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Quality ETFs Worth Your Attention Amid Delta Variant Blues
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Wall Street witnessed a decline in major stock averages, snapping their five-day winning streaks on Jul 27. The S&P 500 lost 0.5%. Notably, the Nasdaq Composite index and the Dow Jones Industrial Average also declined 1.2% and 0.2% on the same day.
The delta variant is a serious concern as the number of cases is rising in the United States. The new cases arising from the variant are being mostly observed among the unvaccinated population. Considering the latest surge in COVID-19 cases, investors seem worried about the sustainability of U.S. economic recovery from the pandemic-led slump.
The coronavirus outbreak is now being observed in kids as well, with about more than 23,000 kids infected, doubling from the figure reported at the end of June (per the American Academy of Pediatrics), as stated in a CNN report.
Commenting on the current market conditions, Jean Boivin, head of BlackRock Investment Institute, has said that “Market volatility is on the rise, as worries about new virus strains have been exacerbated by stretched positioning and light summer trading,” per a CNBC article.
Moreover, the annual inflation rate in the United States accelerated to 5.4% year over year in June 2021 from 5% in May, hitting a fresh high since August 2008, and well above forecasts of 4.9%. The latest uptick in inflation was the largest 12-month increase.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9% sequentially in June on a seasonally adjusted basis after rising 0.6% in May, the U.S. Bureau of Labor Statistics reported. This marked the largest one-month change since June 2008 when the index rose 1.0%.
Meanwhile, it is worth noting here that the second-quarter earnings season has already seen better-than-expected results, stimulating the rally in stock markets. Per FactSet data, 88% of S&P 500 companies have reported an earnings per share (EPS) surprise (per a CNBC article). In fact, at the end of the reporting season, if the figure remains at 88%, it will stand out as the highest percentage since FactSet started tracking the metric in 2008.
In this regard, Craig Johnson, chief market technician at Piper Sandler, has said that “U.S. equities remain resilient as they continue to climb the wall of worry into record-high territory. An impressive start to earnings season has kept the buy the dip sentiment alive and offset concerns over peak growth and rising new cases of coronavirus,” according to a CNBC article.
Going on, the world’s largest economy is strongly combatting the coronavirus outbreak. Rapid distribution of coronavirus vaccines by multiple developers, the Fed’s continued support with easy monetary policies, fiscal stimulus support and reopening of non-essential business are strengthening hopes of rapid recovery from the coronavirus-led slump.
Strengthening optimism, coronavirus vaccines have been found to be effective against the delta variant. These include vaccines by Pfizer (PFE) /BioNTech and AstraZeneca (AZN). Two doses of their COVID-19 vaccine have been found to be about 88% effective against the variant, per a CNN report. Moreover, Moderna’s (MRNA) COVID-19 vaccine has been successful in producing neutralizing titers against all variants tested, including delta (B.1.617.12).
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 the 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 Hot Equity ETFs of Last Week to Sizzle on Solid Earnings).
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks that has the highest-quality score based on three fundamental measures, namely, return on equity, accruals ratio and financial leverage ratio (read: 5 ETF Zones Hitting Highs As Growth Worries Resurface).
Expense Ratio: 0.15%
AUM: $3.10 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 (read: 5 Quality ETFs to Buy Now).
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 Capped Index.
Image: Bigstock
Quality ETFs Worth Your Attention Amid Delta Variant Blues
Wall Street witnessed a decline in major stock averages, snapping their five-day winning streaks on Jul 27. The S&P 500 lost 0.5%. Notably, the Nasdaq Composite index and the Dow Jones Industrial Average also declined 1.2% and 0.2% on the same day.
The delta variant is a serious concern as the number of cases is rising in the United States. The new cases arising from the variant are being mostly observed among the unvaccinated population. Considering the latest surge in COVID-19 cases, investors seem worried about the sustainability of U.S. economic recovery from the pandemic-led slump.
The coronavirus outbreak is now being observed in kids as well, with about more than 23,000 kids infected, doubling from the figure reported at the end of June (per the American Academy of Pediatrics), as stated in a CNN report.
Commenting on the current market conditions, Jean Boivin, head of BlackRock Investment Institute, has said that “Market volatility is on the rise, as worries about new virus strains have been exacerbated by stretched positioning and light summer trading,” per a CNBC article.
Moreover, the annual inflation rate in the United States accelerated to 5.4% year over year in June 2021 from 5% in May, hitting a fresh high since August 2008, and well above forecasts of 4.9%. The latest uptick in inflation was the largest 12-month increase.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9% sequentially in June on a seasonally adjusted basis after rising 0.6% in May, the U.S. Bureau of Labor Statistics reported. This marked the largest one-month change since June 2008 when the index rose 1.0%.
Meanwhile, it is worth noting here that the second-quarter earnings season has already seen better-than-expected results, stimulating the rally in stock markets. Per FactSet data, 88% of S&P 500 companies have reported an earnings per share (EPS) surprise (per a CNBC article). In fact, at the end of the reporting season, if the figure remains at 88%, it will stand out as the highest percentage since FactSet started tracking the metric in 2008.
In this regard, Craig Johnson, chief market technician at Piper Sandler, has said that “U.S. equities remain resilient as they continue to climb the wall of worry into record-high territory. An impressive start to earnings season has kept the buy the dip sentiment alive and offset concerns over peak growth and rising new cases of coronavirus,” according to a CNBC article.
Going on, the world’s largest economy is strongly combatting the coronavirus outbreak. Rapid distribution of coronavirus vaccines by multiple developers, the Fed’s continued support with easy monetary policies, fiscal stimulus support and reopening of non-essential business are strengthening hopes of rapid recovery from the coronavirus-led slump.
Strengthening optimism, coronavirus vaccines have been found to be effective against the delta variant. These include vaccines by Pfizer (PFE) /BioNTech and AstraZeneca (AZN). Two doses of their COVID-19 vaccine have been found to be about 88% effective against the variant, per a CNN report. Moreover, Moderna’s (MRNA) COVID-19 vaccine has been successful in producing neutralizing titers against all variants tested, including delta (B.1.617.12).
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 the 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 Hot Equity ETFs of Last Week to Sizzle on Solid Earnings).
Expense Ratio: 0.15%
AUM: $23.96 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 has the highest-quality score based on three fundamental measures, namely, return on equity, accruals ratio and financial leverage ratio (read: 5 ETF Zones Hitting Highs As Growth Worries Resurface).
Expense Ratio: 0.15%
AUM: $3.10 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 (read: 5 Quality ETFs to Buy Now).
Expense Ratio: 0.37%
AUM: $1.60 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 Capped Index.
Expense Ratio: 0.15%
AUM: $985 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: $142.5 million