Amid global bloodbath, key U.S. indexes experienced the biggest single-day selloffs since 1987 on Mar 16 while the fear gauge index climbed to a record high. In fact, Wall Street has been witnessing a turbulence this month on the coronavirus scare.
The S&P 500 logged 9% swings in three consecutive trading days for the first time since 1929. Amid this gyration, some analysts are seeing a bottom and predicting a turnaround.
Morgan Stanley’s strategist Andrew Sheets (normally known for his scepticism) has indicated that assets from liquid stocks, credit-default swaps to agency-issued mortgage bonds now appear attractive due to the Fed’s massive policy easing in March. Notably, the Fed has cut rates to zero and restarted QE. The measures mimic its crisis-era policy (read: Must-Watch ETF Areas on 2nd Fed Rate Cut of 2020 & QE Launch).
Current volatility gauges indicate "a potential peak in market fear", per Sheets. Sheets also acknowledged that the fastest coronavirus-led stock correction in history has brought asset prices down to pretty low levels (read: Are Investors Too Complacent About Market Rally? ETFs to Buy).
Credit Suisse Global Chief Investment Officer Michael Strobaek also suggested that investors with a strong stomach for risks may start building up positions in equities. Having said this, we would like to note that nobody knows if the market crash is over. Some analysts see more pain ahead. But per Sheets, the current scenario offers “very attractive risk premium for investors to take.”
ETFs That Can be Tapped
If you want to follow Sheets, you can bet on the below-mentioned ETFs. Here we highlight a few ETFs that have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), a P/E (36 months) ratio of less than S&P 500-based ETF SPY’s 17.06x and beta below one.
Health Care Select Sector SPDR ETF (XLV - Free Report) — P/E: 15.28x; Beta: 0.92
The fund includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.The fund has a Zacks Rank #2. It yields about 1.70% annually compared with the benchmark U.S. treasury yield of 0.73% (as on Mar 17, 2020).
IShares Russell 1000 Value ETF (IWD - Free Report) — P/E: 14.33x; Beta: 0.97
The underlying Russell 1000 Value Index measures the performance of the large-capitalization value sector of the U.S. equity market. The Zacks Rank #3 fund yields about 3.15% annually.
SPDR S&P Dividend ETF (SDY - Free Report) — P/E: 15.57x; Beta: 0.86
The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of increasing dividends for at least 20 consecutive years. The Zacks Rank #3 fund yields 3.07% annually.
SPDR Russell 1000 Low Volatility Focus ETF (ONEV - Free Report) — P/E: 14.31x; Beta: 0.97
The underlying Russell 1000 Low Volatility Focused Factor Index reflects the performance of a segment of large-capitalization U.S. equity securities demonstrating a combination of core factors — high value, high quality, and low size characteristics, with a focus factor comprising low volatility characteristics. The Zacks Rank #3 fund yields 2.65% annually.
iShares Core Dividend Growth ETF (DGRO - Free Report) — P/E: 16.86x; Beta: 0.94
The underlying Morningstar US Dividend Growth Index is composed of U.S. equities, with a history of consistently growing dividends. The Zacks Rank #2 fund yields 2.70% annually.
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