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Defensive ETF Strategies to Sail Through Soaring COVID-19 Cases
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The world’s largest economy continues to witness a record number of coronavirus cases. The United States, which is averaging almost 210,201 new cases per day, saw at least 254,848 new COVID-19 cases on Dec 14, per data from Johns Hopkins University (according to a CNN report). Also, the country’s death toll has crossed 300,000 since the beginning of the virus outbreak. The Dow Jones Industrial Index has lost 0.7% in the last five days whereas the S&P 500 has fallen 1.2%.
Despite the beginning of Pfizer Inc. (PFE) and BioNTech SE’s (BNTX) vaccine distribution in the United States, people fear another round of lockdowns and increased social-distancing measures considering the aggravating coronavirus outbreak. In fact, New York City Mayor Bill De Blasio recently said that the city could see a “full shutdown” soon, per a CNBC article. In this regard, he said that “we’re seeing the kind of level of infection with the coronavirus we haven’t seen since May and we have got to stop that momentum, or else our hospital system will be threatened,” per the same CNBC article as mentioned above.
Seeing the concerning pace at which the virus is spreading, investors are now worried about another round of fiscal aid to provide some support to the economy. However, it is worth noting here that a group of bipartisan senators announced a $908-billion "framework" for coronavirus relief aid on Dec 1, per a CNBC article. Despite the attempts to pass a stimulus package, several major differences remain between both parties, especially over state and local government support (according to a CNBC article).
Defensive ETF Strategies to Consider
Let's look at some safer ETF strategies that investors can play amid the rising fears regarding another round of coronavirus-led lockdowns:
Dividend ETFs to Watch Out for
The appeal of dividend ETFs has been rising in the face of easing monetary policy on the global front, market uncertainty triggered by the pandemic and deceleration in global growth. This is because dividend-paying securities are major sources of consistent income for investors when returns from equity markets are uncertain.
Although there are plenty of options in the dividend ETF world, ‘dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Dividend aristocrats are the blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, the dividend aristocrat funds provide investors with dividend growth opportunities in comparison to the other products in the space but may not necessarily have the highest yields.
Demand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products usually do not surge in bull market conditions but offer more protection than the unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature. Here are some options -- iShares Edge MSCI Min Vol USA ETF (USMV - Free Report) , Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) , iShares Edge MSCI EAFE Minimum Volatility ETF (EFAV - Free Report) , iShares Edge MSCI Min Vol Global ETF (ACWV - Free Report) and Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: Winning ETF Strategies for Q4).
Quality ETFs for Strengthening Portfolio
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and high margins. They also have a track record of stable or rising sales and earnings growth. In comparison to plain vanilla funds, these products help in lowering volatility and perform rather well during market uncertainty. Further, academic research has proven that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Given this, we have highlighted some ETFs like iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) and FlexShares Quality Dividend Index Fund (QDF - Free Report) targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market environment (read: An ETF Retirement Portfolio for 2021).
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Defensive ETF Strategies to Sail Through Soaring COVID-19 Cases
The world’s largest economy continues to witness a record number of coronavirus cases. The United States, which is averaging almost 210,201 new cases per day, saw at least 254,848 new COVID-19 cases on Dec 14, per data from Johns Hopkins University (according to a CNN report). Also, the country’s death toll has crossed 300,000 since the beginning of the virus outbreak. The Dow Jones Industrial Index has lost 0.7% in the last five days whereas the S&P 500 has fallen 1.2%.
Despite the beginning of Pfizer Inc. (PFE) and BioNTech SE’s (BNTX) vaccine distribution in the United States, people fear another round of lockdowns and increased social-distancing measures considering the aggravating coronavirus outbreak. In fact, New York City Mayor Bill De Blasio recently said that the city could see a “full shutdown” soon, per a CNBC article. In this regard, he said that “we’re seeing the kind of level of infection with the coronavirus we haven’t seen since May and we have got to stop that momentum, or else our hospital system will be threatened,” per the same CNBC article as mentioned above.
Seeing the concerning pace at which the virus is spreading, investors are now worried about another round of fiscal aid to provide some support to the economy. However, it is worth noting here that a group of bipartisan senators announced a $908-billion "framework" for coronavirus relief aid on Dec 1, per a CNBC article. Despite the attempts to pass a stimulus package, several major differences remain between both parties, especially over state and local government support (according to a CNBC article).
Defensive ETF Strategies to Consider
Let's look at some safer ETF strategies that investors can play amid the rising fears regarding another round of coronavirus-led lockdowns:
Dividend ETFs to Watch Out for
The appeal of dividend ETFs has been rising in the face of easing monetary policy on the global front, market uncertainty triggered by the pandemic and deceleration in global growth. This is because dividend-paying securities are major sources of consistent income for investors when returns from equity markets are uncertain.
Although there are plenty of options in the dividend ETF world, ‘dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Dividend aristocrats are the blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, the dividend aristocrat funds provide investors with dividend growth opportunities in comparison to the other products in the space but may not necessarily have the highest yields.
Against this backdrop, dividend ETFs like Vanguard Dividend Appreciation ETF (VIG - Free Report) , SPDR S&P Dividend ETF (SDY - Free Report) , iShares Select Dividend ETF (DVY - Free Report) , ProShares S&P 500 Dividend Aristocrats ETF (NOBL) and iShares Core Dividend Growth ETF (DGRO) can be considered (read: Pick These Dividend Aristocrats ETFs for Solid Returns in 2020).
Low-Volatility ETFs to Play Now
Demand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products usually do not surge in bull market conditions but offer more protection than the unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature. Here are some options -- iShares Edge MSCI Min Vol USA ETF (USMV - Free Report) , Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) , iShares Edge MSCI EAFE Minimum Volatility ETF (EFAV - Free Report) , iShares Edge MSCI Min Vol Global ETF (ACWV - Free Report) and Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: Winning ETF Strategies for Q4).
Quality ETFs for Strengthening Portfolio
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and high margins. They also have a track record of stable or rising sales and earnings growth. In comparison to plain vanilla funds, these products help in lowering volatility and perform rather well during market uncertainty. Further, academic research has proven that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Given this, we have highlighted some ETFs like iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) and FlexShares Quality Dividend Index Fund (QDF - Free Report) targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market environment (read: An ETF Retirement Portfolio for 2021).
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 >>