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The rally in growth and tech stocks in the first quarter caught much of Wall Street off-guard, but many ETF strategists are sticking to their call and not chasing the hot sectors quite yet. As the calendar turns to a new month and a new quarter, CNBC Pro took a look at some of the trends in ETF investing during the first three months of the year and whether they’re likely to continue in coming months. Is growth back? The big winners in the stock market during the first quarter were found among growth stocks. After a terrible 2022 (down 33%), the Invesco QQQ Trust tracking the Nasdaq-100 index rose more than 20% in the first three months of the year. QQQ YTD mountain Growth stocks rebounded in the first quarter. This move was not only in contrast to how 2022 played out, but also to how many Wall Street strategists predicted 2023 would develop. But the latest rebound for growth did not come from a change in their business fundamentals and could be short-lived, said Indrani De, head of global investment research at FTSE Russell. “There are many factors in today’s market that are much more supportive for value, and long-term trends in the other direction of growth” look like they bottomed out toward the end of 2021, De said. Fund flow data suggests that investors did not abandon the value trade, even though it was underperforming in recent months. One area that is popular among value investors is income funds, which can help investors offset market declines by generating cash. “We still very much believe that an income-oriented equity allocation is important going forward … We don’t think that is changed by what we’ve seen so far in the first quarter,” said Paul Baiocchi, chief ETF strategist SS & C Alps. Alps is one of several firms whose income-oriented ETFs have recently proven successful, notably its Alps Sector Dividend Dogs ETF (SDOG) . Other popular funds in this vein include the Pacer US Cash Cows 100 ETF (COWZ) and the JPMorgan Equity Premium Income ETF (JEPI) . One sweet spot between growth and value could be the strategy of focusing on quality stocks, which also captures some of the more traditional tech stocks. The iShares MSCI USA Quality Factor ETF (QUAL) , whose top holdings include Microsoft and Apple , has been the top U.S. ETF by inflows this year, and had a total return of about 9% in the first quarter on a total return basis. Sectors and Themes One of the major themes of the first quarter for ETFs is the shift into fixed income. Bond…
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