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Bet on Low-Volatility ETFs to Combat Rising Delta Variant Scares
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Wall Street is feeling the pressure of growing investors’ concerns about sustainability of the U.S. economic recovery from the pandemic-led slump and the delta variant threat. Accordingly, the two major indices, the S&P 500 Index and the Dow Jones Industrial Average, lost about 0.2% and 0.3% on Aug 2. Moving on, the 10-year Treasury yield declined 8 basis points (bps) to 1.15%. This also highlights that the market participants are concerned about the strength of the U.S. economic mend achieved so far, per a CNBC article.
The world’s largest economy is struggling with the rising number of new delta variant cases. The United States has witnessed a seven-day moving average of about 72,790 new cases per day on Jul 30, per the Centers for Disease Control and Prevention (CDC) data and as mentioned in a CNBC report. Unfortunately, the number has exceeded the peak of about 68,700 new cases per day observed last summer, at a time when the United States didn’t have an authorized vaccine, according to CDC Director Dr. Rochelle Walensky (per a CNBC article). Going on, according to Johns Hopkins University data, the seven-day average rose to about 80,000 new cases per day as of Aug 1, as stated in a CNBC article.
Disappointing economic data highlighted that the U.S. manufacturing activity expanded at a slower pace in July for the second consecutive month amid persistent raw material shortages. In fact, an Institute for Supply Management (ISM) survey recently highlighted that a measure of manufacturing activity declined the maximum in 16 months.
The ISM's index of national factory activity slipped to 59.5 last month (the lowest level since January) from 60.6 in June. A reading above 50 signals expansion in manufacturing, that accounts for about 11.9% of the U.S. economy. The metric compares unfavorably with a forecast of about 60.9, per a Reuters poll.
Going on, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Despite missing the estimate, in absolute term, U.S. GDP came in at $19.4 trillion in second-quarter 2021, exceeding $19.2 trillion recorded in fourth-quarter 2019 (the last quarter before the outbreak of coronavirus).
Notably, commenting on the current market scenario, Canaccord Genuity analyst Tony Dwyer has said that “The markets are having a hard time making up their mind as investors look for the next catalyst in either direction. The fear over the Delta variant of the Covid-19 virus and the other side of ‘peak everything’ has investors on edge, while the monetary and fiscal support for the economy coupled with historically strong earnings keeps liquidity high,” per a CNBC article.
Further, after an impressive first half of the ongoing year, market analysts are anxious about Wall Street’s performance for the rest of 2021, according to a CNBC article. In fact, the analysts are projecting smaller and rougher gains in the second half of 2021.
Low-Volatility ETFs to the Rescue
Low-volatility products could be intriguing choices for those who want to continue investing in equities in the present turbulent market conditions. Consider the following interesting options:
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 Index. With AUM of $28.41 billion, the product charges 0.15% in expense ratio (read: 5 ETF Zones Hitting Highs As Growth Worries Resurface).
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 103 securities in its basket. It has AUM of $7.94 billion and charges an expense ratio of 25 basis points (bps) as stated in the prospectus (read: 5 Best-Performing ETFs of Last Week).
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 400 securities. It has AUM of $5.20 billion and charges 20 bps in annual fees.
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 $3.50 billion and charges 30 bps in annual fees.
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Bet on Low-Volatility ETFs to Combat Rising Delta Variant Scares
Wall Street is feeling the pressure of growing investors’ concerns about sustainability of the U.S. economic recovery from the pandemic-led slump and the delta variant threat. Accordingly, the two major indices, the S&P 500 Index and the Dow Jones Industrial Average, lost about 0.2% and 0.3% on Aug 2. Moving on, the 10-year Treasury yield declined 8 basis points (bps) to 1.15%. This also highlights that the market participants are concerned about the strength of the U.S. economic mend achieved so far, per a CNBC article.
The world’s largest economy is struggling with the rising number of new delta variant cases. The United States has witnessed a seven-day moving average of about 72,790 new cases per day on Jul 30, per the Centers for Disease Control and Prevention (CDC) data and as mentioned in a CNBC report. Unfortunately, the number has exceeded the peak of about 68,700 new cases per day observed last summer, at a time when the United States didn’t have an authorized vaccine, according to CDC Director Dr. Rochelle Walensky (per a CNBC article). Going on, according to Johns Hopkins University data, the seven-day average rose to about 80,000 new cases per day as of Aug 1, as stated in a CNBC article.
Disappointing economic data highlighted that the U.S. manufacturing activity expanded at a slower pace in July for the second consecutive month amid persistent raw material shortages. In fact, an Institute for Supply Management (ISM) survey recently highlighted that a measure of manufacturing activity declined the maximum in 16 months.
The ISM's index of national factory activity slipped to 59.5 last month (the lowest level since January) from 60.6 in June. A reading above 50 signals expansion in manufacturing, that accounts for about 11.9% of the U.S. economy. The metric compares unfavorably with a forecast of about 60.9, per a Reuters poll.
Going on, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. Despite missing the estimate, in absolute term, U.S. GDP came in at $19.4 trillion in second-quarter 2021, exceeding $19.2 trillion recorded in fourth-quarter 2019 (the last quarter before the outbreak of coronavirus).
Notably, commenting on the current market scenario, Canaccord Genuity analyst Tony Dwyer has said that “The markets are having a hard time making up their mind as investors look for the next catalyst in either direction. The fear over the Delta variant of the Covid-19 virus and the other side of ‘peak everything’ has investors on edge, while the monetary and fiscal support for the economy coupled with historically strong earnings keeps liquidity high,” per a CNBC article.
Further, after an impressive first half of the ongoing year, market analysts are anxious about Wall Street’s performance for the rest of 2021, according to a CNBC article. In fact, the analysts are projecting smaller and rougher gains in the second half of 2021.
Low-Volatility ETFs to the Rescue
Low-volatility products could be intriguing choices for those who want to continue investing in equities in the present turbulent market conditions. Consider the following interesting options:
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report)
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 Index. With AUM of $28.41 billion, the product charges 0.15% in expense ratio (read: 5 ETF Zones Hitting Highs As Growth Worries Resurface).
Invesco S&P 500 Low Volatility ETF (SPLV - Free Report)
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 103 securities in its basket. It has AUM of $7.94 billion and charges an expense ratio of 25 basis points (bps) as stated in the prospectus (read: 5 Best-Performing ETFs of Last Week).
iShares MSCI Global Min Vol Factor ETF (ACWV - Free Report)
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 400 securities. It has AUM of $5.20 billion and charges 20 bps in annual fees.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report)
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 $3.50 billion and charges 30 bps in annual fees.