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5 Quality ETFs to Tap as Wall Street Not Out of Woods
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Though Wall Street is off to a good start to first-quarter 2023, a volatile ride is expected ahead as fears of further Fed rate hikes and global growth concerns will continue to pull strings of the markets. Wells Fargo’s head of equity strategy Chris Harvey thinks that the S&P 500 could reach 4,200 this year, but not before it records a decline from current levels to around 3,400, as quoted on TipRanks.
In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, per J.P. Morgan. Most stock market forecasts for 2023 expect a modest improvement in markets. UBS targets a year-end 2023 S&P 500 at 3900 and KKR sees it at 4150. CFRA expects a 2.9% gain, which would put the S&P over 3900. It closed the year around 3840, as quoted on investors.com.
With the inflation levels still high, central banks still hawkish, tech lay-offs intensifying and economic indicators coming in mixed, investors can expect volatility to rule 2023. Against this backdrop, investors may be looking for ways to navigate through this volatility. Low-volatility investing is one such option.
Low-volatility ETFs have the potential to outpace the broader market in an uncertain environment, providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to defensive sectors that usually have a higher distribution yield than the broader markets. Notably, low-volatility ETFs have beaten the S&P 500 last year.
Low-Volatility ETFs in Focus
FlexShares Quality Dividend ETF (QDF - Free Report) – Down 0.4% Past Year Against 9.7% Decline in S&P 500
The underlying Northern Trust Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index and the Index are selected based on expected dividend payment and fundamental factors. The fund yields 2.38% annually and charges 37 bps in fees.
Vanguard U.S. Minimum Volatility ETF (VSMV - Free Report) – Down 1.8% Past Year
The underlying Nasdaq Victory US Multi-Factor Minimum Volatility Index seeks to deliver superior risk adjusted returns by constructing rules-based equity portfolios which aim to minimize expected volatility while potentially outperforming over a market cycle. The fund yields 1.99% annually and charges 35 bps in fees. The fund is flat this year.
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) – Down 5% Past Year
The MSCI USA Minimum Volatility (USD) Index is composed of U.S. equities that, in the aggregate, have lower volatility characteristics relative to the broader U.S. equity market. The fund yields 1.62% annually and charges 15 bps in fees. The fund is off 0.7% this year.
Xtrackers Russell US Multifactor ETF (DEUS - Free Report) – Down 5.1% Past Year
The underlying Russell 1000 Comprehensive Factor Index provides exposure to domestic equities based on five factors Quality, Value, Momentum, Low Volatility and Size. The fund yields 1.69% annually and charges 17 bps in fees.
Fidelity Low Volatility Factor ETF (FDLO - Free Report) – Down 5.5% Past Year
The Fidelity U.S. Low Volatility Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with lower volatility than the broader market. The fund yields 1.48% annually and charges 29 bps in fees.
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5 Quality ETFs to Tap as Wall Street Not Out of Woods
Though Wall Street is off to a good start to first-quarter 2023, a volatile ride is expected ahead as fears of further Fed rate hikes and global growth concerns will continue to pull strings of the markets. Wells Fargo’s head of equity strategy Chris Harvey thinks that the S&P 500 could reach 4,200 this year, but not before it records a decline from current levels to around 3,400, as quoted on TipRanks.
In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, per J.P. Morgan. Most stock market forecasts for 2023 expect a modest improvement in markets. UBS targets a year-end 2023 S&P 500 at 3900 and KKR sees it at 4150. CFRA expects a 2.9% gain, which would put the S&P over 3900. It closed the year around 3840, as quoted on investors.com.
With the inflation levels still high, central banks still hawkish, tech lay-offs intensifying and economic indicators coming in mixed, investors can expect volatility to rule 2023. Against this backdrop, investors may be looking for ways to navigate through this volatility. Low-volatility investing is one such option.
Low-volatility ETFs have the potential to outpace the broader market in an uncertain environment, providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to defensive sectors that usually have a higher distribution yield than the broader markets. Notably, low-volatility ETFs have beaten the S&P 500 last year.
Low-Volatility ETFs in Focus
FlexShares Quality Dividend ETF (QDF - Free Report) – Down 0.4% Past Year Against 9.7% Decline in S&P 500
The underlying Northern Trust Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index and the Index are selected based on expected dividend payment and fundamental factors. The fund yields 2.38% annually and charges 37 bps in fees.
Vanguard U.S. Minimum Volatility ETF (VSMV - Free Report) – Down 1.8% Past Year
The underlying Nasdaq Victory US Multi-Factor Minimum Volatility Index seeks to deliver superior risk adjusted returns by constructing rules-based equity portfolios which aim to minimize expected volatility while potentially outperforming over a market cycle. The fund yields 1.99% annually and charges 35 bps in fees. The fund is flat this year.
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) – Down 5% Past Year
The MSCI USA Minimum Volatility (USD) Index is composed of U.S. equities that, in the aggregate, have lower volatility characteristics relative to the broader U.S. equity market. The fund yields 1.62% annually and charges 15 bps in fees. The fund is off 0.7% this year.
Xtrackers Russell US Multifactor ETF (DEUS - Free Report) – Down 5.1% Past Year
The underlying Russell 1000 Comprehensive Factor Index provides exposure to domestic equities based on five factors Quality, Value, Momentum, Low Volatility and Size. The fund yields 1.69% annually and charges 17 bps in fees.
Fidelity Low Volatility Factor ETF (FDLO - Free Report) – Down 5.5% Past Year
The Fidelity U.S. Low Volatility Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with lower volatility than the broader market. The fund yields 1.48% annually and charges 29 bps in fees.