We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The stock market has been witnessing huge volatility trigerred by Russia’s invasion of Ukraine, skyrocketing inflation and Fed’s rate hike bets.
Investors may want to remain invested in the equity world but at the same time seek protection from a downside. This could be easily achieved by investing in low-beta products like Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) , Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI - Free Report) , Pacer Trendpilot Fund of Funds ETF (TRND - Free Report) , ETC 6 Meridian Low Beta Equity ETF (SIXL - Free Report) and Global X Nasdaq 100 Covered Call ETF (QYLD - Free Report) . These funds could be intriguing options for investors amid the current market turbulence.
The latest data showed that inflation soared at its fastest pace in more than 40 years last month, reflecting more aggressive Fed rate hikes. The impending monetary tightening from the Fed once again pulled growth stocks back into the red territory.
The Fed has raised rates by 25 bps for the first time since 2008 and expects to follow a more aggressive path to fight the 40-year high inflation. The current pricing suggests a 0.5% bps hike in May and a cumulative boost of 2.5% to benchmark rates through the end of the year, from the near-zero level at the start of 2022. This has resulted in a spike in yields.
Higher yields indicate optimism in the economy backed by increased consumer confidence, rising wages and higher spending. This combination of factors will result in increased industrial activity and a pickup in consumer demand, thereby lifting the stocks. However, the persistent rise in commodity prices and the aftermath of the Russia-Ukraine war have led to concerns about a global economic slowdown, making invetsors’ jittery. A resurgence of virus cases in China and the another wave of lockdown added to the chaos (read: 5 Top-Ranked ETFs That Can Shine Bright in April).
Why Low Beta?
Beta measures the price volatility of stocks relative to the overall market. It has a direct relationship to market movements. A beta of 1 indicates that the price of the stock or fund tends to move with the broader market. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.
That said, low-beta products exhibit greater levels of stability than their market-sensitive counterparts and will usually lose less when the market crumbles. Given lesser risks and lower returns, these are considered safe and resilient amid uncertainty. However, when markets soar, these low-beta funds experience lesser gains than the broader market counterparts and thus lag their peers.
All the above-mentioned funds offer broad exposure to a number of sectors and have AUM of more than $50 million, indicating their good tradability.
Invesco S&P 500 Downside Hedged ETF is an actively managed fund and seeks to deliver positive returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns. Invesco S&P 500 Downside Hedged ETF tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The index allows investors to receive exposure to the equity and volatility of the S&P 500 Index in a dynamic framework (read: Top and Flop ETFs of Q1).
Invesco S&P 500 Downside Hedged ETF has accumulated $376.7 million in its asset base and charges 40 bps in fees per year from its investors. Volume is good, exchanging 140,000 shares a day on average.
Nationwide Nasdaq-100 Risk-Managed Income ETF targets high income with lower risk using a rules-based options trading strategy. It is designed for income-focused investors seeking to lower their exposure to market volatility and minimize the potential for losses during down markets.
With AUM of $809.5 million, Nationwide Nasdaq-100 Risk-Managed Income ETF charges 68 bps in annual fees and trades in an average daily volume of 372,000 shares.
Pacer Trendpilot Fund of Funds ETF (TRND - Free Report) – Beta: 0.57
Pacer Trendpilot Fund of Funds ETF follows the Pacer Trendpilot Fund of Funds Index, which seeks to implement a systematic trend-following strategy that directs exposure to 100% to the equity component; or 50% to the equity component and 50% to 3-month US Treasury bills; or 100% to 3-month US Treasury bills, depending on the relative performance of the equity Component and its 200-business day historical simple moving average.
Pacer Trendpilot Fund of Funds ETF has amassed $65.1 million and charges 77 bps in annual fees. It trades in volume of around 9,000 shares a day on average.
ETC 6 Meridian Low Beta Equity ETF is an actively managed ETF that uses a quantitively-driven strategy emphasizing low-beta stocks. Stocks are first screened to remove those that score poorly on financial and growth measures. Those stocks that remain are then ranked according to their beta. Stocks with low betas performed better than the stocks with high betas that did not perform well enough to justify their additional risks. This strategy results in a basket of 241 stocks, charging investors 88 bps in annual fees.
ETC 6 Meridian Low Beta Equity ETF has amassed $151.8 million in its asset base and trades in a paltry volume of 6,000 shares per day on average (read: 5 Top-Ranked ETFs to Weather the Market Storms).
Global X Nasdaq 100 Covered Call ETF (QYLD - Free Report) - Beta: 0.67
Global X Nasdaq 100 Covered Call ETF seeks to generate income through covered call writing, which historically produces higher yields in periods of volatility. It follows a “covered call” or “buy-write” strategy, in which the fund buys the stocks in the Nasdaq 100 Index and “writes” or “sells” corresponding call options on the same index. Global X Nasdaq 100 Covered Call ETF tracks the CBOE Nasdaq-100 BuyWrite V2 Index.
The product has $7.2 billion in AUM and an expense ratio of 0.60%. It trades in an average daily volume of 5 million shares.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Trade Market Uncertainty With Low-Volatility ETFs
The stock market has been witnessing huge volatility trigerred by Russia’s invasion of Ukraine, skyrocketing inflation and Fed’s rate hike bets.
Investors may want to remain invested in the equity world but at the same time seek protection from a downside. This could be easily achieved by investing in low-beta products like Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) , Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI - Free Report) , Pacer Trendpilot Fund of Funds ETF (TRND - Free Report) , ETC 6 Meridian Low Beta Equity ETF (SIXL - Free Report) and Global X Nasdaq 100 Covered Call ETF (QYLD - Free Report) . These funds could be intriguing options for investors amid the current market turbulence.
The latest data showed that inflation soared at its fastest pace in more than 40 years last month, reflecting more aggressive Fed rate hikes. The impending monetary tightening from the Fed once again pulled growth stocks back into the red territory.
The Fed has raised rates by 25 bps for the first time since 2008 and expects to follow a more aggressive path to fight the 40-year high inflation. The current pricing suggests a 0.5% bps hike in May and a cumulative boost of 2.5% to benchmark rates through the end of the year, from the near-zero level at the start of 2022. This has resulted in a spike in yields.
Higher yields indicate optimism in the economy backed by increased consumer confidence, rising wages and higher spending. This combination of factors will result in increased industrial activity and a pickup in consumer demand, thereby lifting the stocks. However, the persistent rise in commodity prices and the aftermath of the Russia-Ukraine war have led to concerns about a global economic slowdown, making invetsors’ jittery. A resurgence of virus cases in China and the another wave of lockdown added to the chaos (read: 5 Top-Ranked ETFs That Can Shine Bright in April).
Why Low Beta?
Beta measures the price volatility of stocks relative to the overall market. It has a direct relationship to market movements. A beta of 1 indicates that the price of the stock or fund tends to move with the broader market. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.
That said, low-beta products exhibit greater levels of stability than their market-sensitive counterparts and will usually lose less when the market crumbles. Given lesser risks and lower returns, these are considered safe and resilient amid uncertainty. However, when markets soar, these low-beta funds experience lesser gains than the broader market counterparts and thus lag their peers.
All the above-mentioned funds offer broad exposure to a number of sectors and have AUM of more than $50 million, indicating their good tradability.
Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) – Beta: 0.33
Invesco S&P 500 Downside Hedged ETF is an actively managed fund and seeks to deliver positive returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns. Invesco S&P 500 Downside Hedged ETF tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The index allows investors to receive exposure to the equity and volatility of the S&P 500 Index in a dynamic framework (read: Top and Flop ETFs of Q1).
Invesco S&P 500 Downside Hedged ETF has accumulated $376.7 million in its asset base and charges 40 bps in fees per year from its investors. Volume is good, exchanging 140,000 shares a day on average.
Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI - Free Report) – Beta: 0.44
Nationwide Nasdaq-100 Risk-Managed Income ETF targets high income with lower risk using a rules-based options trading strategy. It is designed for income-focused investors seeking to lower their exposure to market volatility and minimize the potential for losses during down markets.
With AUM of $809.5 million, Nationwide Nasdaq-100 Risk-Managed Income ETF charges 68 bps in annual fees and trades in an average daily volume of 372,000 shares.
Pacer Trendpilot Fund of Funds ETF (TRND - Free Report) – Beta: 0.57
Pacer Trendpilot Fund of Funds ETF follows the Pacer Trendpilot Fund of Funds Index, which seeks to implement a systematic trend-following strategy that directs exposure to 100% to the equity component; or 50% to the equity component and 50% to 3-month US Treasury bills; or 100% to 3-month US Treasury bills, depending on the relative performance of the equity Component and its 200-business day historical simple moving average.
Pacer Trendpilot Fund of Funds ETF has amassed $65.1 million and charges 77 bps in annual fees. It trades in volume of around 9,000 shares a day on average.
ETC 6 Meridian Low Beta Equity ETF (SIXL - Free Report) - Beta: 0.60
ETC 6 Meridian Low Beta Equity ETF is an actively managed ETF that uses a quantitively-driven strategy emphasizing low-beta stocks. Stocks are first screened to remove those that score poorly on financial and growth measures. Those stocks that remain are then ranked according to their beta. Stocks with low betas performed better than the stocks with high betas that did not perform well enough to justify their additional risks. This strategy results in a basket of 241 stocks, charging investors 88 bps in annual fees.
ETC 6 Meridian Low Beta Equity ETF has amassed $151.8 million in its asset base and trades in a paltry volume of 6,000 shares per day on average (read: 5 Top-Ranked ETFs to Weather the Market Storms).
Global X Nasdaq 100 Covered Call ETF (QYLD - Free Report) - Beta: 0.67
Global X Nasdaq 100 Covered Call ETF seeks to generate income through covered call writing, which historically produces higher yields in periods of volatility. It follows a “covered call” or “buy-write” strategy, in which the fund buys the stocks in the Nasdaq 100 Index and “writes” or “sells” corresponding call options on the same index. Global X Nasdaq 100 Covered Call ETF tracks the CBOE Nasdaq-100 BuyWrite V2 Index.
The product has $7.2 billion in AUM and an expense ratio of 0.60%. It trades in an average daily volume of 5 million shares.