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Here's Why You Should Put Your Money on Quality ETFs
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Wall Street shrugged off the rising pricing pressure worries and rallied on Jun 10. The S&P 500 Index rose 0.5% to hit a record closing high of 4,239.18. It also touched an intraday record of 4,249.74. Moreover, the Dow Jones Industrial Average and the Nasdaq composite were up 0.1% and 0.8%, respectively, on the same day.
Accelerated coronavirus vaccine rollout, solid fiscal stimulus support and reopening of the U.S. economy, which may lead to faster U.S. economic recovery from the pandemic-led slump, have kept investors optimistic so far in the second quarter of 2021.
Notably, the world’s largest economy is strongly controlling the pandemic with accelerated coronavirus vaccine distribution. Per the Centers for Disease Control and Prevention (CDC) data, more than half of the U.S. population is already administered at least one dose of COVID-19 vaccine as stated in a CNBC article. Also, per the CDC, more than seven million teens received at least one dose of the COVID-19 vaccine in the United States, according to a Reuters article.
Pfizer (PFE) and partner BioNTech (BNTX) received authorization for the emergency/conditional use of their COVID-19 vaccine BNT162b2 in adolescents in the United States and Europe, last month. In an encouraging move, Moderna also submitted applications seeking the U.S. authorization of its mRNA-1273 in adolescents (aged from 12 years to less than 18 years).
Moving on, the latest public health guidelines issued by the CDC relaxed restrictions like mandatorily wearing masks at all indoor and public gatherings. Going by the new recommendations, completely vaccinated people do not need to wear masks or stay six feet away from others at any indoor or outdoor assembly, per a CNBC article.
Furthermore, there are certain new economic data releases, which are pointing toward economic recovery. Notably, the recently-released robust job and manufacturing data majorly buoyed market participants' optimism. The Department of Labor reported that the U.S. economy added 559,000 jobs in May compared with the upwardly revised 278,000 payrolls included in April as mentioned in a CNBC article.
Also, the latest ISM Manufacturing PMI data for the United States is painting a rosy picture for the sector. The ISM Manufacturing PMI read 61.2 in May, up from 60.7 in April. May’s growth was also higher than analysts’ expectations of 60.7. Moreover, manufacturing activity rose for the 12th straight month.
Meanwhile, investors kept the Wall Street rally tight due to inflation-related concerns emanated last month. They were worried that rising inflation may hurt corporate margins and profits. They also fear that the persistent rise in inflation may build pressure on the Federal Reserve to tighten the monetary policy, according to a CNBC article.
Notably, the consumer price index for May, which represents a basket of food, energy, groceries and prices across a wide range of goods, climbed 5% from the prior-year tally (per a CNBC article). It surpassed the Dow Jones estimate of a 4.7% rise. Notably, the consumer prices for May increased at the highest speed since the summer of 2008 as stated in a CNBC article.
Now, market participants are eagerly awaiting the Federal Reserve’s FOMC meeting scheduled for Jun 15-16. Treasury Secretary Janet Yellen’s comment that higher interest rates "would actually be a plus for society's point of view and the Fed's point of view," per an interview with Bloomberg, are keeping investors on the tenterhook over worries about the interest rate hikes.
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 proved that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Given that, we 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 ETFs That Saw Maximum Capital Inflows Last Week).
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: $2.77 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: Shutterstock
Here's Why You Should Put Your Money on Quality ETFs
Wall Street shrugged off the rising pricing pressure worries and rallied on Jun 10. The S&P 500 Index rose 0.5% to hit a record closing high of 4,239.18. It also touched an intraday record of 4,249.74. Moreover, the Dow Jones Industrial Average and the Nasdaq composite were up 0.1% and 0.8%, respectively, on the same day.
Accelerated coronavirus vaccine rollout, solid fiscal stimulus support and reopening of the U.S. economy, which may lead to faster U.S. economic recovery from the pandemic-led slump, have kept investors optimistic so far in the second quarter of 2021.
Notably, the world’s largest economy is strongly controlling the pandemic with accelerated coronavirus vaccine distribution. Per the Centers for Disease Control and Prevention (CDC) data, more than half of the U.S. population is already administered at least one dose of COVID-19 vaccine as stated in a CNBC article. Also, per the CDC, more than seven million teens received at least one dose of the COVID-19 vaccine in the United States, according to a Reuters article.
Pfizer (PFE) and partner BioNTech (BNTX) received authorization for the emergency/conditional use of their COVID-19 vaccine BNT162b2 in adolescents in the United States and Europe, last month. In an encouraging move, Moderna also submitted applications seeking the U.S. authorization of its mRNA-1273 in adolescents (aged from 12 years to less than 18 years).
Moving on, the latest public health guidelines issued by the CDC relaxed restrictions like mandatorily wearing masks at all indoor and public gatherings. Going by the new recommendations, completely vaccinated people do not need to wear masks or stay six feet away from others at any indoor or outdoor assembly, per a CNBC article.
Furthermore, there are certain new economic data releases, which are pointing toward economic recovery. Notably, the recently-released robust job and manufacturing data majorly buoyed market participants' optimism. The Department of Labor reported that the U.S. economy added 559,000 jobs in May compared with the upwardly revised 278,000 payrolls included in April as mentioned in a CNBC article.
Also, the latest ISM Manufacturing PMI data for the United States is painting a rosy picture for the sector. The ISM Manufacturing PMI read 61.2 in May, up from 60.7 in April. May’s growth was also higher than analysts’ expectations of 60.7. Moreover, manufacturing activity rose for the 12th straight month.
Meanwhile, investors kept the Wall Street rally tight due to inflation-related concerns emanated last month. They were worried that rising inflation may hurt corporate margins and profits. They also fear that the persistent rise in inflation may build pressure on the Federal Reserve to tighten the monetary policy, according to a CNBC article.
Notably, the consumer price index for May, which represents a basket of food, energy, groceries and prices across a wide range of goods, climbed 5% from the prior-year tally (per a CNBC article). It surpassed the Dow Jones estimate of a 4.7% rise. Notably, the consumer prices for May increased at the highest speed since the summer of 2008 as stated in a CNBC article.
Now, market participants are eagerly awaiting the Federal Reserve’s FOMC meeting scheduled for Jun 15-16. Treasury Secretary Janet Yellen’s comment that higher interest rates "would actually be a plus for society's point of view and the Fed's point of view," per an interview with Bloomberg, are keeping investors on the tenterhook over worries about the interest rate hikes.
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 proved that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Given that, we 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 ETFs That Saw Maximum Capital Inflows Last Week).
Expense Ratio: 0.15%
AUM: $20.87 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: $2.77 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: $1.57 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: $936.1 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.
Total Operating Expenses: 0.70%
AUM: $141.8 million
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