We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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.
According to flow specialists at Goldman Sachs, as quoted on Yahoo Finance, the S&P 500’s rally is anticipated to continue through July, driven by improving liquidity, declining volatility and easing recession fears, with the market’s momentum fading as August approaches.
Even if market bulls increase their bets, underlying risk factors remain, making it prudent for investors to increase exposure to defensive funds.
Why Investors Should Remain Cautious
Inflationary pressures, intensified by the tariffs proposed by President Donald Trump, continue to be a major headwind for the U.S. economy. According to Fed Chair Jerome Powell, as quoted on NBC News, additional impacts from the tariffs may surface soon.
The tariff pause announced in early April is nearing its deadline next week, potentially reigniting inflationary pressures. This could reverse the market rally that followed the pause, which had sparked a bullish run that sent the S&P 500 up approximately 25% by the end of the first half.
Concerns over U.S. debt levels, coupled with leadership and political uncertainty of the Fed, add pressure to investor confidence. A possible Fed leadership shake-up remains a significant source of investor unease.
Equity Funds Can't Catch a Break
According to LSEG Lipper data, as quoted on Reuters, investors pulled a net $20.48 billion from U.S. equity funds last week, marking the sixth consecutive week of outflows and the largest weekly outflow since March 19.
ETFs to Consider
Preserving capital and cushioning volatility is key for investors looking to navigate a volatile period ahead.
Investors should adopt a defensive approach as it's better to be cautious than unprepared. With ETFs offering the additional benefit of instant diversification and tax efficiency, investors can use ETFs to increase exposure to defensive funds.
Investing in these sectors provides dual benefits, protecting portfolios during market downturns and offering gains when the market trends upward.
Consumer Staples ETFs
Increasing exposure to consumer staple funds can bring balance and stability to investors’ portfolios. Investors can put more money in consumer staples funds to safeguard themselves from potential market downturns. The S&P 500 Consumer Staples Index has gained 5.88% year to date and 10.30% over the past year.
Investors can consider Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , Vanguard Consumer StaplesETF (VDC - Free Report) and iShares U.S. Consumer Staples ETF (IYK - Free Report) .
Dividend ETFs
Dividend-paying securities serve as primary sources of reliable income for investors, particularly during periods of equity market volatility. These stocks offer dual advantages of safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices. Companies offering dividends often act as a hedge against economic uncertainty.
Investors can consider Vanguard Dividend Appreciation ETF (VIG - Free Report) , Schwab US Dividend Equity ETF (SCHD - Free Report) and Vanguard High Dividend Yield Index ETF (VYM - Free Report) , which have dividend yields of 1.70%, 3.75% and 2.61%, respectively.
Investors can also consider global dividend-focused funds. According to LSEG Lipper, as quoted on Reuters, global dividend funds drew $23.7 billion in inflows during the first half of the year, the highest in three years. Regionally, Europe led with an average dividend yield of 3%, followed by Asia-Pacific at 2.6%, while the United States trailed with a modest 1.4% yield.
Investors can consider Vanguard International Dividend Appreciation ETF (VIGI - Free Report) and iShares InternationalSelect Dividend ETF (IDV - Free Report) , with dividend yields of 1.82% and 5.12%, respectively.
More Defensive Options
Investors can consider quality and value funds if they want to increase their exposure to more defensive funds. Funds like Vanguard Value ETF (VTV - Free Report) and iShares MSCI USA Quality Factor ETF (QUAL - Free Report) are good options.
Investors can also increase exposure to volatility ETFs like iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) . These funds have delivered short-term gains during periods of market chaos and could climb further if volatility persists.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
ETFs to Consider for a Likely August Slump
According to flow specialists at Goldman Sachs, as quoted on Yahoo Finance, the S&P 500’s rally is anticipated to continue through July, driven by improving liquidity, declining volatility and easing recession fears, with the market’s momentum fading as August approaches.
Even if market bulls increase their bets, underlying risk factors remain, making it prudent for investors to increase exposure to defensive funds.
Why Investors Should Remain Cautious
Inflationary pressures, intensified by the tariffs proposed by President Donald Trump, continue to be a major headwind for the U.S. economy. According to Fed Chair Jerome Powell, as quoted on NBC News, additional impacts from the tariffs may surface soon.
The tariff pause announced in early April is nearing its deadline next week, potentially reigniting inflationary pressures. This could reverse the market rally that followed the pause, which had sparked a bullish run that sent the S&P 500 up approximately 25% by the end of the first half.
Concerns over U.S. debt levels, coupled with leadership and political uncertainty of the Fed, add pressure to investor confidence. A possible Fed leadership shake-up remains a significant source of investor unease.
Equity Funds Can't Catch a Break
According to LSEG Lipper data, as quoted on Reuters, investors pulled a net $20.48 billion from U.S. equity funds last week, marking the sixth consecutive week of outflows and the largest weekly outflow since March 19.
ETFs to Consider
Preserving capital and cushioning volatility is key for investors looking to navigate a volatile period ahead.
Investors should adopt a defensive approach as it's better to be cautious than unprepared. With ETFs offering the additional benefit of instant diversification and tax efficiency, investors can use ETFs to increase exposure to defensive funds.
Investing in these sectors provides dual benefits, protecting portfolios during market downturns and offering gains when the market trends upward.
Consumer Staples ETFs
Increasing exposure to consumer staple funds can bring balance and stability to investors’ portfolios. Investors can put more money in consumer staples funds to safeguard themselves from potential market downturns. The S&P 500 Consumer Staples Index has gained 5.88% year to date and 10.30% over the past year.
Investors can consider Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , Vanguard Consumer Staples ETF (VDC - Free Report) and iShares U.S. Consumer Staples ETF (IYK - Free Report) .
Dividend ETFs
Dividend-paying securities serve as primary sources of reliable income for investors, particularly during periods of equity market volatility. These stocks offer dual advantages of safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices. Companies offering dividends often act as a hedge against economic uncertainty.
Investors can consider Vanguard Dividend Appreciation ETF (VIG - Free Report) , Schwab US Dividend Equity ETF (SCHD - Free Report) and Vanguard High Dividend Yield Index ETF (VYM - Free Report) , which have dividend yields of 1.70%, 3.75% and 2.61%, respectively.
Investors can also consider global dividend-focused funds. According to LSEG Lipper, as quoted on Reuters, global dividend funds drew $23.7 billion in inflows during the first half of the year, the highest in three years. Regionally, Europe led with an average dividend yield of 3%, followed by Asia-Pacific at 2.6%, while the United States trailed with a modest 1.4% yield.
Investors can consider Vanguard International Dividend Appreciation ETF (VIGI - Free Report) and iShares International Select Dividend ETF (IDV - Free Report) , with dividend yields of 1.82% and 5.12%, respectively.
More Defensive Options
Investors can consider quality and value funds if they want to increase their exposure to more defensive funds. Funds like Vanguard Value ETF (VTV - Free Report) and iShares MSCI USA Quality Factor ETF (QUAL - Free Report) are good options.
Investors can also increase exposure to volatility ETFs like iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) . These funds have delivered short-term gains during periods of market chaos and could climb further if volatility persists.