PAVE ETF: AI Luster Loses Ground Among US Infrastructure Plays (Rating Downgrade)

Global growth estimates for 2024 continue to rise. Will it be a “soft landing,” “hard landing,” or even “no landing”? Does it even matter at this point? The new volatility trigger appears to be election risk. We’ve seen stock markets move in Mexico, India and now France with the US general elections less than 5 months away.

It has been interesting to see price movements in stocks related to the IRA and CHIPS Act with Donald Trump rising in the polls and prediction markets. While it may be unlikely that these stimulus measures will be significantly scaled back, it is a risk that should not be completely ruled out. We may see this fear manifest in the price action of the GlobalBats: Introduction).

I am Lower the level Fund from purchase to reservation. I’ve been bullish on industrial-heavy ETFs for several quarters, but their valuation and momentum have me a little wary heading into summer.

Estimates of global GDP growth are trending higher

According to the SourcePAVE seeks to invest in companies that will benefit from the potential increase in infrastructure activity in the United States, including companies engaged in raw material production, heavy equipment, engineering, and construction. The fund invests in growth and value stocks of companies with diversified market caps.

PAVE has been a popular play since I last reviewed the fund in the fourth quarter of 2023. Assets under management have swelled from $5.3 billion last November to nearly $7.5 billion today. European Training Foundation Sport Moderate annual expense ratio of 0.47% while The 12-month dividend yield is meager at just 0.63%about 0.8 percentage points lower than the Standard & Poor’s 500 Index.

Stock price momentum It was strong, but I will highlight my concerns about the chart and technical situation later in this analysis. PAVE is in the middle of the package When it comes to risks But it is Liquidity metrics It’s in very good health — average daily trading volume is just under 1 million shares, while the ETF’s 30-day average bid/ask spread is low at just three basis points, according to Global X.

Focusing on the PAVE portfolio, this 5-star Morningstar Bronze-rated ETF has great diversification across fund styles. Multi-allocation, 29%, is a mix of mid-value and there is a slight bias towards growth over value. It’s about equal division between uppercase and lowercase letters as well. One of the main reasons for my downgrade today is that PAVE is five full turns more expensive than where it traded in late 2023. The price-to-earnings ratio is close to 20 while long-term EPS growth is expected to be less than 10%, leading to a lower PEG Lukewarm by about two.

PAVE: Portfolio Profiles and Factors

Given the relative weakness in markets since mid-April among cyclical sectors, PAVE has suffered significant relative weakness recently. Industrials, which represents 73% of ETFs, are now at their lowest level of relative strength compared to the S&P 500 since mid-2022.

Hot AI and Energy Production Stocks I took a break, which hurt PAVE. The materials sector managed to overweight significantly early in the year, but it also underperformed amid a decline in resources like copper last month.

Introduction: High exposure to the cyclical sector

But seasonally, PAVE tends to perform well during the middle of the third quarter. This bodes well for near-term price action and poses an upside risk to my Hold recommendation for now.

Preface: Bullish seasonal trends during early August

Technical take

To be clear, PAVE’s performance has been very strong since the market bottomed in the fourth quarter of 2023. Notice in the chart below that the ETF rose from $28 to nearly $40 at its peak in early April of this General. But the rise was due to weaker RSI momentum, which is a sign of bearish price divergence. Now, the fund is testing important support at the $37 level.

If this level is broken, a downside action price target measured at around $34 will be in play based on the $3 high of the current pattern. Such a bearish mark would take PAVE below its long-term 200-day moving average high and put it just below its early 2024 high of $34.93. I think this would be a good place to buy ETFs on a risk/reward basis.

Bigger picture, PAVE more than achieved its upside target from the $22 to $30 range in 2022 through mid-2023. The $8 area, which added to the $30 breakout point, achieved a target of $38, a level I detailed in my research note Previous. So, taking profits here is justified in my view.

Preface: RSI bearish momentum trends, key support at $37

Bottom line

I have a comment rating on PAVE. There are some cracks emerging in risky cyclical trade, even as global GDP estimates rise. Political risks may be on the rise while AI-related industrial stocks become more expensive.