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Low-Volatility ETFs to the Rescue Amid Rising Market Uncertainty

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Investors seem worried about the June Federal Open Market Committee meeting minutes, sustainability of the U.S. economic recovery from the pandemic-led slump and the delta variant threat. Accordingly, the S&P 500 Index snapped its seven-day winning streak after declining 0.2% on Jul 6. Moving on, the 10-year Treasury yield below 1.4% also highlights that the market participants are concerned about the strength of the U.S. economic mend achieved so far, per a CNBC article.

Further, after an impressive first half of the ongoing year, market analysts are anxious about the Wall Street’s performance for the rest of 2021, according to a CNBC article. In fact, the analysts are projecting smaller and rougher gains in the second-half of 2021. A CNBC Market Strategist Survey that covers about 16 top strategists’ forecasts reflects that the Wall Street’s consensus year-end target for the S&P 500 is pegged at a near 2% loss from the index’s current level, per the same CNBC report.

In this regard, Michael Wilson, chief U.S. equity strategist at Morgan Stanley said that “The U.S. economy is booming, but this is now a known known and asset markets reflect it. What isn’t so clear anymore is at what price this growth will accrue. Higher costs mean lower profits, another reason why the overall equity market has been narrowing... equity markets are likely to take a break this summer as things heat up,” as mentioned in a CNBC write-up.

Moreover, inflation levels continue to rise in the United States. According to the Commerce Department, another major inflation indicator, core personal consumption expenditures (PCE) price index, used by the Federal Reserve to implement policies, climbed 3.4% year over year in May, per a CNBC article. Notably, it registered the biggest gains since April 1992 and was on par with Wall Street estimates, per verified sources.

Also, according to the latest CNN tally, the Delta strain is now found in all 50 states and Washington, DC. Further, this highly contagious and aggressive variant accounted for 26.1% coronavirus cases in the United States as of Jun 29, per the Centers for Disease Control and Prevention data and a CNN report. Notably, the rapidly-spreading mutants induced a widespread fear, putting responsibility on the local and state officials to ramp up the vaccination rate.

Low-Volatility ETFs to the Rescue

Low-volatility products could be intriguing choices for those who want to continue investing in equities in the present turbulent market conditions. Consider the following interesting options:

iShares MSCI USA Min Vol Factor ETF  (USMV - Free Report)

This fund offers exposure to 183 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 $27.86 billion, the product charges 0.15% in expense ratio (read: 5 Winning ETF Strategies for the Second Half).

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. The fund is based on the S&P 500 Low Volatility Index and holds 103 securities in its basket. It has AUM of $7.89 billion and charges an expense ratio of 25 basis points (bps) as stated in the prospectus (read:  ETF Strategies to Combat the FOMC June Meeting Worries).

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 400 securities. It has AUM of $5.15 billion and charges 20 bps in annual fees.

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 51 securities. The fund has AUM of $3.07 billion and charges 30 bps in annual fees.

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