Investors have eyes on the minutes from the Federal Reserve’s two-day policy meeting that will begin on Sep 21. Fears surrounding the rising inflationary levels have picked up as the producer price index witnessed the largest annual surge since November 2010 (per a CNBC article). The metric rose 0.7% in August and 8.3% year over year.
It is being speculated that rising inflation levels may build more pressure on the Fed to tighten the monetary policies. In this regard, Charlie Ripley, senior investment strategist for Allianz Investment Management, has said that ″[Friday’s] data on wholesale prices should be eye-opening for the Fed, as inflation pressures still don’t appear to be easing and will likely continue to be felt by the consumer in the coming months,” according to a CNBC article.
Several economic data releases are also weighing on investors’ minds. The U.S. economy added only 235,000 jobs in August 2021 (the lowest in seven months). The metric was far behind the forecast of 750,000 as a surge in COVID-19 infections probably kept companies from hiring and workers from actively looking for a job. Consumer confidence in the United States slipped to a six-month low in August.
There are still certain positive developments that can help stimulate a market rally. President Joe Biden has outlined a very effective plan to increase the vaccination rate and control the outbreak. He has made it mandatory for federal employees to get the COVID-19 vaccination, per a CNBC article. The Biden government will also issue guidelines to the Labor Department for imposing vaccine mandates for employers with more than 100 employees or run weekly tests.
New data from the CDC reflects that the seven-day average of new COVID-19 cases through Sep 10 came in at around 136,000, down from 157,000 average new cases at August-end, according to a CNBC article.
With the present market scenario, let’s take a look at some ETFs that investors can consider adding to their portfolios:
Vanguard Dividend Appreciation ETF ( VIG Quick Quote VIG - Free Report)
Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, dividend aristocrat funds provide investors with dividend growth opportunities in comparison to other products in the space but might not necessarily have the highest yields.
These products also form a strong portfolio, with a higher scope of capital appreciation as against simple dividend-paying stocks or those with high yields. As a result, these products deliver a nice combination of annual dividend growth and capital-appreciation opportunities and are mostly good for risk adverse long-term investors.
This fund tracks the NASDAQ US Dividend Achievers Select Index. The product has amassed $63.02 billion in its asset base. It charges 6 basis points (bps) in annual fees from investors (read:
Defensive ETF Strategies to Fend Off September Chills). Invesco S&P 500 High Dividend Low Volatility ETF ( SPHD Quick Quote SPHD - Free Report)
Demand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products usually do not surge in bull market conditions but offer more protection than the unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature.
This fund tracks the S&P 500 Low Volatility High Dividend Index. The product has amassed $2.98 billion in its asset base. It charges 30 bps in annual fees from investors (read:
Growth Concerns to Drive Demand for Low-Volatility ETFs). iShares MSCI USA Quality Factor ETF ( QUAL Quick Quote QUAL - Free Report)
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 increasing sales and earnings growth. In comparison to 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.
This fund tracks the MSCI USA Sector Neutral Quality Index. The product has amassed $24.65 billion in its asset base. It charges 15 bps in annual fees from investors (read:
Quality ETFs to the Rescue Amid Rising Market Concerns). The Health Care Select Sector SPDR Fund ( XLV Quick Quote XLV - Free Report)
The pandemic has triggered a race to introduce vaccines and treatment options, opening up investing opportunities in the healthcare sector. Moreover, the space has been gaining increasing attention lately, largely due to the resurgence in COVID-19 infections due to the highly-contagious Delta variant. This has made investors jittery, compelling them to shift toward defensive investments.
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Health Care Select Sector Index. It has AUM of $33.12 billion and charges 12 bps in annual fees.
Vanguard Consumer Staples ETF ( VDC Quick Quote VDC - Free Report)
Investors can consider parking their money in the non-cyclical consumer staples sector during economic recession. This high-quality sector, which is largely defensive in nature, has been found to have low correlation factor with economic cycles.
Research has shown that consumer staples companies have been mostly found to outperform during market turbulences. Thus, the space generally acts as a safe haven for investors. Moreover, consumer staples stocks have been found to have more stable profit levels in a contracting economy.
This fund tracks the MSCI US Investable Market Consumer Staples 25/50 Index. The product has amassed $5.92 billion in its asset base. It charges 10 bps in annual fees from investors (read:
Climb the "Wall of Worry" With These ETFs).