The global stock markets took a bloodbath on Feb 24 trading session as coronavirus, which originated in China, spread rapidly outside the country with confirmed cases in South Korea, Italy and Iran over the last weekend. According to the latest figures from the World Health Organization, there are now 79,407 cases of COVID-19 — official name given to coronavirus — in 32 countries and 2,622 related deaths.
Notably, global stocks had the worst day in two years, shedding about $1.73 trillion alone in a day while the U.S. stocks dropped the most since February 2018. The S&P 500 lost more than $900 billion in value, according to S&P Dow Jones (read: Is it the Right Time to Buy Global Low-Volatility ETFs?).
Per the latest report, the coronavirus cases in South Korea surged past 800 while it topped 200 in Italy, including five deaths. Iran said there had been 12 deaths and 61 confirmed coronavirus cases in the country. China reported 409 new cases, raising the mainland’s total to 77,150. The 150 new deaths from the illness raised China’s total to 2,592.
The spike in the number of cases has raised fresh worries that the outbreak could threaten global growth. In particular, a growing number of companies have warned that the deadly virus will prevent them from meeting sales or profit targets for the first three months of the year. Reduced demand for goods and services and factory closures in China are also expected to hurt global growth and weigh on trade at a time when Japan and Germany are already teetering on the brink of recession.
Per International Monetary Fund, the virus outbreak could reduce global economic growth by 0.1% this year. Goldman now projects the U.S. economy to grow just 1.2% in the first quarter, down from 2.1% in the fourth quarter and 2.3% in full-year 2019 (read: ETF Areas That Can Stay Strong Amid Covid-19 Outbreak).
Amid such scenario, we have highlighted some ETFs that could benefit investors’ portfolio in the near term. These products could also provide some shelter from the crisis and would be in focus in the weeks ahead.
SPDR Gold Trust ETF (GLD - Free Report)
As gold is often viewed as a store of value and a hedge against market turmoil, it rallied more than 2% to its highest level in over seven years. 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 $49.3 billion and heavy volume of nearly 8.5 million shares a day. It charges 40 basis points (bps) in fees per year from investors. The product has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Gold to Hit $2000 Soon? ETFs to Bet On).
iShares 20+ Year Treasury Bond ETF (TLT - Free Report)
Fear of virus pandemic has led investors to flock to government bonds, especially the long-dated ones as they often provide a safe haven. As such, 10-year yields tumbled to 1.377%, a few basis points away from its record low of 1.32% in June 2016. 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 $20.7 billion and average daily volume of 10 million shares. Expense ratio comes in at 0.15%. Holding 38 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 25.32 years and effective duration of 18.27 years. It has a Zacks ETF Rank #3 with a High risk outlook (read: Safe-Haven ETFs Rally as Coronavirus Cases Surge).
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report)
The volatility level represented by the CBOE Volatility Index (VIX) surged to its highest in more than a year, suggesting that the market worries have started to set in. This fear gauge tends to outperform when markets are declining or fear-levels pertaining to the future are high. VXX is a popular option providing exposure to volatility that sees truly impressive average volume of about 38 million shares a day. The note has amassed $1.1 billion in AUM and charges 89 bps in fees per year. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months of VIX futures contracts.
Invesco CurrencyShares Japanese Yen Trust (FXY - Free Report)
As yen is considered a safe haven currency in times of uncertainty, the risk-off sentiments led to jump in yen against the dollar. 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 moderate volume of roughly 77,000 shares per day. The product has accumulated $199.7 million in its asset base and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Tough Time for Japan ETFs? COVID-19 Alone Isn't the Culprit).
iShares Core S&P Small-Cap ETF (IJR - Free Report)
Investors could seek shelter in a basket of small-cap stocks that have less international exposure and are less vulnerable to external shocks like the ongoing virus outbreak. While the small-cap space is crowded with ETFs, the ultra-popular IJR having a Zacks ETF Rank #2 (Buy) and a Medium risk outlook could be the best pick. It follows the S&P SmallCap 600 Index, holding 602 stocks in its basket. The fund has AUM of $47.8 billion and trades in average daily volume of 3.2 million shares. It charges investors 7 bps in annual fees (read: Pick These US Small-Cap ETFs to Fight the Coronavirus Scare).
Vanguard Dividend Appreciation ETF (VIG - Free Report)
The dividend paying securities are the major sources of consistent income for investors when returns from the equity market are at risk. This is especially true as these stocks offer the best of both these worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices. The companies that offer dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis. While the dividend space has been crowded, ETFs with stocks having a strong history of dividend growth like VIG seem to be good picks. The ETF has AUM of $44.1 million and charges 6 bps in annual fees. It trades in average daily volume of 1.1 million shares and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Guide to 10 Most Popular Dividend ETFs).
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