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Times are unstable for US stocks. On Wednesday, October 24, the S & P 500 dipped, wiping out his 2018 earnings only to go back and rebound by almost 2% the next day. The US stock benchmark was below its 200-day moving average and more than 8% below its 52-week high.
"Wednesday's decline reflected investors' concern about the end of a series of good news encouraging purchases, replaced by concern over rising interest rates and commercial disputes, "the newspaper reports. The New York Times.
Thursday's boil could be short-lived as two well-known companies disappointed on the profit front, prompting stocks to fall after hours. Google's parent Alphabet Inc (NASDAQ:GOOGL GOOG) and Amazon (NASDAQ:AMZN), two of the largest components of the S & P 500, slipped during the session on Thursday afternoon.
Despite recent volatility, the data suggests investors are still fond of Exchange Traded Funds (ETFs). In fact, some ETFs may be perfectly adapted to the current environment. Here are some to ponder:
Select Sector Utilities SPDR (XLU)
Expenditure ratio: 0.13% per year, or $ 13 on an investment of $ 10,000.
When volatility increases, the less volatile sectors are often taken into account, including utilities. the Utilities Select SPDR sector (NYSEArca:XLU), the largest utility-based ETF by assets, was a resounding success on Wednesday, recording a large volume increase of more than 2% as other ETFs in the sector faded. Some analysts are optimistic about the utility sector, generally defensive.
In a note released on Wednesday, Todd Rosenbluth, director of mutual fund and mutual fund research at CFRA, said his company had reviewed Marketweight's overweight position in the utilities sector.
The sector's dividend yield of 3.4% and a price-earnings ratio of less than 18, which compares favorably with the S & P 500, are also added to utility-related ETFs such as XLU.
Invesco S & P 500 ETF with Low Volatility and Exorbitant Rate (XRLV)
Expenditure ratio: 0.25% per year
Low Volatility ETFs are a way to attract investors when market turbulence increases. This is understandable, but investors should follow the common advice that surrounds these ETFs: Low volatility funds are designed to behave less badly when stocks go down, without taking advantage of all the benefits of up-and-coming bull markets.
For here and now, the Invesco S & P 500 ETF with Low Volatility and Variable Rate Ex-Rate (NYSEArca:XRLV) is becoming more relevant as it addresses two issues that currently confuse investors. XRLV follows the S & P 500 response index with low volatility.
"The Index is composed of the 100 constituents of the S & P 500 Index, which have both low volatility and low interest rate risk," Invesco said. XRLV owns 100 shares, of which 41.62% in total come from the financial services and technology sectors.
Legg Mason ETF Low Volatility, High Dividend ETF (LVHD)
Expenditure ratio: 0.27% per year
In addition to low volatility, dividends have been a winning theme of this month's volatility. The combination of these two themes benefits ETFs such as Legg Mason ETF High dividend, low volatility ETF (NYSEArca:LVHD).
"The common denominators in this list are low volatility strategies and dividend games," Morningstar said in a recent note. "In other words, to varying degrees, these ETFs behave as intended for investors. And the best performing ETF of the month of October, Legg Mason ETF High dividend, low volatility ETF (NASDAQ: LVHD), marry these two strategies. "
LVHD holds only 79 shares, including more than 43% in the utilities and consumer staples sectors. This month, the ETF is down 0.79%, which is much better than the 6.83% return of the S & P 500.
IShares National Muni Bond ETF (MUB)
Expenditure ratio: 0.07% per year
Municipal bonds are often regarded as the territory of very conservative investors, but establishing this type of vision in the current context may be the right thing to do. In addition, municipal bond ETFs generate more revenue than traditional cash investments with less risk than corporate bonds.
the iShares National Muni Bond ETF (NYSEArca:MUB) is the largest municipal bond ETF. MUB, which manages $ 9.48 billion in assets, targets the national S & P-free municipal bond index and holds more than 3,400 municipal bonds. The 2.9% yield of the SEC's 30-day SEC SEC on MUB is significantly higher than what investors find on broad US equity benchmarks.
Over 76% of the MUB's holdings are rated AAA or AA. The risk of municipal bond ETFs is that if the overall economy slows faster than expected, some states may experience financial difficulty, which could lead to a series of new municipal issues with interest rates. higher than MUB bonds and other municipal ETFs.
WisdomTree Fundamental US High Yield Bond Fund (WFHY)
Expenditure ratio: 0.38% per year
The high-yield bond ETFs were surprisingly robust after the Fed raised three interest rates this year. Part of the reason may be a still benign default climate. The number of business failures in 2018 (less than 20) is far from alarming, but if that number increases significantly over the next few months, the WisdomTree Fundamental US High Yield Bond Fund (CBOE:WFHY) is the ETF to consider.
The underlying index of the WFHF is fundamentally weighted, a strategy that maintains the quality of the ETF's credit among high-end equities and its exposure to potential defaulters is relatively low.
"In 2018, of the 19 companies (issuers) in default, the market capitalization-weighted index held 16, which represents 31 bonds (issues) in total," according to WisdomTree. "These companies represent about 1.19% of the global investment universe. This compares to a single issue and a single issuer in our fundamental approach constituting only 0.21% of the index. "
The performance of the SEC's 30-day ETF is 5.34% and its effective duration is 4.07 years.
John Hancock ETF specializing in multifactor consumer goods (JHMS)
Expenditure ratio: 0,50% per year
After falling for most of the first three quarters of 2018, the consumer staples sector is showing signs of life. Emphasizing this point, the John Hancock Staples Consumer Staples ETF (NYSEArca:JHMS) is one of five ETFs to reach its highest level in six months on October 25th.
The multifactor strategy used by JHMS focuses on the following factors: smaller capitalization, lower relative price, and higher profitability. Although JHMS is bowing to large cap stocks, the weighted average market value of its holdings of $ 83.76 billion is $ 20 billion lower than a widely followed base consumption index.
This year, JHMS shows that multifactorial strategies offer sector-specific benefits, with the loss of the ETF for 2018 being about 100 basis points lower than that of the S & P 500 Consumer Staples Index.
Vanguard Value ETF (VTV)
Expenditure ratio: 0.05% per year
Investors who take stock ETFs into account during October may find some comfort in the value factor, which historically has been less volatile than growth and momentum. No matter where an investor is, whether it's your investor or your retiree, the Vanguard Value ETF (NYSEArca:VTV) is appealing on several fronts.
First, the value factor has slowed growth and momentum for some time and, given the wind on these factors, it may be time to return to value. Secondly, VTV is really cheap. As in cheaper than 95% of competing strategies.
As is the case with other traditional value ETFs, VTV is heavily affected by the disappointing financial services sector. Financials account for nearly 24% of the VTV list, but this sector is heavily oversold, indicating that VTV and other valuable ETFs could be credible candidates for short-term rebound.
At the time of writing, Todd Shriber did not hold any position on any of the above titles.
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