ETF Strategies to Fight the Rising Coronavirus Fears
Wall Street is having a tough September after a blockbuster rally in the previous month. The Dow Jones Industrial Average dropped 1.8% on Sep 21. Moreover, the S&P 500 index lost 1.2% and the Nasdaq composite was down 0.1% during the trading session on the same day. Notably, this decline also marked for the first time since February that S&P 500 witnessed four consecutive daily losses, per a CNBC article.
It seems like the seasonal phenomenon, where September is historically considered the worst month for the stock market, is playing on. Per LPL Financial data published in a Yahoo Finance article, the S&P 500 has fallen about 1%, on average, in the month of September since 1950. Notably, the S&P 500 has lost more than 6% in September and the Dow Jones Industrial Average has dropped nearly 4.5%. The Nasdaq Composite has also declined around 8.5% month to date.
Investors seem to be increasingly worried about the worsening coronavirus situation globally and in the United States. The United Kingdom is seeing a rise in infections and the government there is considering another national lockdown to control the situation, per a CNBC article. They also seem to be bothered about the uncertainty surrounding further U.S. fiscal stimulus which shall be an absolute necessity for economic recovery. Reacting to these looming concerns, stocks belonging to cyclical sectors like airlines and cruise lines suffered. Cruise operators like Carnival, Norwegian Cruise Line and Royal Caribbean lost ground on Sep 21. Airline stocks like United Airlines and American Airlines also slipped.
Investors should not forget that this year has the U.S. Presidential elections as well. Thus, with elections approaching, investors need to prepare for heightened volatility in the broader equities space. Notably, this election year could be worse as the coronavirus pandemic continues to spread.
ETF Strategies to Follow
Given the situation, let’s look at some ETF strategies that investors can follow for a smooth sail in these turbulent times.
In a low-interest rate environment, dividend investing has been the hot spot. Against this backdrop, dividend ETFs like WisdomTree U.S. Quality Dividend Growth Fund DGRW, FlexShares Quality Dividend Defensive ETF QDEF, WBI Power Factor High Dividend ETF (WBIY) and Schwab U.S. Dividend Equity ETF (SCHD) might be compelling picks (read: A Quick Guide to Dividend Aristocrat ETFs).
Given the uncertainties surrounding theU.S. Presidential elections as well as the September sell-offs, investors can consider low-volatility ETFs. Low-volatility products could be intriguing choices for those who want to stay invested in equities during turbulent market conditions. The following options are intriguing: iShares Edge MSCI Min Vol USA ETF USMV, Invesco S&P 500 Low Volatility ETF SPLV, iShares Edge MSCI Min Vol EAFE ETF (EFAV) and iShares Edge MSCI Min Vol Global ETF (ACWV) (read: Bears Creep In: ETF Strategies to Win).
Real estate investment trusts (REITs) funds look like attractive choices for investors now. A dovish Fed can be cited as the main reason. When interest rates drop, mortgage rates fall, making real estate or refinancing mortgages affordable. This in turn boosts real estate sales. Moreover, these funds offer outsized yields and act as good investing options when increased safe-haven trades keep yields at check. Notably, low interest rates are boosting demand in the housing market, resulting in an increase in mortgage applications. Analysts believe support from the Federal Reserve is helping keep rates at such low levels
In view of this, investors can consider ETFs like JPMorgan BetaBuilders MSCI US REIT ETF BBRE, iShares Core U.S. REIT ETF USRT, Nuveen Short-Term REIT ETF (NURE), Invesco S&P 500 Equal Weight Real Estate ETF (EWRE) and Schwab U.S. REIT ETF (SCHH) (read: Here's Why REIT ETFs are Sizzling With Opportunities).
Prices of precious metals like gold and silver rise during chaotic market conditions. This enhances the appeal of iShares Silver Trust SLV, Invesco DB Silver Fund DBS, SPDR Gold Trust ETF (GLD) and iShares Gold Trust (IAU) (read: 4 Safe ETF Bets as Global Stocks Tumble).
The rising tensions are causing investors to seek refuge in safer investment options, with the utility sector grabbing major attention. The sector is among the most stable for the long term as its players are likely to offer decent returns, irrespective of market conditions. It is known for its non-cyclical nature and acts as a safe haven for investors during erratic stock market conditions. Moreover, utilities act as a defensive option to stay invested in more rewarding equity markets. In view of this, investors can consider The Utilities Select Sector SPDR ETF XLU, Vanguard Utilities ETF VPU, iShares U.S. Utilities ETF (IDU) and Fidelity MSCI Utilities Index ETF (FUTY) (read: 4 Sector ETFs to Benefit From 3-Year Lower Rates).
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Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
iShares Silver Trust (SLV): ETF Research Reports
Vanguard Utilities ETF (VPU): ETF Research Reports
iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
Invesco DB Silver ETF (DBS): ETF Research Reports
WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
FlexShares Quality Dividend Defensive ETF (QDEF): ETF Research Reports
Invesco SP 500 Low Volatility ETF (SPLV): ETF Research Reports
iShares Core U.S. REIT ETF (USRT): ETF Research Reports
JPMorgan BetaBuilders MSCI US REIT ETF (BBRE): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.