Globally, more than 43,100 people have been infected with the coronavirus, the fatality count crossing the 1000-mark. The numbers have surpassed those recorded during the 2002-2003 SARS outbreak. Along with impact on human resources, global investors are majorly worried about the impact this might have on financial markets and majorly on China’s economy as it makes up for about 17% of global GDP.
Estimates on the impact of the virus on the global economy have been issued by leading companies. Per Moody’s Analytics and Barclays, the coronavirus outbreak will dent global GDP by 0.3% in 2020. Meanwhile, analysts at Oxford Economics predict a 0.2% drop in the current year. Moreover, the World Bank estimates a more intensive pandemic to result in economic losses of roughly 5% of global GDP or more than $3 trillion. It also estimates that 0.5% of global GDP will be affected if the current coronavirus eruption turns out to be a weaker pandemic like swine flu in 2009.
ETF Strategies to Follow
Given the situation, let’s look at some ETF strategies that investors can follow for a smooth sail in these turbulent times.
In a low-interest rate environment, dividend investing has been the hot spot. Against this backdrop, dividend ETFs like WisdomTree U.S. Quality Dividend Growth Fund (DGRW - Free Report) , FlexShares Quality Dividend Defensive Index Fund (QDEF - Free Report) , WBI Power Factor High Dividend ETF WBIY and Schwab US Dividend Equity ETF SCHD might be compelling picks (read: 7 Dividend ETFs That Offer Growth in 2020).
Real estate investment trusts (REITs) have had a good run on the bourses in 2019. A dovish Fed can be cited as the main driving factor. When interest rate drops, mortgage rates fall, making real estate or refinancing mortgages more affordable. This in turn boosts real estate sales. These funds offer outsized yields and act as good investing options when increased safe-haven trades keep yields at check. In view of this, investors can consider ETFs like JPMorgan BetaBuilders MSCI US REIT ETF BBRE, iShares Core U.S. REIT ETF USRT, Nuveen Short-Term REIT ETF NURE, Invesco S&P 500 Equal Weight Real Estate ETF (EWRE - Free Report) and Schwab U.S. REIT ETF (SCHH - Free Report) (read: Homebuilder ETFs Shining in 2020: Will This Continue?).
Prices of precious metals like gold and silver rise during chaotic market conditions. This enhances the appeal of iShares Silver Trust (SLV - Free Report) , Invesco DB Silver Fund (DBS - Free Report) , SPDR Gold Trust ETF (GLD - Free Report) , iShares Gold Trust (IAU - Free Report) and Aberdeen Standard Physical Palladium Shares ETF PALL (read: Palladium ETF Continues to Surge in 2020: What Lies Ahead?).
The rising tensions are causing investors to seek refuge in safer investment options, with the utility sector grabbing major attention. The sector is among the most stable for the long term as its players are likely to offer decent returns, irrespective of market conditions. It is known for its non-cyclical nature and acts as a safe haven for investors during erratic stock market conditions. Moreover, utilities act as a defensive option to stay invested in more rewarding equity markets. In view of this, investors can consider The Utilities Select Sector SPDR Fund (XLU - Free Report) , Vanguard Utilities ETF (VPU - Free Report) , iShares U.S. Utilities ETF (IDU - Free Report) and Fidelity MSCI Utilities Index ETF (FUTY - Free Report) (read: ETFs to Buy as Utilities Are Favored Amid Virus Scare).
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