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ETFs to Counter Georgia Senate Runoffs-Induced Volatility
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Wall Street surprised investors with annual gains in 2020. However, the first trading day of 2021 was disappointing. The Dow Jones Industrial Average lost 1.3% on Jan 4 and was index’s first negative start to a year since 2016, per a CNBC article. Going on, the other two broader indices S&P 500 and the Nasdaq Composite were down by around 1.5% on the same day.
It is being believed that the Jan 5 Senate run-off elections in Georgia has kept investors on edge. The results of the elections are going to be very influential given that favorable outcome can result in Democrats holding a majority in the chamber. In this regard, Jason Pride, CIO of private wealth at Glenmede, has said that “if the GOP wins just one seat, they will likely stonewall some of Biden’s more ambitious proposals, but a Democratic sweep of both elections might give the incoming administration free rein on their policy agenda,” per a CNBC article.
Going on, John Stoltzfus, chief investment strategist at Oppeneheimer, has said that “it is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow’s run-off results in a sweep for the Democrats — providing them with control of the Senate as well as the House — that it would bode ill for business with the likelihood that corporate tax rates could rise substantially,” according to the same CNBC article. Stoltzfus added that there can be a 10% decline in the S&P 500 triggered by the Democratic candidate’s victory in the Georgia runoffs.
Meanwhile, the globally aggravating coronavirus outbreak and efforts to combat the spread can weigh on the global economic recovery achieved so far. In this regard, British Prime Minister Boris Johnson has imposed a national lockdown on England in order to control the surge in coronavirus cases and combat the more transmissible variant of COVID-19. Furthermore, Thanksgiving, Christmas and New Year holidays have worsened the condition in the United States, which is seeing increasing hospitalizations and coronavirus cases. In fact, health experts have commented that the United States averaged 213,437 new infections every day over the past week, per a CNN report.
However, investors have high expectations from 2021 on coronavirus vaccine rollout, introduction of the much-awaited fresh round of stimulus and the Fed’s continuous support to keep interest rates low, increasing chances of faster economic recovery in the United States.
Low-Volatility ETFs to the Rescue
Low-volatility products could be intriguing choices for those who want to continue investing in equities during turbulent market conditions. Consider the following interesting options:
This fund offers exposure to 186 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 $33.41 billion, the product charges 0.15% in expense ratio (read: Most Loved/Hated ETFs of Q4).
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 amassed $8.20 billion in its asset base. It charges 25 basis points (bps) in annual fees (read: ETF Strategies to Sail Through New COVID-19 Strain-Led Volatility).
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 256 securities. It accumulated $10.65 billion in its asset base. EFAV charges 20 bps in annual fees (read: Defensive ETF Strategies to Sail Through Soaring COVID-19 Cases).
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 385 securities. It has AUM of $5.87 billion and charges 20 bps in annual.
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 49 securities. The fund has AUM of $2.53 billion and charges 30 bps in annual fees.
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ETFs to Counter Georgia Senate Runoffs-Induced Volatility
Wall Street surprised investors with annual gains in 2020. However, the first trading day of 2021 was disappointing. The Dow Jones Industrial Average lost 1.3% on Jan 4 and was index’s first negative start to a year since 2016, per a CNBC article. Going on, the other two broader indices S&P 500 and the Nasdaq Composite were down by around 1.5% on the same day.
It is being believed that the Jan 5 Senate run-off elections in Georgia has kept investors on edge. The results of the elections are going to be very influential given that favorable outcome can result in Democrats holding a majority in the chamber. In this regard, Jason Pride, CIO of private wealth at Glenmede, has said that “if the GOP wins just one seat, they will likely stonewall some of Biden’s more ambitious proposals, but a Democratic sweep of both elections might give the incoming administration free rein on their policy agenda,” per a CNBC article.
Going on, John Stoltzfus, chief investment strategist at Oppeneheimer, has said that “it is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow’s run-off results in a sweep for the Democrats — providing them with control of the Senate as well as the House — that it would bode ill for business with the likelihood that corporate tax rates could rise substantially,” according to the same CNBC article. Stoltzfus added that there can be a 10% decline in the S&P 500 triggered by the Democratic candidate’s victory in the Georgia runoffs.
Meanwhile, the globally aggravating coronavirus outbreak and efforts to combat the spread can weigh on the global economic recovery achieved so far. In this regard, British Prime Minister Boris Johnson has imposed a national lockdown on England in order to control the surge in coronavirus cases and combat the more transmissible variant of COVID-19. Furthermore, Thanksgiving, Christmas and New Year holidays have worsened the condition in the United States, which is seeing increasing hospitalizations and coronavirus cases. In fact, health experts have commented that the United States averaged 213,437 new infections every day over the past week, per a CNN report.
However, investors have high expectations from 2021 on coronavirus vaccine rollout, introduction of the much-awaited fresh round of stimulus and the Fed’s continuous support to keep interest rates low, increasing chances of faster economic recovery in the United States.
Low-Volatility ETFs to the Rescue
Low-volatility products could be intriguing choices for those who want to continue investing in equities during turbulent market conditions. Consider the following interesting options:
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report)
This fund offers exposure to 186 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 $33.41 billion, the product charges 0.15% in expense ratio (read: Most Loved/Hated ETFs of Q4).
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 amassed $8.20 billion in its asset base. It charges 25 basis points (bps) in annual fees (read: ETF Strategies to Sail Through New COVID-19 Strain-Led Volatility).
iShares MSCI EAFE Min Vol Factor 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 256 securities. It accumulated $10.65 billion in its asset base. EFAV charges 20 bps in annual fees (read: Defensive ETF Strategies to Sail Through Soaring COVID-19 Cases).
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 385 securities. It has AUM of $5.87 billion and charges 20 bps in annual.
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 49 securities. The fund has AUM of $2.53 billion and charges 30 bps in annual fees.
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 >>