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Wall Street has been caught in uncertainty brought about by concerns over the sustainability of economic recovery. This is especially true as the highly contagious Delta variant of coronavirus is spreading rapidly in the United States with the lowest vaccination rates such as Alabama, Arkansas, Louisiana and Mississippi, according to the U.S. Centers for Disease Control and Prevention (CDC) as well as elsewhere around the world.
The Delta variant is now estimated to make up 83% of all sequenced COVID-19 cases in the United States, per CDC. This represents a dramatic increase from 50% for the week ended Jul 3. The United States is averaging nearly 30,000 new daily cases in the last seven days compared to last month's 11,000 seven-day average of new daily cases.
The World Health Organization urged caution on reopenings worldwide with most regions seeing a rise in case counts. It puts emphasis on “reintroduction of indoor mask mandates, distancing and occupancy limits” in certain parts of the country in the coming months (read: 4 ETF Zones to Invest in As Volatility Spikes).
Many scientists projects COVID-19 to continue spreading around the world for at least the next two to three years, requiring nations to reinstitute public health measures on an ad hoc basis. Authorities in Australia, South Africa and Asia have recently reintroduced curfews or other measures to curb rising delta outbreaks. Japan has declared a coronavirus state of emergency in Tokyo and banned spectators at the Olympics.
However, the economy has shown strong recovery from the pandemic lows driven by rapid vaccine rollouts, an expanded stimulus, a healing job market and earnings growth that have led to higher activities across all sectors and categories. Additionally, inflation concerns have been eased with the latest Fed minutes, which indicate that officials may not be ready yet to tighten policy (read: 5 Top-Ranked ETFs to Buy on Dovish Fed Minutes).
Against such a backdrop, investors should focus on high-quality investing.
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, elevated margins, and a track of stable or rising sales and earnings growth. These products thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings. Academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term.
In its research, BlackRock CIO of U.S. fundamental equities Tony DeSpirito revealed that quality stocks are trading at their largest valuation discount to the broad market since the dot com bubble of the early 2000s. This is because these stocks have underperformed since COVID-19 vaccine announcements in November 2020. Investors have largely avoided or sold these stocks in favor of the riskier bets that produced strong gains early in the recovery.
iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report) and Invesco S&P 500 Quality ETF (SPHQ - Free Report) have been the most popular plays targeting this niche strategy. Barron's 400 ETF (BFOR - Free Report) , FlexShares Quality Dividend Index Fund (QDF - Free Report) and SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) could also enjoy smooth trading and generate market-beating returns in the current market environment.
These ETFs often provide hedge against market volatility. Adding any of the above-mentioned products to one’s long-term portfolio could be a good move given their credit worthiness and soundness.
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Here's Why You Should Invest in Quality ETFs Now
Wall Street has been caught in uncertainty brought about by concerns over the sustainability of economic recovery. This is especially true as the highly contagious Delta variant of coronavirus is spreading rapidly in the United States with the lowest vaccination rates such as Alabama, Arkansas, Louisiana and Mississippi, according to the U.S. Centers for Disease Control and Prevention (CDC) as well as elsewhere around the world.
The Delta variant is now estimated to make up 83% of all sequenced COVID-19 cases in the United States, per CDC. This represents a dramatic increase from 50% for the week ended Jul 3. The United States is averaging nearly 30,000 new daily cases in the last seven days compared to last month's 11,000 seven-day average of new daily cases.
The World Health Organization urged caution on reopenings worldwide with most regions seeing a rise in case counts. It puts emphasis on “reintroduction of indoor mask mandates, distancing and occupancy limits” in certain parts of the country in the coming months (read: 4 ETF Zones to Invest in As Volatility Spikes).
Many scientists projects COVID-19 to continue spreading around the world for at least the next two to three years, requiring nations to reinstitute public health measures on an ad hoc basis. Authorities in Australia, South Africa and Asia have recently reintroduced curfews or other measures to curb rising delta outbreaks. Japan has declared a coronavirus state of emergency in Tokyo and banned spectators at the Olympics.
However, the economy has shown strong recovery from the pandemic lows driven by rapid vaccine rollouts, an expanded stimulus, a healing job market and earnings growth that have led to higher activities across all sectors and categories. Additionally, inflation concerns have been eased with the latest Fed minutes, which indicate that officials may not be ready yet to tighten policy (read: 5 Top-Ranked ETFs to Buy on Dovish Fed Minutes).
Against such a backdrop, investors should focus on high-quality investing.
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, elevated margins, and a track of stable or rising sales and earnings growth. These products thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings. Academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term.
In its research, BlackRock CIO of U.S. fundamental equities Tony DeSpirito revealed that quality stocks are trading at their largest valuation discount to the broad market since the dot com bubble of the early 2000s. This is because these stocks have underperformed since COVID-19 vaccine announcements in November 2020. Investors have largely avoided or sold these stocks in favor of the riskier bets that produced strong gains early in the recovery.
iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report) and Invesco S&P 500 Quality ETF (SPHQ - Free Report) have been the most popular plays targeting this niche strategy. Barron's 400 ETF (BFOR - Free Report) , FlexShares Quality Dividend Index Fund (QDF - Free Report) and SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) could also enjoy smooth trading and generate market-beating returns in the current market environment.
These ETFs often provide hedge against market volatility. Adding any of the above-mentioned products to one’s long-term portfolio could be a good move given their credit worthiness and soundness.