Investors are turning to low-volatility ETFs as market conditions worsen, seeking stability amid rising inflation and uncertainty.
New York: The stock market is feeling the heat lately. Rising inflation fears and uncertainty about future interest rate cuts are making things pretty shaky. The S&P 500, Dow Jones, and Nasdaq have all seen declines for two weeks straight. Even the small-cap Russell 2000 index is down over 10% from its peak in late November. And to top it off, Wall Street’s fear gauge just hit a three-week high.
With all this chaos, investors are looking for safer bets, and low-volatility ETFs are catching their eye. Funds like the iShares MSCI USA Min Vol Factor ETF and the Invesco S&P 500 Low Volatility ETF are being considered as solid options in this rocky market.
These low-volatility ETFs can help investors weather the storm. They focus on more stable stocks that don’t swing wildly in price. Plus, they tend to invest more in defensive sectors, which usually offer better yields than the overall market.
Recent economic data has stirred up inflation worries, making investors even more cautious. The U.S. added 256,000 jobs in December, and unemployment dipped slightly. Manufacturing activity is also looking up, which is a good sign for the economy.
But there’s a catch. Rising Treasury yields are putting pressure on the stock market, as higher yields mean higher borrowing costs. And with President-elect Trump’s potential tariff plans looming, investors are feeling a bit jittery.
Consumer sentiment is also on the decline, which adds to the worries about inflation. A recent survey showed a drop in consumer confidence as we kick off the New Year.
With inflation staying high and bond yields rising, many equity investors are now leaning towards low-volatility ETFs for some peace of mind.
Let’s take a closer look at some of these low-volatility ETFs. The iShares MSCI USA Min Vol Factor ETF, for instance, tracks stocks with lower volatility compared to the broader market. It holds 182 stocks, with tech being the biggest sector.
Then there’s the Invesco S&P 500 Low Volatility ETF, which focuses on stocks that have shown the least volatility over the past year. It’s well-diversified across sectors, making it a solid choice.
Another option is the Invesco S&P 500 High Dividend Low Volatility ETF, which targets stocks with high dividends and low volatility. It’s also spread across various sectors, providing a balanced approach.
The SPDR SSGA US Large Cap Low Volatility Index ETF and the Invesco S&P SmallCap Low Volatility ETF are also worth considering. They focus on large-cap and small-cap stocks, respectively, that have shown lower volatility.
In short, these low-volatility ETFs could be a smart move for investors looking for stability in these uncertain times. They might even outperform the broader market if volatility continues.
