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S&P 500 to Fall by 64%? Low-Volatility ETFs in Focus
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Although Wall Street has been kind to investors so far this year, rising caution from some market bears indicate a potential market crash. John Hussman, a well-known asset-bubble expert and long-time market bear, has issued a dire warning about the likelihood of a big market crash, as quoted on Business Insider.
He believes that the S&P 500 could plunge by as much as 64%, due to rich equity valuations and unfavorable market internals. According to Hussman, the current market conditions are suggestive of “the most extreme yield-seeking speculative bubble in U.S. history,” suggesting that the market's remarkable gains may be unsustainable.
In the first quarter of 2023, the P/E ratio of the S&P 500 23.46X, 41.2% discount to the all-time high P/E of 39.90X hit in the fourth quarter of 2020. But investors should note that 2020 was seen as the peak of the pandemic, when there was a massive flow of fiscal and monetary policy easing. This led to such a height of the S&P 500. In the face of higher interest rates that we have been witnessing now, such a rally is less likely.
The United States is likely headed for a recession in 2023 end or early 2024, per JPMorgan, as quoted on CNBC. This is all the more an important reason for investors to protect their equity portfolio. While some market participants may opt for a more defensive approach like long/short investing, others may consider low volatility ETFs as a way to seek protection while still participating in the market's upside.
What are Low Volatility ETFs?
Low volatility ETFs focus on selecting stocks with historically lower price fluctuations. These ETFs typically include companies that have demonstrated more stable performance over time, often characterized by a smoother price trajectory compared to the broader market. By investing in these companies, the ETF aims to provide investors with a less volatile investment option compared to traditional index funds or individual stocks.
ETFs in Focus
Against this backdrop, below we highlight a few ETFs that has gained momentum past month.
Invesco S&P SmallCap Low Volatility ETF (XSLV - Free Report) – Up 8.0% Past Month
Invesco S&P SmallCap High Dividend Low Volatility ETF (XSHD - Free Report) – Up 7.8% Past Month
SPDR Russell 1000 Low Volatility Focus ETF (ONEV - Free Report) – Up 7.2% Past Month
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV - Free Report) – Up 7.2% Past Month
Invesco S&P MidCap Low Volatility ETF (XMLV - Free Report) – Up 6.8% Past Month
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S&P 500 to Fall by 64%? Low-Volatility ETFs in Focus
Although Wall Street has been kind to investors so far this year, rising caution from some market bears indicate a potential market crash. John Hussman, a well-known asset-bubble expert and long-time market bear, has issued a dire warning about the likelihood of a big market crash, as quoted on Business Insider.
He believes that the S&P 500 could plunge by as much as 64%, due to rich equity valuations and unfavorable market internals. According to Hussman, the current market conditions are suggestive of “the most extreme yield-seeking speculative bubble in U.S. history,” suggesting that the market's remarkable gains may be unsustainable.
In the first quarter of 2023, the P/E ratio of the S&P 500 23.46X, 41.2% discount to the all-time high P/E of 39.90X hit in the fourth quarter of 2020. But investors should note that 2020 was seen as the peak of the pandemic, when there was a massive flow of fiscal and monetary policy easing. This led to such a height of the S&P 500. In the face of higher interest rates that we have been witnessing now, such a rally is less likely.
The United States is likely headed for a recession in 2023 end or early 2024, per JPMorgan, as quoted on CNBC. This is all the more an important reason for investors to protect their equity portfolio. While some market participants may opt for a more defensive approach like long/short investing, others may consider low volatility ETFs as a way to seek protection while still participating in the market's upside.
What are Low Volatility ETFs?
Low volatility ETFs focus on selecting stocks with historically lower price fluctuations. These ETFs typically include companies that have demonstrated more stable performance over time, often characterized by a smoother price trajectory compared to the broader market. By investing in these companies, the ETF aims to provide investors with a less volatile investment option compared to traditional index funds or individual stocks.
ETFs in Focus
Against this backdrop, below we highlight a few ETFs that has gained momentum past month.
Invesco S&P SmallCap Low Volatility ETF (XSLV - Free Report) – Up 8.0% Past Month
Invesco S&P SmallCap High Dividend Low Volatility ETF (XSHD - Free Report) – Up 7.8% Past Month
SPDR Russell 1000 Low Volatility Focus ETF (ONEV - Free Report) – Up 7.2% Past Month
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV - Free Report) – Up 7.2% Past Month
Invesco S&P MidCap Low Volatility ETF (XMLV - Free Report) – Up 6.8% Past Month