Unlocking EM Value and Momentum: UEVM's Strategic Edge in a Shifting Global Landscape

The global macroeconomic landscape in 2025 is marked by a stark divergence in central bank policies. While the U.S. Federal Reserve remains on hold, emerging market (EM) central banks are aggressively cutting interest rates to stimulate growth amid slowing global demand and trade tensions. This policy asymmetry, coupled with a weakening U.S. dollar, is creating a fertile environment for EM value stocks—particularly those with strong momentum and disciplined volatility management. For investors, the VictoryShares Emerging Markets Value Momentum ETF (UEVM) offers a compelling vehicle to capitalize on this confluence of factors.

Central Bank Policy Shifts: A Tailwind for EM Value Stocks

J.P. Morgan Research underscores that EM growth is projected to decelerate to 2.4% annualized in H2 2025, driven by trade policy shifts and geopolitical tensions. However, EM central banks are responding with rate cuts, even as the Fed pauses. This divergence is critical: lower rates reduce borrowing costs, stimulate economic activity, and enhance the appeal of EM equities. For value stocks—often tied to sectors like financials, industrials, and consumer staples—this environment is particularly favorable.

Consider India and Brazil, two of UEVM's key markets. India's Reserve Bank of India (RBI) surprised markets with a 100-basis-point rate cut in Q2 2025, propelling the MSCI India Index 9.2% higher. Similarly, Brazil's central bank signaled the end of its tightening cycle, with a 25-basis-point hike in June 2025 likely marking the final move. These actions have spurred investor inflows into undervalued EM equities, with the MSCI Emerging Markets IMI Index surging 12.7% in Q2 2025.

UEVM's Strategic Framework: Value, Momentum, and Volatility Management

UEVM's investment strategy is rooted in a rules-based approach that combines value and momentum factors while mitigating volatility. The fund tracks the Nasdaq Victory Emerging Market Value Momentum Index, which ranks stocks by value (low price-to-book ratios) and momentum (price performance) within sector groups. The top 25% of stocks are selected and weighted inversely to their volatility, ensuring that lower-volatility securities receive higher allocations. This methodology not only enhances risk-adjusted returns but also aligns with the current macroeconomic backdrop, where stability is paramount.

For example, UEVM's liquidity filters exclude the bottom 10% of securities by trading volume, ensuring exposure to liquid, high-quality assets. Its quarterly rebalancing allows for agile adjustments to shifting market conditions, such as the recent policy shifts in India and Brazil. The fund's volatility metrics—14.1% annualized as of July 2025—compare favorably to traditional EM indices, which often exhibit higher volatility due to concentration in cyclical sectors.

Mean Reversion in EM Equities: A Case for Positioning

Emerging markets have historically experienced valuation cycles, with periods of underperformance followed by sharp rebounds. As of 2025, EM equities trade at a significant discount to developed markets. The MSCI Emerging Markets Index, for instance, trades at a price-to-earnings (P/E) ratio of 10.5x, compared to 22x for the S&P 500. This undervaluation is exacerbated by structural factors such as political uncertainty and trade tensions, which have depressed investor sentiment.

However, the current macroeconomic environment is primed for a mean reversion. Central bank rate cuts in EM are reducing the cost of capital, while a weaker dollar is making EM assets more attractive to foreign investors. Additionally, structural reforms in countries like India and Brazil are improving corporate governance and earnings visibility. For UEVM, which is heavily weighted toward large- and mid-cap stocks (81.3% of assets), this setup offers a unique opportunity to capture value in sectors poised for growth.

The Case for UEVM: A Balanced Approach to EM Exposure

UEVM's dual focus on value and momentum, combined with its volatility management, positions it to outperform in a reversionary environment. The fund's top holdings include companies in sectors such as financials, consumer staples, and industrials—areas that benefit from lower interest rates and improved economic conditions. For instance, Indian financials have surged post-RBI rate cuts, while Brazilian consumer stocks have gained traction as inflation eases.

Moreover, UEVM's cost efficiency enhances its appeal. With an expense ratio of 0.45%, it is significantly cheaper than the average EM ETF, allowing more capital to be allocated to high-conviction positions. Its Total Cost of Ownership (TCO) is also favorable, with an average bid/ask spread of 0.0%, compared to 28 basis points for peers.

Conclusion: Positioning for a Reversionary Cycle

The interplay of central bank policy shifts, a weakening dollar, and undervalued EM equities creates a compelling case for value and momentum strategies in emerging markets. UEVM's structured approach—combining value screening, momentum selection, and volatility management—offers a disciplined way to navigate this environment. As global growth dynamics evolve and EM economies stabilize, investors who position now may benefit from a potential mean reversion in EM returns.

For those seeking to capitalize on this opportunity, UEVM provides a cost-effective, diversified, and risk-managed vehicle to access the next phase of EM growth. The time to act is now, as the macroeconomic tides turn in favor of value-driven, momentum-boosted emerging market equities.