The bloodbath in Wall Street continues as the three major stock market averages closed in red on Mar 7. After seeing the fourth consecutive losing week, the Dow Jones Industrial Average was again down 797.42 points in yesterday’s trading session. The other two broad market indices, the S&P 500 and the Nasdaq Composite, also declined 3% and 3.6%, respectively, on the same day. The S&P 500 index is standing in correction territory. The tech-heavy index is now more than 20% from its all-time close and has entered the bear market zone.
Against this backdrop, let’s take a look at some of the safe ETF options that investors can consider like
Vanguard Dividend Appreciation ETF ( VIG Quick Quote VIG - Free Report) , Invesco S&P 500 Low Volatility ETF ( SPLV Quick Quote SPLV - Free Report) , iShares MSCI USA Quality Factor ETF ( QUAL Quick Quote QUAL - Free Report) , SPDR S&P MIDCAP 400 ETF Trust ( MDY Quick Quote MDY - Free Report) and Vanguard Consumer Staples ETF ( VDC Quick Quote VDC - Free Report) .
The raging war between Russia and Ukraine has been keeping investors under pressure. They are largely worried about the impact of the war on commodity prices and the inflation level. Market experts also believe that the war may slow down many countries' economic growth.
In fact, analysts are projecting the European economic growth to slow down and might enter a recession. It is also estimated that the geopolitical crisis may deplete Kremlin’s economic growth by double-digits. The outlook on U.S. equity is also disappointing as major strategists like Citi to UBS, Yardeni Research and Evercore ISI have
slashed their estimates amid the war crisis. In fact, the S&P 500 is projected to decline by 16% in 2022 to end at 4,000 by Ed Yardeni, per a CNBC article. Defensive ETFs in Focus
Given the current market conditions,we highlighted some ETFs like:
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 give investors dividend growth opportunities compared 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 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 opportunity and are mostly good for risk-averse long-term investors.
Vanguard Dividend Appreciation ETF is the largest and the most popular ETF in the dividend space, with AUM of $64.44 billion. VIG follows the S&P U.S. Dividend Growers Index. Vanguard Dividend Appreciation ETF charges 6 basis points (bps) in annual fees (read:
Take Shelter in Dividend Aristocrat ETFs Amid Ukraine-Russia War). Invesco S&P 500 Low Volatility ETF ( SPLV Quick Quote SPLV - 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. These funds are less cyclical, providing more stable cash flow than the overall market.
Invesco S&P 500 Low Volatility ETF has been providing 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 101 securities in its basket. Invesco S&P 500 Low Volatility ETF hasAUM of $8.94 billion and charges an expense ratio of 25 bps, as stated in the prospectus (read:
Low-Volatility ETFs to the Rescue Amid Rising War Concerns). 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. Compared to plain vanilla funds, these products help lower volatility and perform better 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.
iShares MSCI USA Quality Factor ETF 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. With AUM of $21.83 billion, QUAL charges 0.15% of fees.
SPDR S&P MIDCAP 400 ETF Trust ( MDY Quick Quote MDY - Free Report)
Considering the mixed sentiments, mid-cap funds are gaining attention as they provide both growth and stability compared to their small-cap and large-cap counterparts. Investors seeking to capitalize on the strong fundamentals but are worried about uncertainties should consider mid-cap ETFs.
SPDR S&P MIDCAP 400 ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and the yield performance of the S&P MidCap 400 Index. MDY has AUM of $19.56 billion. SPDR S&P MIDCAP 400 ETF Trust charges a fee of 23 bps (see:
all the Mid Cap ETFs here). Vanguard Consumer Staples ETF ( VDC Quick Quote VDC - Free Report)
The consumer staples sector is known for its non-cyclical nature and acts as a safe haven during unstable market conditions. Moreover, like utility, consumer staples is considered a stable sector for the long term as its players are likely to offer decent returns. Investors can consider parking their money in the non-cyclical consumer staples sector during an economic recession. This high-quality sector, which is largely defensive, is found to have a low correlation factor with economic cycles.
Vanguard Consumer Staples ETF seeks to track the performance of the MSCI US Investable Market Consumer Staples 25/50 Index. With AUM of $6.85 billion, VDC has an expense ratio of 10 bps.