U.S. markets have been in great shape in 2019, thanks to a dovish Fed and U.S.-China trade optimism. The S&P 500 has recovered sharply this year from the Christmas lull. The S&P 500 touched 2,800 for the first time in nearly four months while the Dow Jones hit its 26,000 mark in late February for the first time since Nov 9 (read:
Wall Street's Best Start Since 1987: Top ETFs of Top Sectors).
The S&P 500-based ETF (
SPY - Free Report) gained 11.8% (as of Mar 4, 2019), the Dow Jones-based ETF ( DIA - Free Report) returned 10.8% and the Nasdaq-100-based fund QQQ has advanced 13.1% so far this year. The S&P 500 regained 75% of the steep drop from the high hit last September.
But these haven't been able to dim the appeal of low-volatility ETFs. These apparently safe products, which normally do not surge in a bull market but offer protection in troubled times, are still in a steady position despite the highs scaled by stocks.
VIDEO Why Are Low-Volatility ETFs in Good Shape?
After the astounding gains, thoughts of a correction in the market or overvaluation concerns are justifiable. This is especially true given stocks
have gotten 17% pricier in two months while profits are fading.
The analysts’ earnings estimates are declining for Q1 and Q2 of 2019. Today, the consensus estimates earnings will fall 2.7% in Q1, and rise just 0.7% in the June quarter, “representing a downward swing of 4.2 points in the outlook since the start of the year,”
per an article published on Fortune. Analysts are deducing operating EPS, which is normally around 15% lower than the GAAP.
Meanwhile, global growth worries remain rife. Most of the developed economies, especially in Europe and some emerging economies, have been suffering a slowdown. China, which slowed in Q4, has recently cut its economic growth forecast for 2019 to the range of 6-6.5%,
down from a target of 6.5% over the past two years. India economy also slowed in the final quarter of 2018. The Eurozone economy grew 0.2% on quarter in Q4 of 2018, which was the lowest since the Q2 of 2014.
Though there were signs of improvement in 2018, U.S.-China trade tensions are not resolved yet. These wavering factors explain why a group of investors is still stuck to low-volatility ETFs.
ETFs in Focus
Below we highlight a few low-volatility U.S. ETFs that have been in fine fettle this year despite a market rebound. These funds are currently around a 52-week high level. These ETFs have returned slightly lower than the S&P-based fund SPY this year.
SSGA US Large Cap Low Vol Index SPDR (— Up 11% LGLV - Free Report) S&P 500 Low Vol Invesco ETF (— Up 10.7% SPLV - Free Report) USA Min Vol iShares Edge MSCI ETF (— Up 9.7% USMV - Free Report)
Investors should also note that
SPDR S&P 500 ETF Trust ( SPY - Free Report) and iShares Core S&P 500 ETF ( IVV - Free Report) have seen outflows of $8.45 billion and $6.59 billion of assets this year while USMV, SPLV and LGLV have gathered about $2.7 billion, $842.5 million and $106.5 million in assets. Want key ETF info delivered straight to your inbox?
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