Navigating Market Corrections: The Case for Low-Cost Value ETFs in Uncertain Times

In an era marked by economic uncertainty, shifting interest rates, and volatile market conditions, investors are increasingly seeking strategies that balance defensive resilience with income generation. While growth-heavy indices have dominated headlines in recent years, historical data and recent market dynamics suggest that low-cost value ETFs may offer a compelling alternative-particularly during periods of economic stress. This article examines the performance of value ETFs versus growth indices during major market corrections, highlights their income-generating potential, and evaluates their role in mitigating downside risk.

The Defensive Resilience of Value ETFs

Low-cost value ETFs have historically demonstrated superior resilience during market downturns compared to growth-heavy indices. For instance, during the 2022-2025 period of elevated inflation and rising interest rates, the iShares S&P 500 Value ETF (IVE) outperformed the iShares S&P 500 Growth ETF (IVW), which fell 30% in 2022 alone. This marked a reversal of the prior decade's trend, where growth stocks had consistently outperformed value from 2015 to 2021. According to research, growth stocks had consistently outperformed value from 2015 to 2021.

The cyclical nature of value and growth performance is well-documented. Value stocks tend to thrive in environments of rising inflation and interest rates, as their earnings are often more stable and less speculative than those of growth counterparts. According to analysis, value stocks tend to thrive in environments of rising inflation and interest rates. For example, during the 2008 financial crisis, value ETFs experienced shallower drawdowns than growth indices, which saw the S&P 500 plummet by 56.78%. More recently, in 2025, the Invesco S&P 500 Low Volatility ETF (SPLV)-with a value tilt-delivered a year-to-date return of over 3%, outperforming the S&P 500's 5% loss. This resilience is partly attributed to SPLV's focus on defensive sectors like utilities and industrials, which provide inelastic demand for essential goods and services during downturns.

Income Generation: The Dividend Edge of Value ETFs

Beyond defensive resilience, low-cost value ETFs also offer superior income generation, a critical factor during economic uncertainty. The Vanguard High Dividend Yield ETF (VYM), for instance, has maintained a dividend yield of 2.62% as of 2025, significantly higher than the S&P 500's current yield of 1.2%. According to data, this disparity underscores the structural advantages of value ETFs, which prioritize companies with established dividend histories and conservative balance sheets.

During the 2008 financial crisis, the Vanguard Dividend Appreciation ETF (VIG)-a growth-oriented dividend strategy-experienced a relatively modest -4.6% dip in dividends, outperforming high-yield ETFs like VYM. This resilience is partly due to VIG's methodology, which excludes companies at risk of dividend cuts. However, even as growth indices like the S&P 500 Growth ETF have seen declining dividend yields, value ETFs have maintained a more consistent income stream. For example, U.S. common dividend increases in Q3 2025 reached $14.0 billion, up 43% from Q2 2025, but this growth was driven largely by value-oriented sectors.

Long-Term Outperformance and Cyclical Reversals

While short-term volatility is inevitable, the long-term data reinforces the case for value ETFs. Over the past century, value stocks have outperformed growth stocks by an average of 4.4% annually in the U.S., a trend that aligns with their historical role. This outperformance has not been linear, however. For example, from 2015 to 2021, growth stocks dominated, but the 2022-2025 period marked a cyclical reversal as value regained its edge. According to research, the 2022-2025 period marked a cyclical reversal as value regained its edge.

The current macroeconomic environment-characterized by rising rates and inflation-favors value strategies. Defensive sectors within value ETFs, such as utilities and consumer staples, are less sensitive to economic cycles and often maintain stable cash flows even during downturns. According to analysis, defensive sectors within value ETFs, such as utilities and consumer staples, are less sensitive to economic cycles and often maintain stable cash flows even during downturns. This contrasts sharply with growth indices, which are heavily weighted toward speculative, high-valuation sectors like AI and semiconductors. As of 2025, the S&P 500's dividend yield has fallen to levels last seen in the late 1990s, reflecting a broader shift toward growth-oriented investing at the expense of income stability.

Conclusion: A Balanced Approach for Uncertain Times

While no investment strategy is immune to market risk, low-cost value ETFs offer a compelling combination of defensive resilience and income generation during periods of economic uncertainty. Their historical outperformance during rising rate environments, coupled with their ability to maintain consistent dividend yields, positions them as a robust alternative to growth-heavy indices. For investors seeking to mitigate downside risk while preserving income, value ETFs provide a cyclical and structural edge that aligns with the challenges of the current macroeconomic landscape.

As always, diversification and a long-term perspective remain critical. However, in an era where market corrections and economic volatility are increasingly likely, the case for value ETFs is not just theoretical-it is supported by decades of empirical evidence.