The U.S. economy shrank deeper in the second quarter as the COVID-19 pandemic halted business and industrial activities. The first reading from the Bureau of Economic Analysis showed that the economy contracted at a historic 32.9% annual rate from April through June, marking its worst drop ever. This was followed by a first-quarter drop of 5%.
With this, America officially plunged into its first recession — two consecutive quarters of declining gross domestic product — in 11 years, putting an end to the longest economic expansion in U.S. history. The Q2 GDP drop was nearly four times worse than the peak of the financial crisis in the fourth quarter of 2008, when the economy contracted at an annual rate of 8.4% (read: 2 New Factor-Based ETFs to Endure the Current Volatile Market).
The shutdown of businesses and industries to contain the pandemic had thrown tens of millions of people out of work, pushing the unemployment rate higher to 14.7%. Though the job market has recovered due to reopening of the economy, bringing millions back to work, the resurgence in virus will likely slow further gains in the job market. Meanwhile, consumer spending, which accounts for more than two-thirds of U.S. economic activity, tumbled 34% — the sharpest decline on record.
Further, the latest report showed that jobless claims surged to 1.43 million in the week ending Jul 25. This has added to signs of slowdown in the economic recovery as coronavirus cases spiraled in southern and western U.S. states.
ETFs to Consider
The deep slowdown in economy has made investors jittery, raising the demand for low-risk securities or stocks that are pandemic gainers. Below we have highlighted some ETFs that look compelling choice amid the economic turmoil:
SPDR Gold Trust ETF (GLD - Free Report)
Gold will continue to shine as the economic turmoil will spur demand for the metal as a great store of value and hedge against market turmoil. GLD is the most-popular gold ETF with AUM of $78.1 billion and has a Zacks ETF Rank #3 (Hold). It has risen 15.7% over the past 13-week period (read: How to Bet on the Gold Frenzy With ETFs & Stocks).
AGFiQ US Market Neutral Momentum Fund (MOM - Free Report)
Low-risk ETFs provide significant protection to the portfolio. This ETF provides exposure to the “momentum” factor by investing long in U.S. equities that have had above-average total returns and shorting those securities that have had below-average total returns. The product has accumulated $5.4 million in its asset base and has gained 9.6% over the past 13 weeks.
Global X Cloud Computing ETF (CLOU - Free Report)
The pandemic has resulted in a dramatic shift in consumer behavior toward the digital world. Cloud computing has encouraged video conferencing, gaming, e-commerce, remote project collaboration, online classes and several other programs. With AUM of $1 billion, this fund invests in companies positioned to benefit from the increased adoption of the cloud computing technology. It is up 30.5% in the same time frame and has a Zacks ETF Rank #3.
Amplify Online Retail ETF (IBUY - Free Report)
Consumers have made a radical shift toward online shopping as people want to avoid direct contact or go outside. IBUY offers global exposure to companies that derive 70% or more revenues from online and virtual retail. It has attracted $755.2 million in its asset base and soared 54.4% over the past 13-week period.
Global X E-commerce ETF (EBIZ - Free Report)
With the rapidly growing demand for e-commerce amid the coronavirus-driven economy slowdown, EBIZ stands to benefit. This fund invests in companies positioned to benefit from increased adoption of e-commerce as a distribution model, including companies whose principal business is in operating e-commerce platforms, providing related software and services or selling goods and services online. The ETF has amassed $54.7 million in its asset base and has gained 39.5% in the past 13 weeks.
Global X Cybersecurity ETF (BUG - Free Report)
With growing digitization, the need for cyber security is fast increasing. This is because the digital transformation has increased the risk of security breaches and threats. In fact, we have seen years’ worth of digital transformation in months amid pandemic. BUG offers exposure to the companies that stand to potentially benefit from the increased adoption of cybersecurity technology. It has AUM of $33.1 million and has surged 31.3% over the past 13-week period (read: Cybersecurity Stocks & ETFs for the Coronavirus Crisis).
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 >>