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Try These ETFs to Counter the Coronavirus-Induced Volatility
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The coronavirus outbreak has caused an unprecedented collapse of economic activities, as governments are forced to shut down commerce and take social distancing measures, in an effort to contain the spread of the virus. The pandemic has already infected more than 2.7 million globally with above 191,000 casualties, per Johns Hopkins University data. The United States alone has recorded a death toll of more than 49,000.
The pandemic is sparking fears of a global economic recession among investors as the outbreak is disrupting global supply chains followed by the shutdown of economic activities. The market participants also seem to be worried about the pandemic’s impact on corporate earnings.
The job market is also expected to be disrupted as Americans are filing claims for unemployment benefits. The weekly jobless claim data showed another 4.4 million Americans filing for unemployment benefits in the week ending Apr 17. This has lifted total claims to over 26 million over the past five weeks, meaning that the coronavirus-led layoffs eliminated all the jobs created since the Great Recession. With rising unemployment levels, the spending capacity of consumers will, undoubtedly, be compromised to a great extent. In fact, the latest preliminary report on April’s U.S. consumer sentiment shows that the metric has seen a record decline. Moreover, the housing sector is being impacted, as coronavirus hits the job market and spending. In its 35-year history, the index measuring the homebuilder sentiment has witnessed the sharpest monthly decline (per a CNBC article).
Going on, despite the biggest OPEC+ output cut deal in mid-April, May WTI crude futures plunged below zero for the first time in history on Apr 20. Oil markets have been struggling severely with drying demand due to coronavirus-induced shutdowns, still-ample supplies and most importantly, storage crisis. Oil prices also suffered in March on a price war between Saudi Arabia and Russia. OPEC+ producers’ inability to crack an output cut deal and Saudi Arabia’s announcement that it will pump more oil sparked the war.
Notably, JPMorgan Chase & Co. economists project that the global economy will see lost output at $5.5 trillion or almost 8% of GDP through the end of 2021, per a Bloomberg article. Moreover, they believe that the cost to developed economies will be similar to what was borne by them during the 2008-2009 and 1974-1975 recessions, per the report. Going on, according to Morgan Stanley, GDP in developed markets will return to the pre-pandemic levels by the third quarter of 2021, according to a Bloomberg article.
ETFs in Focus
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:
This fund offers exposure to 208 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 $32.36 billion, the product charges 0.15% in expense ratio. It has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook (read: 6 Healthy ETFs Amid Coronavirus-Hit Economy).
This ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 100 securities in its basket. SPLV has amassed $9.24 billion in its asset base. It charges 25 bps in annual fees and has a Zacks ETF Rank #3, with a Medium risk outlook (read: Low Beta ETFs to Consider in an Uncertain Market).
EFAV looks to replicate the performance of international equity securities that have lower risk. The fund tracks the MSCI EAFE Minimum Volatility (USD) Index and holds 279 securities. It has amassed $10.41 billion in its asset base. EFAV charges 20 bps in annual fees and has a Zacks ETF Rank #3, with a Low risk outlook (read: Try These Global Low-Volatility ETFs on Rising Recession Scares).
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 446 securities. It has AUM of $5.30 billion and charges 20 bps in annual fees. ACWV has a Low risk outlook.
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 50 securities. The fund has AUM of $2.42 billion and charges 30 bps in annual fees. It has a Medium risk outlook.
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Try These ETFs to Counter the Coronavirus-Induced Volatility
The coronavirus outbreak has caused an unprecedented collapse of economic activities, as governments are forced to shut down commerce and take social distancing measures, in an effort to contain the spread of the virus. The pandemic has already infected more than 2.7 million globally with above 191,000 casualties, per Johns Hopkins University data. The United States alone has recorded a death toll of more than 49,000.
The pandemic is sparking fears of a global economic recession among investors as the outbreak is disrupting global supply chains followed by the shutdown of economic activities. The market participants also seem to be worried about the pandemic’s impact on corporate earnings.
The job market is also expected to be disrupted as Americans are filing claims for unemployment benefits. The weekly jobless claim data showed another 4.4 million Americans filing for unemployment benefits in the week ending Apr 17. This has lifted total claims to over 26 million over the past five weeks, meaning that the coronavirus-led layoffs eliminated all the jobs created since the Great Recession. With rising unemployment levels, the spending capacity of consumers will, undoubtedly, be compromised to a great extent. In fact, the latest preliminary report on April’s U.S. consumer sentiment shows that the metric has seen a record decline. Moreover, the housing sector is being impacted, as coronavirus hits the job market and spending. In its 35-year history, the index measuring the homebuilder sentiment has witnessed the sharpest monthly decline (per a CNBC article).
Going on, despite the biggest OPEC+ output cut deal in mid-April, May WTI crude futures plunged below zero for the first time in history on Apr 20. Oil markets have been struggling severely with drying demand due to coronavirus-induced shutdowns, still-ample supplies and most importantly, storage crisis. Oil prices also suffered in March on a price war between Saudi Arabia and Russia. OPEC+ producers’ inability to crack an output cut deal and Saudi Arabia’s announcement that it will pump more oil sparked the war.
Notably, JPMorgan Chase & Co. economists project that the global economy will see lost output at $5.5 trillion or almost 8% of GDP through the end of 2021, per a Bloomberg article. Moreover, they believe that the cost to developed economies will be similar to what was borne by them during the 2008-2009 and 1974-1975 recessions, per the report. Going on, according to Morgan Stanley, GDP in developed markets will return to the pre-pandemic levels by the third quarter of 2021, according to a Bloomberg article.
ETFs in Focus
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 - Free Report)
This fund offers exposure to 208 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 $32.36 billion, the product charges 0.15% in expense ratio. It has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook (read: 6 Healthy ETFs Amid Coronavirus-Hit Economy).
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. It tracks the S&P 500 Low Volatility Index and holds 100 securities in its basket. SPLV has amassed $9.24 billion in its asset base. It charges 25 bps in annual fees and has a Zacks ETF Rank #3, with a Medium risk outlook (read: Low Beta ETFs to Consider in an Uncertain Market).
iShares Edge MSCI Min Vol EAFE ETF (EFAV - Free Report)
EFAV looks to replicate the performance of international equity securities that have lower risk. The fund tracks the MSCI EAFE Minimum Volatility (USD) Index and holds 279 securities. It has amassed $10.41 billion in its asset base. EFAV charges 20 bps in annual fees and has a Zacks ETF Rank #3, with a Low risk outlook (read: Try These Global Low-Volatility ETFs on Rising Recession Scares).
iShares Edge MSCI Min Vol Global 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 446 securities. It has AUM of $5.30 billion and charges 20 bps in annual fees. ACWV has a Low risk outlook.
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 50 securities. The fund has AUM of $2.42 billion and charges 30 bps in annual fees. It has a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>