The Schwab US Dividend Equity ETF (SCHD) is firing on all cylinders this year amid dips in the S&P 500 (VOO), Nasdaq 100 (QQQ), and crypto markets. SCHD has jumped by over 12% and is hovering at its all-time high.
On the other hand, the QQQ ETF has dropped by over 2.27%, while the VOO has dropped by 0.60%. Bitcoin’s price fell below $68,000, and the market capitalization of all coins fell to $2.3 trillion.
SCHD ETF is Soaring as Investors Rotate From Growth to Value
The main reason SCHD stock is outperforming the broader market is that investors are rotating from growth to value. Most growth stocks that drove the equities market in the past few years have slumped.
Microsoft stock price plunged to $400 from the all-time high of $565. Similarly, NVIDIA has entered a bear market after falling more than 20% from its November high. AMD and Palantir stocks crashed despite reporting strong financial results this week.
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The worst performers are software companies such as Atlassian, ServiceNow, Intuit, and Salesforce, which have plunged by over 60% from their all-time highs. The Nasdaq 100 Index is primarily composed of technology companies, while the S&P 500 consists of 30% tech companies.
SCHD stock is thriving because it has little exposure to the technology industry. Technology stocks account for about 8% of its fund. This includes legacy technology companies such as Texas Instruments and Cisco.
Instead, its largest constituents are companies such as Lockheed Martin, Texas Instruments, Chevron, ConocoPhillips, Verizon, Bristol Myers Squibb, and PepsiCo.
Energy companies account for almost 20% of the fund. These companies are performing well as crude oil and natural gas prices surge amid ongoing tensions in the Middle East.
The other large companies in the ETF are in industries like consumer staples, healthcare, industrials, and financials. Most of these companies perform well when risk rises.
Schwab US Dividend Equity ETF is Cheaper
The other main reason the SCHD is outperforming the broader market is that it is a low-cost fund with a high dividend yield. Data show a price-to-earnings ratio of 17, lower than the S&P 500’s 22 and the Nasdaq 100 Index’s 30.
Therefore, investors are shifting from highly overvalued tech names to cheaper value stocks. Two of the best examples of this are Palantir and Tesla, which have price-to-earnings ratios over 150. Palantir justifies this valuation by citing revenue growth and traction in its commercial segment.
Tesla, on the other hand, spots a high valuation despite its business going through a major slowdown. Its valuation is based on the Elon Musk premium and its entry into the AI and robotics industry.
Meanwhile, the crypto market crash occurred amid investor concerns about the industry. In a long X post, Nouriel Roubini warned that a crypto apocalypse was coming, noting that these coins were valueless.
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