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Don't Be Spooked by Rate Risks & Tech Volatility: 3 ETF Tricks for You
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Key Takeaways
Dividend ETFs are outperforming as investors seek income amid AI-related tech volatility.
Low-volatility ETFs offer exposure to historically less volatile stocks during market uncertainty.
Cash cow ETFs focus on companies with strong free cash flow and financial stability.
The prospects of Fed rate hikes due to surging inflation, rising U.S. fiscal deficit and the tech stocks’ rush to tap the bond market to fund their AI ambitions are likely to push U.S. Treasury yields higher in the coming days. Yield on the 10-year U.S. Treasury note already increased to 5.31% at the beginning of October. Although yields have fallen lately to around 5%, it is still pretty high.
Many investors may see the impending rising rate risks as goblins prior to Halloween. This makes it necessary for investors to have a look at the ETF strategies that can protect them from any threat.
Play Dividend ETFs
Dividend ETFs have topped the S&P 500 over the past month as AI stocks retreated. The AI debt boom and the uncertainty over the payoff timeline of this massive investment have turned tech investors cautious.
State Street SPDR S&P 500 ETF Trust (SPY - Free Report) has added about 0.5% over the past month (as of Oct. 27, 2026), Invesco S&P 500 High Div Low Volatility ETF (SPHD - Free Report) has added about 5%, ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report) has returned about 6%, while State Street Technology Select Sector SPDR ETF (XLK) has lost about 2.6%.
As semiconductor and AI-linked stocks face selling pressure, investors are turning to dividend-paying companies for recurring income, established businesses and relatively strong balance sheets.
Slightly falling Treasury yields are also supporting dividend stocks by making their income streams more attractive relative to government bonds. The 10-year Treasury yield settled at 4.987% on Oct. 27, down from 5.31% at the start of the month, providing an additional tailwind for dividend-focused investments.
Tap Low-Volatility ETFs
Low-volatility ETFs appear as another great bet. 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.
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) has added about 5.3% over the past month, State Street SPDR SSGA US Lg Cap Low Vol Index ETF (LGLV - Free Report) has added about 5.3% and Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) has advanced about 6%.
Bet on Cash Cows
A cash cow is a business, product or asset that generates steady cash flow over its lifetime after the initial investment is recovered. These companies consistently generate positive cash flows, reflecting their strong business models and financial stability.
Since we know that a cash cushion is always needed in a rough market, one can easily look at the indicators related to cash flows to measure a company's performance. One important factor that makes free cash flow a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, genuinely diagnosing a company's financial health.
Pacer Global Cash Cows Dividend ETF (GCOW) has added about 3% and Pacer US Cash Cows 100 ETF (COWZ - Free Report) has advanced about 5.2% over the past month.
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Don't Be Spooked by Rate Risks & Tech Volatility: 3 ETF Tricks for You
Key Takeaways
The prospects of Fed rate hikes due to surging inflation, rising U.S. fiscal deficit and the tech stocks’ rush to tap the bond market to fund their AI ambitions are likely to push U.S. Treasury yields higher in the coming days. Yield on the 10-year U.S. Treasury note already increased to 5.31% at the beginning of October. Although yields have fallen lately to around 5%, it is still pretty high.
Many investors may see the impending rising rate risks as goblins prior to Halloween. This makes it necessary for investors to have a look at the ETF strategies that can protect them from any threat.
Play Dividend ETFs
Dividend ETFs have topped the S&P 500 over the past month as AI stocks retreated. The AI debt boom and the uncertainty over the payoff timeline of this massive investment have turned tech investors cautious.
State Street SPDR S&P 500 ETF Trust (SPY - Free Report) has added about 0.5% over the past month (as of Oct. 27, 2026), Invesco S&P 500 High Div Low Volatility ETF (SPHD - Free Report) has added about 5%, ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report) has returned about 6%, while State Street Technology Select Sector SPDR ETF (XLK) has lost about 2.6%.
As semiconductor and AI-linked stocks face selling pressure, investors are turning to dividend-paying companies for recurring income, established businesses and relatively strong balance sheets.
Slightly falling Treasury yields are also supporting dividend stocks by making their income streams more attractive relative to government bonds. The 10-year Treasury yield settled at 4.987% on Oct. 27, down from 5.31% at the start of the month, providing an additional tailwind for dividend-focused investments.
Tap Low-Volatility ETFs
Low-volatility ETFs appear as another great bet. 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.
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) has added about 5.3% over the past month, State Street SPDR SSGA US Lg Cap Low Vol Index ETF (LGLV - Free Report) has added about 5.3% and Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) has advanced about 6%.
Bet on Cash Cows
A cash cow is a business, product or asset that generates steady cash flow over its lifetime after the initial investment is recovered. These companies consistently generate positive cash flows, reflecting their strong business models and financial stability.
Since we know that a cash cushion is always needed in a rough market, one can easily look at the indicators related to cash flows to measure a company's performance. One important factor that makes free cash flow a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, genuinely diagnosing a company's financial health.
Pacer Global Cash Cows Dividend ETF (GCOW) has added about 3% and Pacer US Cash Cows 100 ETF (COWZ - Free Report) has advanced about 5.2% over the past month.