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Worst Market Drop in About Two Weeks: ETF Strategies to Win
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On Jun 24, Wall Street logged its worst dailyand percentage decline since June 11, according to Dow Jones Market Data, quoted on MarketWatch. The three key indexes — the S&P 500, the Dow Jones and the Nasdaq – lost 2.59%, 2.72% and 2.19% on Jun 24, respectively.
The reason behind the market drop was the rise in coronavirus cases with easing lockdown measures. New York, New Jersey and Connecticut announced 14-day quarantines on Jun 24 on visitors from states with high COVID-19 infection rates.
The “travel advisory,” which majorly affects residents of nine states, triggered concerns about the momentum of business activity that has just started to take off in the post-lockdown period.
The 7-day average of daily new COVID-19 cases increased more than 30% compared with a week ago, according to a CNBC report of Johns Hopkins University data.
Rise in cases are most rife in states like Texas, Florida, Arizona and California. Texas governor Greg Abbott advised all the state’s residents to stay at home. Hospitalization rates are surging in some areas.
Chicago Fed President Charles Evans said the U.S. economy may be in need for more monetary stimulus, due to low inflation, which is likely to fall further, as quoted on MarketWatch.
Against this backdrop, below we highlight a few investing strategies that could help you survive the present volatile equity market.
Go for Gold
Gold prices spiked to the highest level in nearly eight years on coronavirus fears. Goldman Sachs predicts a $2,000/ounce gold price within 12 months. A dovish Fed and the resultant weakness in the greenback, fear of a second wave of coronavirus, higher levels of economic uncertainty related to the U.S. election as well as virus, should boost the demand for this safe-haven metal and the related bullion ETF GLD (read: Get Ready For A Gold Rush: ETFs In Focus).
Pick Multi-Asset ETFs
The multi-asset strategy looks to boost returns and lower overall volatility in portfolios. These products normally provide a high level of current income and take care of downside risks of a specific asset class. These also cater to various asset classes (equity, fixed income and alternative securities), which have low correlation to each other.
Notably, yield on the 10-year U.S. Treasuries was 0.69% on Jun 24, 2020. So, one can choose to bet on some ETFs that offer benchmark-beating yields. These options are the likes of Amplify BlackSwan Growth & Treasury Core ETF (SWAN) (yields about 3% annually) and Amplify High Income ETF (YYY - Free Report) (yields about 10% annually).
Dividend Appreciation: A Strong Bet
Investors are now fearing companies cutting dividends due to cash crisis. So, the winning investing area would be stocks that are hiking dividends despite the corona scare. This shows the strength of the company in this tough time. The Zacks Rank #2 (Buy) ETF Vanguard Dividend Appreciation ETF (VIG - Free Report) focuses on companies that have a record of increasing dividends over time (read: Dividend Growth ETFs to Fight Second Wave of Coronavirus Fears).
Play Defensive ETFs if Market Skids
If market selloffs remain heavy, investors can deal with this in various ways. First comes low-volatility U.S. ETFs like iShares Edge MSCI Min Vol USA ETF (USMV). This is likely to offer protection to a large extent in a heavy market selloff. Another way to fight volatility is with defensive ETFs like U.S Market Neutral Anti-Beta Fund (BTAL - Free Report) , Reality Shares DIVCON Dividend Defender ETF (DFND) and Direxion Flight to Safety Strategy ETF .
Take Shelter Under Online Retail ETFs
If you want to remain invested in growth areas and still seek shelter from acute stock selloffs, play online retail and Internet ETFs. The self-imposed quarantine and stay at home would inevitably boost demand for mobile gaming (as a way of indoor entertainment) and online retailing. No wonder, Internet ETFs like O'Shares Global Internet Giants ETF (OGIG - Free Report) , ProShares Long Online/Short Stores ETF (CLIX - Free Report) and VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report) would be better-placed even in the second half of 2020.
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Worst Market Drop in About Two Weeks: ETF Strategies to Win
On Jun 24, Wall Street logged its worst dailyand percentage decline since June 11, according to Dow Jones Market Data, quoted on MarketWatch. The three key indexes — the S&P 500, the Dow Jones and the Nasdaq – lost 2.59%, 2.72% and 2.19% on Jun 24, respectively.
The reason behind the market drop was the rise in coronavirus cases with easing lockdown measures. New York, New Jersey and Connecticut announced 14-day quarantines on Jun 24 on visitors from states with high COVID-19 infection rates.
The “travel advisory,” which majorly affects residents of nine states, triggered concerns about the momentum of business activity that has just started to take off in the post-lockdown period.
The 7-day average of daily new COVID-19 cases increased more than 30% compared with a week ago, according to a CNBC report of Johns Hopkins University data.
Rise in cases are most rife in states like Texas, Florida, Arizona and California. Texas governor Greg Abbott advised all the state’s residents to stay at home. Hospitalization rates are surging in some areas.
Chicago Fed President Charles Evans said the U.S. economy may be in need for more monetary stimulus, due to low inflation, which is likely to fall further, as quoted on MarketWatch.
Against this backdrop, below we highlight a few investing strategies that could help you survive the present volatile equity market.
Go for Gold
Gold prices spiked to the highest level in nearly eight years on coronavirus fears. Goldman Sachs predicts a $2,000/ounce gold price within 12 months. A dovish Fed and the resultant weakness in the greenback, fear of a second wave of coronavirus, higher levels of economic uncertainty related to the U.S. election as well as virus, should boost the demand for this safe-haven metal and the related bullion ETF GLD (read: Get Ready For A Gold Rush: ETFs In Focus).
Pick Multi-Asset ETFs
The multi-asset strategy looks to boost returns and lower overall volatility in portfolios. These products normally provide a high level of current income and take care of downside risks of a specific asset class. These also cater to various asset classes (equity, fixed income and alternative securities), which have low correlation to each other.
Notably, yield on the 10-year U.S. Treasuries was 0.69% on Jun 24, 2020. So, one can choose to bet on some ETFs that offer benchmark-beating yields. These options are the likes of Amplify BlackSwan Growth & Treasury Core ETF (SWAN) (yields about 3% annually) and Amplify High Income ETF (YYY - Free Report) (yields about 10% annually).
Dividend Appreciation: A Strong Bet
Investors are now fearing companies cutting dividends due to cash crisis. So, the winning investing area would be stocks that are hiking dividends despite the corona scare. This shows the strength of the company in this tough time. The Zacks Rank #2 (Buy) ETF Vanguard Dividend Appreciation ETF (VIG - Free Report) focuses on companies that have a record of increasing dividends over time (read: Dividend Growth ETFs to Fight Second Wave of Coronavirus Fears).
Play Defensive ETFs if Market Skids
If market selloffs remain heavy, investors can deal with this in various ways. First comes low-volatility U.S. ETFs like iShares Edge MSCI Min Vol USA ETF (USMV). This is likely to offer protection to a large extent in a heavy market selloff. Another way to fight volatility is with defensive ETFs like U.S Market Neutral Anti-Beta Fund (BTAL - Free Report) , Reality Shares DIVCON Dividend Defender ETF (DFND) and Direxion Flight to Safety Strategy ETF .
Take Shelter Under Online Retail ETFs
If you want to remain invested in growth areas and still seek shelter from acute stock selloffs, play online retail and Internet ETFs. The self-imposed quarantine and stay at home would inevitably boost demand for mobile gaming (as a way of indoor entertainment) and online retailing. No wonder, Internet ETFs like O'Shares Global Internet Giants ETF (OGIG - Free Report) , ProShares Long Online/Short Stores ETF (CLIX - Free Report) and VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report) would be better-placed even in the second half of 2020.
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 >>