacks.com).

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