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Try These Global Low-Volatility ETFs on Rising Recession Scares
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The coronavirus pandemic continues to wreak havoc in global economies as the number of infected cases is nearing 800,000 and a death toll of roughly 37,820. The United States (164,603 confirmed cases) has reported the highest number of infected cases, followed by Italy (101,739), Spain (87,956), China (82,240) and Germany (66,885). Notably, to combat the outbreak, President Trump has extended the federal government’s guidelines for social distancing until Apr 30.
The aggravating coronavirus outbreak is leading to increasing travel bans, and cancellation of large events as well as shutting down of schools, colleges, universities, restaurants and bars and shopping malls. In such a scenario, slowing global economic growth looks inevitable. The job market is also expected to be severely hit. With elevated unemployment levels, the spending capacity of consumers will definitely be compromised to a greater extent. In such a scenario, various research houses have started trimming their growth estimates for global economic growth (read: ETF Strategies to Follow Amid the Coronavirus Crisis).
Global rating agency Morgan Stanley had estimated the coronavirus pandemic to result in a deep recession in the world economy in the first half of 2020, along with a 2.3% deceleration in growth. Although Morgan Stanley expects the economy to recover from the second half of the ongoing year, full-year global economic growth is expected to edge down 0.6% year over year. Economic growth in 2020 will be the weakest since the 1930s, as it also lags the decline of 0.5% that was reported during the 2008 financial crisis. Moreover, the International Monetary Fund Managing Director Kristalina Georgieva has commented that, "we have reassessed the prospects for growth for 2020 and 2021. It is now clear that we have entered a recession as bad or worse than in 2009. We do project recovery in 2021."
ETFs to Play
Against such a backdrop, seeking refuge in low-volatility products seems judicious. These global low-volatility products could be intriguing choices for those who want to stay invested in equities but like the idea of focusing on minimum volatility. Low-volatility ETFs generally tend to offer positive risk-adjusted gains, though not enormous.
The United States (51.5%) is the top holding of the fund, followed by Japan (12.6), Switzerland (6%) and Canada (4.6%). Financials, Consumer Staples, Information Technology and Communication get a double-digit weight in the fund. The fund charges 20 basis points (bps) in fees (read: Tap These Low-Volatility ETFs to Shrug Off Coronavirus Fears).
EFAV looks to replicate the performance of international equity securities that have lower absolute volatility. No single stock makes up more than 1.89% of the portfolio. Country wise, the fund appears more focused on Japan (30.3%), Switzerland (14.2%) and the U.K. (10.9%) equities. The fund charges 20 bps in fees (read: 5 International Equity ETFs That Topped S&P 500 in Q1).
iShares Edge MSCI Min Vol Europe ETF
It tracks the MSCI Europe Minimum Volatility Index, giving exposure to 173 European stocks having low-volatility characteristics relative to the broader European-developed equity markets. The product charges 25 bps a year.
Like many other funds in the space, the ETF provides higher diversification benefits with none of the securities making up for more than 1.91% of assets. In terms of country exposure, the Switzerland takes the largest share at 21%, followed by U.K. (20%), France (12.3%) and Germany (11%).
This ETF provides stable income through investment in stocks of profitable U.S. companies, with relatively high dividend yields, lower price and earnings volatility. Utilities, Real Estate and Consumer Staples make up the top three sectors, with a double-digit allocation each. It charges 27 bps in annual fees (read: Bet on Low-Beta ETFs in an Uncertain Market).
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Try These Global Low-Volatility ETFs on Rising Recession Scares
The coronavirus pandemic continues to wreak havoc in global economies as the number of infected cases is nearing 800,000 and a death toll of roughly 37,820. The United States (164,603 confirmed cases) has reported the highest number of infected cases, followed by Italy (101,739), Spain (87,956), China (82,240) and Germany (66,885). Notably, to combat the outbreak, President Trump has extended the federal government’s guidelines for social distancing until Apr 30.
The aggravating coronavirus outbreak is leading to increasing travel bans, and cancellation of large events as well as shutting down of schools, colleges, universities, restaurants and bars and shopping malls. In such a scenario, slowing global economic growth looks inevitable. The job market is also expected to be severely hit. With elevated unemployment levels, the spending capacity of consumers will definitely be compromised to a greater extent. In such a scenario, various research houses have started trimming their growth estimates for global economic growth (read: ETF Strategies to Follow Amid the Coronavirus Crisis).
Global rating agency Morgan Stanley had estimated the coronavirus pandemic to result in a deep recession in the world economy in the first half of 2020, along with a 2.3% deceleration in growth. Although Morgan Stanley expects the economy to recover from the second half of the ongoing year, full-year global economic growth is expected to edge down 0.6% year over year. Economic growth in 2020 will be the weakest since the 1930s, as it also lags the decline of 0.5% that was reported during the 2008 financial crisis. Moreover, the International Monetary Fund Managing Director Kristalina Georgieva has commented that, "we have reassessed the prospects for growth for 2020 and 2021. It is now clear that we have entered a recession as bad or worse than in 2009. We do project recovery in 2021."
ETFs to Play
Against such a backdrop, seeking refuge in low-volatility products seems judicious. These global low-volatility products could be intriguing choices for those who want to stay invested in equities but like the idea of focusing on minimum volatility. Low-volatility ETFs generally tend to offer positive risk-adjusted gains, though not enormous.
iShares Edge MSCI Min Vol Global ETF (ACWV - Free Report)
The United States (51.5%) is the top holding of the fund, followed by Japan (12.6), Switzerland (6%) and Canada (4.6%). Financials, Consumer Staples, Information Technology and Communication get a double-digit weight in the fund. The fund charges 20 basis points (bps) in fees (read: Tap These Low-Volatility ETFs to Shrug Off Coronavirus Fears).
iShares Edge MSCI Min Vol EAFE ETF (EFAV - Free Report)
EFAV looks to replicate the performance of international equity securities that have lower absolute volatility. No single stock makes up more than 1.89% of the portfolio. Country wise, the fund appears more focused on Japan (30.3%), Switzerland (14.2%) and the U.K. (10.9%) equities. The fund charges 20 bps in fees (read: 5 International Equity ETFs That Topped S&P 500 in Q1).
iShares Edge MSCI Min Vol Europe ETF
It tracks the MSCI Europe Minimum Volatility Index, giving exposure to 173 European stocks having low-volatility characteristics relative to the broader European-developed equity markets. The product charges 25 bps a year.
Like many other funds in the space, the ETF provides higher diversification benefits with none of the securities making up for more than 1.91% of assets. In terms of country exposure, the Switzerland takes the largest share at 21%, followed by U.K. (20%), France (12.3%) and Germany (11%).
Legg Mason Low Volatility High Dividend ETF (LVHD - Free Report)
This ETF provides stable income through investment in stocks of profitable U.S. companies, with relatively high dividend yields, lower price and earnings volatility. Utilities, Real Estate and Consumer Staples make up the top three sectors, with a double-digit allocation each. It charges 27 bps in annual fees (read: Bet on Low-Beta ETFs in an Uncertain Market).
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 >>