In the wake of the issues plaguing global economies, the International Monetary Fund (IMF) recently indicated a dip in the world output growth projection to 3.1% this year from 3.2% last year. However, economies are likely to gather steam next year and log 3.4% growth.
The advanced economies are expected to expand only 1.6% in 2016, down from 2.1% recorded in 2015 and 1.8% projected in July. More interestingly, the U.S. witnessed a considerable reduction in growth projections from 2.2% to 1.6%, thanks to low business investments.
The Eurozone is projected to grow 1.7% this year and 1.5% next year compared with 2% growth recorded in 2015. Japan’s growth is estimated at just 0.5% for 2016 and at 0.6% for 2017. The U.K. economy is predicted to see 1.8% growth this year, down from 2.2% in 2015. Output growth for the nation is likely to slip to 1.1% in 2017.
Shifting to emerging markets, the Chinese economy is estimated to grow 6.6% this year compared to 6.9% in 2015. Economic growth is expected to drop to 6.2% next year. Meanwhile, the IMF is optimistic about China’s efforts toward achieving a floating exchange rate over time.
However, a 7.6% growth rate forecast for India both for this and the next represent a 0.2% uptick from the July projections. Better terms of trade and policy reforms backed the positive growth outlook revision for India (read: 4 India ETFs to Buy as RBI Cuts Rate).
Brazil is steadily advancing; however, the economy will see a marked improvement only through the implementation of effective measures. Growth is expected to be negative 3.3% in 2016, better than the negative 3.8% recorded in 2015. However, next year will likely see about a 0.5% rate of expansion. Similarly, the Russian economy contracted 3.7% in 2015 but is expected to see a 0.8% drop this year and even grow 1.1% in 2017 (read: 3 Country ETFs Soaring on Hopes of Oil Output Curb).
U.S. Rate Hike to Upset Asian Capital Flow?
IMF believes that a likely Fed rate hike this year may dent Asian capital flow and intensify volatility. Slowing developed economies could hit emerging Asian economies via subdued exports.
Bank of America Warns About Momentum Loss
If this was not enough, Bank of America lately said that everything is at 'peak' and huge changes in the market may be underway. Fading central banks’ spirits as evident by the Fed’s imminent policy tightening, ECB’s QE tapering talks and BoJ’s reluctance in rolling out another round of hefty monetary stimulus (despite an ailing economy) may cause an upheaval in the market. In fact, 671 rate cuts since Lehman bankruptcy could not drive global growth as corporations & households continued to pile up cash, as per the bank.
In such a scenario, investors need to be cautious while exposing themselves to the investing world as occasional sell-offs are likely to hit the market. Below we highlight a few ETFs that could earn investors decent returns irrespective of market movement.
ETFs in Focus
Fidelity Dividend ETF for Rising Rates (FDRR - ETF report)
With rising rate concerns prevailing in the U.S. market lately, FDRR could be a great pick. The fund looks to track the performance of stocks of large- and mid-cap dividend-paying companies that are expected to continue to pay and hike their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields (read: Fidelity's New Smart Beta Lineup for Any Market Condition).
WisdomTree US Quality Dividend Growth ETF (DGRW - ETF report)
The 285-stock fund gives exposure to both growth and quality factors. The fund yields about 2.22% and charges 28 bps in fees. IT, industrials, consumer discretionary, staples and health care have a double-digit exposure to the fund.
O'Shares FTSE US Quality Dividend ETF (OUSA - ETF report)
The fund reflects the performance of high-quality U.S. large and mid-cap equities exhibiting relatively low volatility and high dividend yields. It yields about 2.86% annually. Sector-wise, the fund has a major focus in consumer goods, technology, healthcare, industrials and consumer services – each with double-digit exposure (read: How to Invest Like Connor O'Brien and Shark Tank's Kevin O'Leary).
ValueShares International ETF (IVAL - ETF report)
It is an actively managed fund that employs a methodical process to identify the cheapest, highest quality, international value stocks. The 49-stock fund charges 79 bps in fees.
SPDR MSCI World Quality Mix ETF (QWLD - ETF report)
The fund looks to provide exposure to 23 developed economies focusing on matrices like value, low volatility and quality. This $6.3-million ETF comprises over 1,050 stocks. It charges 30 bps in fees. The U.S. takes about 60% of the fund followed by Japan (9.95%), U.K. (6.63%) and Switzerland (4.9%).
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