As we all know, coronavirus has been hitting global headlines lately. So far, coronavirus has claimed
more than 2,000 lives in mainland China, with more than 75,000 confirmed cases. Though Wall Street staged occasional rallies on the signing of trade deals and global police easing, markets remained pretty volatile of late.
The S&P 500 gained only 0.4% in the past month. The volatility ETN
iPath Series B S&P 500 VIX Short-Term Futures ETN ( VXX Quick Quote VXX - Free Report) has added 10.5% over the same timeframe. Key U.S. indexes slumped on Feb 21 with the S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000 losing about 1.1%, 0.8%, 1.8% and 1%, respectively. This mainly followed rising apprehensions about the impact of coronavirus on several assets. Impact of the Virus
Starting from car to aerospace, tourism, retail and entertainment, all industries are likely to suffer as China has been facing travel restrictions from many countries. Several cities in the country are on lockdown. A number of factories have not been operating full scale.
Citigroup’s chief equity strategist indicated that the flattening yield curve hints at more volatility ahead, which is usually accompanied with “
equity market wobbles” (read: Buy These ETFs if U.S. Yield Curve Flattens Further).
The International Monetary Fund (IMF) recently said that the virus will likely dent global growth by 0.1% and drag down China’s economic growth to 5.6%, which is
0.4% lower than IMF’s January outlook. IMF has lowered global growth forecast in January as well. The organization warned that further severity of the virus contagion may mar the global growth picture.
Goldman Sachs has cautioned that the coronavirus is the
biggest near-term risk to stock markets, which can succumb to a correction. "Chinese tourism alone now accounts for 0.4% of global GDP, and the number of 'missing work days' in China will be roughly equivalent to the entire US workforce taking an unplanned break for two months," per Goldman's chief global equity strategist Peter Oppenheimer. Apple AAPL, Tesla TSLA, McDonalds MCD, Yum China ( YUMC Quick Quote YUMC - Free Report) , Starbucks SBUX, Walt Disney DIS are some of the companies that are going to be hit hard by the outbreak.
Against this backdrop, investors can seek safety in quality products, which are undervalued and have relatively lesser correlation with the broader market (read:
Beyond Coronavirus, What's Driving Gold ETFs?). ETFs to Buy
Here we highlight a few ETFs that have a Zacks Rank # 2 (Buy), beta below one and a P/E (36 months) ratio almost equal to S&P 500’s P/E of 19.51x (read:
Here's Why You Should Bet on Quality ETFs & Stocks). Health Care Select Sector SPDR ETF ( XLV Quick Quote XLV - Free Report) — P/E 16.50x; Beta: 0.92
The fund includes companies from industries like pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. It charges 13 bps in fees and yields 2.13% annually.
iShares Core Dividend Growth ETF ( DGRO Quick Quote DGRO - Free Report) — P/E 19.56x; Beta: 0.92
The fund is composed of U.S. equities, with a history of consistently growing dividends. It charges 8 bps in fees and yields 2.19% annually.
VanEck Vectors Mortgage REIT Income ETF ( MORT Quick Quote MORT - Free Report) — P/E 16.45x; Beta: 0.6
The fund tracks the overall performance of mortgage real estate investment trusts. It charges 42 bps in fees and yields 6.86% annually. The fund has added about 3.6% in the past month.
Principal U.S. Mega-Cap Multi-Factor Index ETF ( USMC Quick Quote USMC - Free Report) — P/E: 19.54x; Beta: 0.86
The underlying Nasdaq U.S. Mega Cap Select Leaders Index uses a quantitative model designed to identify equity securities of companies with the largest market capitalizations in the Nasdaq US 500 Large Cap Index, with higher weights given to securities that are less volatile. The fund charges 12 bps in fees and yields 1.97% annually.
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