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Grab Quality ETFs to Counter Fed, War and Pandemic Threats
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After an encouraging March, market participants are having to deal with tumultuous market conditions. Several factors have been adding to the market uncertainties for a while. The Russia-Ukraine war saga is seeing new twists and turns while the Federal Reserve took a more aggressive stance in controlling hot inflation readings. Market participants are keenly awaiting the first-quarter earnings season.
Investors willing to sail through the current market turbulences can consider iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) , FlexShares Quality Dividend Index Fund (QDF - Free Report) , SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) and Barron's 400 ETF (BFOR - Free Report) .
Russia is already facing rage and condemnation from global leaders on the atrocities on Ukrainians, labeled as “war crimes”. After seeing the images from Bucha in the northwest of Kyiv, some global leaders proposed the idea of imposing more sanctions on Russia. Russian missile strike on a train station operating as an evacuation hub in the eastern city of Kramatorsk is once again condemned by the global leaders (according to a CNN report).
Japanese Prime Minister Fumio Kishida recently informed that it will increase its sanctions against Russia, prohibiting the Russian imports like coal and vodka. The country will also freeze assets of major banks, such as Alphabank and Sberbank, per a CNN report. The UN member states voted against Russia to suspend it from the Human Rights Council in response to the allegations of atrocities on Ukrainians by the Russian soldiers.
The resurgence of COVID-19 cases in China led to a lockdown in Shanghai, the major financial hub of the country, in accordance with its zero-COVID policy.
As the turmoil continues, rising commodity prices and fears of further disruptions in global supply-chain distributions might stoke higher inflation. Also, as the Federal Reserve took an aggressive approach to increase the rates, market participants are worried about the U.S. economy slipping into a stagflation due to high-interest rates and steep inflation.
The recently released FOMC minutes of the March meeting highlighted the central bank’s plans to control the inflation levels by larger interest rate hikes. The same also outlined the method and magnitude of reducing the balance sheet that is holding around $9 trillion of assets. The Federal Reserve officials decided to shrink their balance sheet by approximately $95 billion a month.
Investors are also scared of the recessionary signals coming from the bond market as the 2-year and 10-year Treasury yield curve inverts for the first time since 2019.
The core personal consumption expenditures (PCE) price index rose 5.4% year over year, witnessing the largest jump in about 40 years (per a CNBC article). The Federal Reserve considers this metric to be the most dependable inflation indicator. The index fell shy of the Dow Jones estimate of 5.5%.
Quality ETFs Worth a Look
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and healthy margins. These stocks also have a track record of stable or rising sales and earnings growth. In comparison to plain vanilla funds, these products help lower volatility and perform rather well during market uncertainties. Also, academic research proved that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Against such a backdrop, 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 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: Tap on These 5 ETFs as Recession Fears Grip Wall Street).
Invesco S&P 500 Quality ETF tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks with the highest-quality score based on three fundamental measures, namely, the return on equity, accruals ratio and the financial leverage ratio.
Expense Ratio: 0.15%
AUM: $3.88 billion
FlexShares Quality Dividend Index Fund (QDF - Free Report)
FlexShares Quality Dividend Index Fund seeks investment results that generally correspond to the price and yield performance, before fees and expenses, of the Northern Trust Quality Dividend Index.
SPDR MSCI USA StrategicFactors ETF offers exposure to the stocks that combine value, low volatility and quality-factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Capped Index (read: Best ETF Investment Strategies for Q2 2022)
Image: Bigstock
Grab Quality ETFs to Counter Fed, War and Pandemic Threats
After an encouraging March, market participants are having to deal with tumultuous market conditions. Several factors have been adding to the market uncertainties for a while. The Russia-Ukraine war saga is seeing new twists and turns while the Federal Reserve took a more aggressive stance in controlling hot inflation readings. Market participants are keenly awaiting the first-quarter earnings season.
Investors willing to sail through the current market turbulences can consider iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) , FlexShares Quality Dividend Index Fund (QDF - Free Report) , SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) and Barron's 400 ETF (BFOR - Free Report) .
Russia is already facing rage and condemnation from global leaders on the atrocities on Ukrainians, labeled as “war crimes”. After seeing the images from Bucha in the northwest of Kyiv, some global leaders proposed the idea of imposing more sanctions on Russia. Russian missile strike on a train station operating as an evacuation hub in the eastern city of Kramatorsk is once again condemned by the global leaders (according to a CNN report).
Japanese Prime Minister Fumio Kishida recently informed that it will increase its sanctions against Russia, prohibiting the Russian imports like coal and vodka. The country will also freeze assets of major banks, such as Alphabank and Sberbank, per a CNN report. The UN member states voted against Russia to suspend it from the Human Rights Council in response to the allegations of atrocities on Ukrainians by the Russian soldiers.
The resurgence of COVID-19 cases in China led to a lockdown in Shanghai, the major financial hub of the country, in accordance with its zero-COVID policy.
As the turmoil continues, rising commodity prices and fears of further disruptions in global supply-chain distributions might stoke higher inflation. Also, as the Federal Reserve took an aggressive approach to increase the rates, market participants are worried about the U.S. economy slipping into a stagflation due to high-interest rates and steep inflation.
The recently released FOMC minutes of the March meeting highlighted the central bank’s plans to control the inflation levels by larger interest rate hikes. The same also outlined the method and magnitude of reducing the balance sheet that is holding around $9 trillion of assets. The Federal Reserve officials decided to shrink their balance sheet by approximately $95 billion a month.
Investors are also scared of the recessionary signals coming from the bond market as the 2-year and 10-year Treasury yield curve inverts for the first time since 2019.
The core personal consumption expenditures (PCE) price index rose 5.4% year over year, witnessing the largest jump in about 40 years (per a CNBC article). The Federal Reserve considers this metric to be the most dependable inflation indicator. The index fell shy of the Dow Jones estimate of 5.5%.
Quality ETFs Worth a Look
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and healthy margins. These stocks also have a track record of stable or rising sales and earnings growth. In comparison to plain vanilla funds, these products help lower volatility and perform rather well during market uncertainties. Also, academic research proved that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Against such a backdrop, 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)
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 (read: Tap on These 5 ETFs as Recession Fears Grip Wall Street).
Expense Ratio: 0.15%
AUM: $22.87 billion
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
Invesco S&P 500 Quality ETF tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks with the highest-quality score based on three fundamental measures, namely, the return on equity, accruals ratio and the financial leverage ratio.
Expense Ratio: 0.15%
AUM: $3.88 billion
FlexShares Quality Dividend Index Fund (QDF - Free Report)
FlexShares Quality Dividend Index Fund seeks investment results that generally correspond to the price and yield performance, before fees and expenses, of the Northern Trust Quality Dividend Index.
Expense Ratio: 0.37%
AUM: $1.71 billion
SPDR MSCI USA StrategicFactors ETF (QUS - Free Report)
SPDR MSCI USA StrategicFactors ETF offers exposure to the stocks that combine value, low volatility and quality-factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Capped Index (read: Best ETF Investment Strategies for Q2 2022)
Expense Ratio: 0.15%
AUM: $950 million
Barron's 400 ETF (BFOR - Free Report)
Barron's 400 ETF seeks investment results that generally correspond, before fees and expenses, to the performance of the Barron's 400 Index.
Total Operating Expenses: 0.65%
AUM: $140.9 million