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Quality ETFs to the Rescue Amid Worsening Coronavirus Outbreak
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Wall Street witnessed a rally on Apr 21 after suffering for two consecutive days as the pandemic worsened. Notably, the Dow Jones Industrial Average rose 0.9%. Meanwhile, the S&P 500 and the tech-heavy Nasdaq Composite climbed 0.9% and 1.2%, respectively, on the day. The small-cap Russell 2000 index also rose 2.4%.
The weakness at the start of the week was majorly observed due to aggravating pandemic conditions. Notably, the rapid rise in coronavirus cases is being observed globally, fuelling fears of a global economic lockdown to contain the outbreak. In fact, the head of the World Health Organization (WHO) has said that rapidly rising coronavirus cases are causing the global infections to reach toward the highest point in the pandemic, according to a CNBC article.
Globally, 5,236,922 new coronavirus cases were recorded over the past seven days, per data published by the WHO (per a CNN report). Unfortunately, the number surpassed the last record of 5.04 million new cases witnessed in the week of Jan 4, 2021. Moreover, the death toll has crossed 3 million in the past week.
Commenting on the present conditions, WHO Director-General Tedros Adhanom Ghebreyesus said that “globally, the number of new cases per week has nearly doubled over the past two months. This is approaching the highest rate of infection that we have seen so far during the pandemic,” per a CNBC article.
Going on, investors are worried that another round of business restrictions and lockdown measures might derail the economic recovery achieved so far.
Sluggishness has been observed in the market despite solid corporate earnings releases. Notably, market analysts are of the opinion that majority of the impressive corporate earnings updates have already been priced in and now the focus has shifted to earnings outlook, per a CNBC article. In this regard, Scott Wren, Wells Fargo’s senior global market strategist, has said that “it appears the economy is now well on its way to recovery. Still, earnings guidance early in the current reporting season appears to lean more conservative than our economic projections suggest,” according to a CNBC article.
Meanwhile, there are several factors which are instilling confidence in the U.S. market, the first being the accelerated coronavirus vaccine rollout that buoys hopes of faster U.S. economic reopening of non-essential businesses and the return to normalcy. Strengthening optimism, the United States has administered around 200 million doses of vaccines in less than 100 days of Biden administration, per a CNN report.
Additionally, the Fed’s continued dovish stance is increasing chances of a speedy U.S. economic growth recovery from the coronavirus-induced sluggishness. The central bank has decided to maintain rates at near-zero level until 2023, at least. Moreover, the central bank raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.
It is also worth noting here that on Mar 31, Biden unveiled his $2.3-trillion infrastructure development plan that focuses on improving the American infrastructure. The proposal includes funds for restoring roads and bridges, shoring up affordable housing, backing clean-energy projects and creating a nationwide broadband network. This will create millions of jobs, resulting in solid hiring in the coming months and benefit sectors like basic materials, industrials and utilities.
Further, the release of strong economic data like retail sales and unemployment has supported upbeat market sentiments. Notably, U.S. retail sales recorded the best gains during March in 10 months, according to a Reuters article. Markedly, sales surged 9.8% sequentially in March 2021 following a downward revision of 2.7% in the previous month. The metric also surpassed market predictions of a 5.9% rise.
Quality ETFs Worth Your Attention
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and high margins. These stocks also have a track record of stable or rising sales and earnings growth. In comparison to the plain vanilla funds, these products help lower 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 that, we have highlighted five ETFs targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market scenario.
This fund provides exposure to large- and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index (read: 5 Solid Quality ETFs to Buy Now).
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks that have the highest-quality score based on three fundamental measures — return on equity, accruals ratio and financial leverage ratio (read: Bet on Quality ETFs to Combat the FOMC Meeting Worries).
Expense Ratio: 0.15%
AUM: $2.66 billion
FlexShares Quality Dividend Index Fund (QDF - Free Report)
This ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Dividend Index.
This fund offers exposure to stocks that have a combination of value, low volatility and quality factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Index.
Image: Bigstock
Quality ETFs to the Rescue Amid Worsening Coronavirus Outbreak
Wall Street witnessed a rally on Apr 21 after suffering for two consecutive days as the pandemic worsened. Notably, the Dow Jones Industrial Average rose 0.9%. Meanwhile, the S&P 500 and the tech-heavy Nasdaq Composite climbed 0.9% and 1.2%, respectively, on the day. The small-cap Russell 2000 index also rose 2.4%.
The weakness at the start of the week was majorly observed due to aggravating pandemic conditions. Notably, the rapid rise in coronavirus cases is being observed globally, fuelling fears of a global economic lockdown to contain the outbreak. In fact, the head of the World Health Organization (WHO) has said that rapidly rising coronavirus cases are causing the global infections to reach toward the highest point in the pandemic, according to a CNBC article.
Globally, 5,236,922 new coronavirus cases were recorded over the past seven days, per data published by the WHO (per a CNN report). Unfortunately, the number surpassed the last record of 5.04 million new cases witnessed in the week of Jan 4, 2021. Moreover, the death toll has crossed 3 million in the past week.
Commenting on the present conditions, WHO Director-General Tedros Adhanom Ghebreyesus said that “globally, the number of new cases per week has nearly doubled over the past two months. This is approaching the highest rate of infection that we have seen so far during the pandemic,” per a CNBC article.
Going on, investors are worried that another round of business restrictions and lockdown measures might derail the economic recovery achieved so far.
Sluggishness has been observed in the market despite solid corporate earnings releases. Notably, market analysts are of the opinion that majority of the impressive corporate earnings updates have already been priced in and now the focus has shifted to earnings outlook, per a CNBC article. In this regard, Scott Wren, Wells Fargo’s senior global market strategist, has said that “it appears the economy is now well on its way to recovery. Still, earnings guidance early in the current reporting season appears to lean more conservative than our economic projections suggest,” according to a CNBC article.
Meanwhile, there are several factors which are instilling confidence in the U.S. market, the first being the accelerated coronavirus vaccine rollout that buoys hopes of faster U.S. economic reopening of non-essential businesses and the return to normalcy. Strengthening optimism, the United States has administered around 200 million doses of vaccines in less than 100 days of Biden administration, per a CNN report.
Additionally, the Fed’s continued dovish stance is increasing chances of a speedy U.S. economic growth recovery from the coronavirus-induced sluggishness. The central bank has decided to maintain rates at near-zero level until 2023, at least. Moreover, the central bank raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.
It is also worth noting here that on Mar 31, Biden unveiled his $2.3-trillion infrastructure development plan that focuses on improving the American infrastructure. The proposal includes funds for restoring roads and bridges, shoring up affordable housing, backing clean-energy projects and creating a nationwide broadband network. This will create millions of jobs, resulting in solid hiring in the coming months and benefit sectors like basic materials, industrials and utilities.
Further, the release of strong economic data like retail sales and unemployment has supported upbeat market sentiments. Notably, U.S. retail sales recorded the best gains during March in 10 months, according to a Reuters article. Markedly, sales surged 9.8% sequentially in March 2021 following a downward revision of 2.7% in the previous month. The metric also surpassed market predictions of a 5.9% rise.
Quality ETFs Worth Your Attention
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and high margins. These stocks also have a track record of stable or rising sales and earnings growth. In comparison to the plain vanilla funds, these products help lower 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 that, we have highlighted five ETFs targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market scenario.
iShares MSCI USA Quality Factor ETF (QUAL - Free Report)
This fund provides exposure to large- and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index (read: 5 Solid Quality ETFs to Buy Now).
Expense Ratio: 0.15%
AUM: $20.49 billion
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks that have the highest-quality score based on three fundamental measures — return on equity, accruals ratio and financial leverage ratio (read: Bet on Quality ETFs to Combat the FOMC Meeting Worries).
Expense Ratio: 0.15%
AUM: $2.66 billion
FlexShares Quality Dividend Index Fund (QDF - Free Report)
This ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Dividend Index.
Expense Ratio: 0.37%
AUM: $1.54 billion
SPDR MSCI USA StrategicFactors ETF (QUS - Free Report)
This fund offers exposure to stocks that have a combination of value, low volatility and quality factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Index.
Expense Ratio: 0.15%
AUM: $909.8 million
Barron's 400 ETF (BFOR - Free Report)
This ETF seeks investment results that correspond generally, before fees and expenses, to the performance of the Barron's 400 Index.
Expense Ratio: 0.70%
AUM: $138 million
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