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The start of 2024 has been turbulent for the U.S. stock market, with the three major indices experiencing notable declines. The S&P 500 Index logged its fourth consecutive day of declines — the longest losing streak in over two months — while the Nasdaq Composite Index was down for the fifth consecutive session — its longest losing streak since October 2022 (read: S&P 500 ETF (SPY) Approaches $500B AUM Landmark).
Overstretched valuations and uncertainty around when the Fed will begin to cut rates have dampened investors’ optimism. In such a scenario, investors are increasingly exploring diversified strategies that help to protect their portfolios from downside risk.
Low-risk ETFs like Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) , Simplify Tail Risk Strategy ETF , Cambria Tail Risk ETF (TAIL - Free Report) and AGF U.S. Market Neutral Anti-Beta Fund (BTAL - Free Report) could be compelling choices. These ETFs are designed for investors who prioritize capital preservation over high returns.
The 10-year Treasury yields climbed to above 4%. The latest Fed minutes show that it wouldn’t cut rates as aggressively as expected for this year. This suggests an uncertain path toward interest rate cuts and reflects a growing sense that inflation is under control. There is also a rising concern about the risks that an “overly restrictive” monetary policy may pose to the economy.
The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction during December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace (read: Inverse ETFs Soar at the Start of 2024).
iPhone maker Apple (AAPL - Free Report) is struggling in the New Year, with shares plunging to an eight-week low after the two analysts — Piper Sandler and Barclays — downgraded the rating on the stock on worries about iPhone demand.
Semiconductor stocks also saw rough trading after Dutch semiconductor manufacturing equipment maker ASML Holdings (ASML) said it would restrict shipments of some technology to China at the Dutch government’s behest.
Invesco S&P 500 High Dividend Low Volatility ETF offers exposure to 50 stocks trading on the S&P 500 Index that historically have provided high dividend yields and low volatility. It follows the S&P 500 Low Volatility High Dividend Index. Invesco S&P 500 High Dividend Low Volatility ETF is widely spread across sectors, with utilities, real estate, consumer staples, materials and energy receiving double-digit exposure each.
Invesco S&P 500 High Dividend Low Volatility ETF has amassed $3 billion and charges 30 bps in annual fees. The fund trades in an average daily volume of 597,000 shares (read: 5 Dividend ETFs That Beat S&P 500 in 2023).
Simplify Tail Risk Strategy ETF
Simplify Tail Risk Strategy ETF seeks to provide income and capital appreciation while protecting against significant downside risk. It hedges diversified portfolios against severe equity market sell-offs. The fund deploys advanced options strategies that are designed to handle multiple types of market dislocations.
Simplify Tail Risk Strategy ETF has amassed $2.6 million in its asset base and charges 1.64% in annual fees from investors. It trades in a volume of 809,000 shares a day on average.
Cambria Tail Risk ETF seeks to mitigate significant downside market risk as it invests in a portfolio of "out of the money" put options purchased on the U.S. stock market. The TAIL strategy offers the potential advantage of buying more puts when volatility is low and fewer puts when volatility is high. While a portion of the fund's assets are invested in the basket of long put option premiums, the majority of fund assets are invested in intermediate-term U.S. Treasuries.
Cambria Tail Risk ETF has amassed $98 million in its asset base and charges 59 bps in annual fees from investors. It trades in a volume of 130,000 shares a day on average.
AGF U.S. Market Neutral Anti-Beta Fund has the potential to generate positive returns regardless of the direction of the stock market as long as low-beta stocks outperform high-beta stocks. It invests primarily in long positions in low-beta U.S. equities and short positions in high-beta U.S. equities on a dollar-neutral basis within sectors.
AGF U.S. Market Neutral Anti-Beta Fund has AUM of $231.7 million and an expense ratio of 1.43%. It trades in an average daily volume of 440,000 shares.
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Low-Risk ETFs to Consider Amid the Market Turmoil
The start of 2024 has been turbulent for the U.S. stock market, with the three major indices experiencing notable declines. The S&P 500 Index logged its fourth consecutive day of declines — the longest losing streak in over two months — while the Nasdaq Composite Index was down for the fifth consecutive session — its longest losing streak since October 2022 (read: S&P 500 ETF (SPY) Approaches $500B AUM Landmark).
Overstretched valuations and uncertainty around when the Fed will begin to cut rates have dampened investors’ optimism. In such a scenario, investors are increasingly exploring diversified strategies that help to protect their portfolios from downside risk.
Low-risk ETFs like Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) , Simplify Tail Risk Strategy ETF , Cambria Tail Risk ETF (TAIL - Free Report) and AGF U.S. Market Neutral Anti-Beta Fund (BTAL - Free Report) could be compelling choices. These ETFs are designed for investors who prioritize capital preservation over high returns.
The 10-year Treasury yields climbed to above 4%. The latest Fed minutes show that it wouldn’t cut rates as aggressively as expected for this year. This suggests an uncertain path toward interest rate cuts and reflects a growing sense that inflation is under control. There is also a rising concern about the risks that an “overly restrictive” monetary policy may pose to the economy.
The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction during December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace (read: Inverse ETFs Soar at the Start of 2024).
iPhone maker Apple (AAPL - Free Report) is struggling in the New Year, with shares plunging to an eight-week low after the two analysts — Piper Sandler and Barclays — downgraded the rating on the stock on worries about iPhone demand.
Semiconductor stocks also saw rough trading after Dutch semiconductor manufacturing equipment maker ASML Holdings (ASML) said it would restrict shipments of some technology to China at the Dutch government’s behest.
ETFs in Focus
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report)
Invesco S&P 500 High Dividend Low Volatility ETF offers exposure to 50 stocks trading on the S&P 500 Index that historically have provided high dividend yields and low volatility. It follows the S&P 500 Low Volatility High Dividend Index. Invesco S&P 500 High Dividend Low Volatility ETF is widely spread across sectors, with utilities, real estate, consumer staples, materials and energy receiving double-digit exposure each.
Invesco S&P 500 High Dividend Low Volatility ETF has amassed $3 billion and charges 30 bps in annual fees. The fund trades in an average daily volume of 597,000 shares (read: 5 Dividend ETFs That Beat S&P 500 in 2023).
Simplify Tail Risk Strategy ETF
Simplify Tail Risk Strategy ETF seeks to provide income and capital appreciation while protecting against significant downside risk. It hedges diversified portfolios against severe equity market sell-offs. The fund deploys advanced options strategies that are designed to handle multiple types of market dislocations.
Simplify Tail Risk Strategy ETF has amassed $2.6 million in its asset base and charges 1.64% in annual fees from investors. It trades in a volume of 809,000 shares a day on average.
Cambria Tail Risk ETF (TAIL - Free Report)
Cambria Tail Risk ETF seeks to mitigate significant downside market risk as it invests in a portfolio of "out of the money" put options purchased on the U.S. stock market. The TAIL strategy offers the potential advantage of buying more puts when volatility is low and fewer puts when volatility is high. While a portion of the fund's assets are invested in the basket of long put option premiums, the majority of fund assets are invested in intermediate-term U.S. Treasuries.
Cambria Tail Risk ETF has amassed $98 million in its asset base and charges 59 bps in annual fees from investors. It trades in a volume of 130,000 shares a day on average.
AGF U.S. Market Neutral Anti-Beta Fund (BTAL - Free Report)
AGF U.S. Market Neutral Anti-Beta Fund has the potential to generate positive returns regardless of the direction of the stock market as long as low-beta stocks outperform high-beta stocks. It invests primarily in long positions in low-beta U.S. equities and short positions in high-beta U.S. equities on a dollar-neutral basis within sectors.
AGF U.S. Market Neutral Anti-Beta Fund has AUM of $231.7 million and an expense ratio of 1.43%. It trades in an average daily volume of 440,000 shares.