Consider These Low-Volatility ETFs Amid Market Meltdown Scares
Low-volatility products could be fascinating picks for those seeking steady investment in equities amid the current market volatility.
Investors are a little on the edge about their investment choices in September given that the month has been historically considered the worst-performing for Wall Street. Meanwhile, market analysts expect a market correction in September.
There are certain factors that are raising worries like surging delta variant cases and the Federal Reserve meeting where it might announce its plan to taper bond purchases.
Thus, LPL Financial chief market strategist Ryan Detrick has said that “Although this bull market has laughed at nearly all the worry signs in 2021, let’s not forget that September is historically the worst month of the year for stocks. Even last year, in the face of a huge rally off the March 2020 lows, we saw a nearly 10% correction in the middle of September,” according to a CNBC article. The same article states that Ryan Detrick expects a short-term market correction in the range of 5-8%. According to the LPL Financial data in a Yahoo Finance article, the S&P 500 has fallen about 1% on average in September since 1950.
Certain economic data releases have also turned out to be very disappointing. The U.S. economy added only 235,000 jobs in August 2021 (the lowest in seven months). The metric was far behind the forecast of 750,000 as a surge in COVID-19 infections probably kept companies from hiring and workers from actively looking for a job (per a CNBC article). The U.S. unemployment rate declined to 5.4% in July 2021, below market expectations of 5.7%. The number of unemployed persons dropped by 782,000 to 8.7 million.
U.S. consumers seem worried about the sustainability of economic recovery from the pandemic-led slump, surging delta variant threat and increasing inflation levels. Consequently, the consumer confidence in the United States slipped to a six-month low in August. The Conference Board's measure of consumer confidence index stands at 113.8 (the lowest level since February), comparing unfavorably with July’s reading of 125.1.
The virus variant remains a serious concern as the number of cases is rising in the United States. The new cases arising from the delta variant are being mostly observed among the unvaccinated population. Going by Johns Hopkins University data, the United States is witnessing an average of 160,000 new COVID-19 cases a day, per a CNN report.
The resurging cases might scare investors as they worry about the implementation of new lockdown measures to control the spread, which may hurt the global economic recovery achieved so far.
The increasing concerns about the surging coronavirus cases due to the delta variant continue to dampen U.S. consumer sentiments. The metric surprisingly slid to a pandemic-era low level in early August when compared to a reading of 70.8 recorded in April 2020. The University of Michigan’s preliminary consumer sentiment index fell to 70.2 in August from 81.2 in the prior month. The reading was the lowest since December 2011 as Americans seem to be sceptical about things like personal finances, inflation and employment.
Low-Volatility ETFs to the Rescue
Low-volatility products could be intriguing choices for those who want to continue investing in equities in turbulent market conditions. Consider the following interesting options:
iShares MSCI USA Min Vol Factor ETF USMV
This fund offers exposure to 183 U.S. stocks with lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility (USD) Index. With AUM of $28.89 billion, the product charges 0.15% in expense ratio (read: ETF Strategies to Combat Delta Variant Woes & Market Uncertainty).
Invesco S&P 500 Low Volatility ETF SPLV
This ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. The fund is based on the S&P 500 Low Volatility Index and holds 101 securities in its basket. It has AUM of $8.36 billion and charges an expense ratio of 25 basis points (bps) as stated in the prospectus (read: 5 Hot Equity ETFs of Last Week Amid Volatility).
iShares MSCI Global Min Vol Factor ETF ACWV
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 399 securities. It has AUM of $5.35 billion and charges 20 bps in annual fees.
Invesco S&P 500 High Dividend Low Volatility ETF SPHD
The fund seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S&P 500 Low Volatility High Dividend Index. It holds 51 securities. The fund has AUM of $3.03 billion and charges 30 bps in annual fees (read: 5 ETFs to Bet on Fed's Stimulus Tapering Concerns, Weak Data).
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iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
iShares MSCI Global Min Vol Factor ETF (ACWV): ETF Research Reports
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