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Though the broad U.S. stock market is riding high this year, the latest series of events seem to be stalling the ascent. Global growth concerns and rising fears of recession in the United States are the main culprits behind the volatility.
In particular, the eurozone manufacturing sector activity in March fell at the fastest pace in nearly six years, per the latest data from IHS/Markit research. German manufacturing activity grew at the weakest pace in six and a half years while France’s private sector contracted. Meanwhile, the U.S. manufacturing sector Flash Purchasing Managers' Index (PMI) also tumbled to its weakest level in nearly two years.
These have shaken the complacency in the stock market, compelling investors to dump the riskier assets and take flight to safety at least for the near term. Further, the Fed’s more-than-expected dovish stance sent 10-year Treasury yields to the lowest since early 2018. In fact, the spread between yields of three-month Treasury bills exceeded those of 10-year notes for the first time since 2007. An inverted yield curve — wherein long-term rates fall below short-term — generally signals an upcoming recession (read: Growth Worries Resurface as Bulls Turn 10: 5 ETF Buying Zones).
Further, both Europe and China are battling tariff wars with the United States that are causing slowdown in global growth. Political turmoil in Britain over the country's exit from the European Union also remains a drag on risk assets.
Against such a backdrop, we have highlighted four safe haven ETFs that investors should add to their portfolio, especially if global growth fears continue to escalate. These products will likely benefit from the crisis and would be in focus in the weeks ahead.
Gold is often viewed as a store of value and a hedge against market turmoil. The product tracking this bullion like GLD could be an interesting pick to play in the current market turbulence. The fund tracks the price of gold bullion measured in U.S. dollars, and is kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $32.9 billion and heavy volume of nearly 8.8 million shares a day. It charges 40 bps in fees per year from investors. The product has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Can Gold ETFs Continue to Shine in 2019?).
Invesco CurrencyShares Japanese Yen Trust (FXY - Free Report)
Yen is considered a safe haven currency in times of uncertainty. Investors could tap this via FXY, which appears a great way to play a future rise in the yen relative to the U.S. dollar. It tracks the price of the Japanese yen relative to the U.S. dollar. The fund charges 40 bps a year in fees and sees a good volume of roughly 198,000 shares per day. The product has accumulated $176.4 million in its asset base and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Be Secure With 5 ETFs This Week That Packs a Global Punch).
iPath Series B S&P 500 VIX Short-Term Futures ETN
This ETN is a popular option providing exposure to volatility that sees a truly impressive average volume of about 8.3 million shares a day. The note has amassed $806.5 million in AUM and charges 89 bps in fees per year. The note is linked to the performance of the S&P 500 VIX Short-Term Futures Index Total Return, which provides access to equity market volatility through CBOE Volatility Index futures. The index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants’ views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the index.
The products tracking the long end of the yield curve often provide a safe haven. TLT provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It is one of the most popular and liquid ETFs in the bond space with AUM of $10 billion and average daily volume of 9 million shares. Expense ratio comes in at 0.15%. Holding 34 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 25.39 years and effective duration of 17.48 years. It has a Zacks ETF Rank #3 with a High risk outlook (read: Muni Bonds Off to Best Start Since 2006: 5 Hot ETFs to Buy).
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4 Safe Haven ETFs to Escape Recession Warnings
Though the broad U.S. stock market is riding high this year, the latest series of events seem to be stalling the ascent. Global growth concerns and rising fears of recession in the United States are the main culprits behind the volatility.
In particular, the eurozone manufacturing sector activity in March fell at the fastest pace in nearly six years, per the latest data from IHS/Markit research. German manufacturing activity grew at the weakest pace in six and a half years while France’s private sector contracted. Meanwhile, the U.S. manufacturing sector Flash Purchasing Managers' Index (PMI) also tumbled to its weakest level in nearly two years.
These have shaken the complacency in the stock market, compelling investors to dump the riskier assets and take flight to safety at least for the near term. Further, the Fed’s more-than-expected dovish stance sent 10-year Treasury yields to the lowest since early 2018. In fact, the spread between yields of three-month Treasury bills exceeded those of 10-year notes for the first time since 2007. An inverted yield curve — wherein long-term rates fall below short-term — generally signals an upcoming recession (read: Growth Worries Resurface as Bulls Turn 10: 5 ETF Buying Zones).
Further, both Europe and China are battling tariff wars with the United States that are causing slowdown in global growth. Political turmoil in Britain over the country's exit from the European Union also remains a drag on risk assets.
Against such a backdrop, we have highlighted four safe haven ETFs that investors should add to their portfolio, especially if global growth fears continue to escalate. These products will likely benefit from the crisis and would be in focus in the weeks ahead.
SPDR Gold Trust ETF (GLD - Free Report)
Gold is often viewed as a store of value and a hedge against market turmoil. The product tracking this bullion like GLD could be an interesting pick to play in the current market turbulence. The fund tracks the price of gold bullion measured in U.S. dollars, and is kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $32.9 billion and heavy volume of nearly 8.8 million shares a day. It charges 40 bps in fees per year from investors. The product has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Can Gold ETFs Continue to Shine in 2019?).
Invesco CurrencyShares Japanese Yen Trust (FXY - Free Report)
Yen is considered a safe haven currency in times of uncertainty. Investors could tap this via FXY, which appears a great way to play a future rise in the yen relative to the U.S. dollar. It tracks the price of the Japanese yen relative to the U.S. dollar. The fund charges 40 bps a year in fees and sees a good volume of roughly 198,000 shares per day. The product has accumulated $176.4 million in its asset base and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Be Secure With 5 ETFs This Week That Packs a Global Punch).
iPath Series B S&P 500 VIX Short-Term Futures ETN
This ETN is a popular option providing exposure to volatility that sees a truly impressive average volume of about 8.3 million shares a day. The note has amassed $806.5 million in AUM and charges 89 bps in fees per year. The note is linked to the performance of the S&P 500 VIX Short-Term Futures Index Total Return, which provides access to equity market volatility through CBOE Volatility Index futures. The index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants’ views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the index.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report)
The products tracking the long end of the yield curve often provide a safe haven. TLT provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It is one of the most popular and liquid ETFs in the bond space with AUM of $10 billion and average daily volume of 9 million shares. Expense ratio comes in at 0.15%. Holding 34 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 25.39 years and effective duration of 17.48 years. It has a Zacks ETF Rank #3 with a High risk outlook (read: Muni Bonds Off to Best Start Since 2006: 5 Hot ETFs to Buy).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>