Investors seem to be spooked by the resurgence in coronavirus cases as they fear that another round of business restrictions and lockdown measures might derail the economic recovery achieved so far. The coronavirus crisis continues to be acute in the United States, as the death toll has now crossed 130,000. Infectious diseases expert, Dr. Anthony Fauci, has said that the United States is “knee-deep” in the first wave of the pandemic even as the number of coronavirus cases has doubled within a week and a half, per a CNN report.
In fact, United States saw the highest number at 60,646 new coronavirus cases reported on a single day on Jul 9, per the CNN report. Going on, Florida and Texas witnessed a record one-day increase in deaths on the same day. Given the current situation, at least 24 states have paused or rolled back reopening efforts for some time.
Considering the halting of the reopening process in around a dozen states in the United States, Goldman Sachs (NYSE:GS) has revised its growth estimates downward for the U.S. economy for the third quarter of 2020, per a Bloomberg article. Going by the article, the economy is expected to see 25% growth in the third quarter in comparison to 33% predicted previously. Consequently, the U.S. economy is expected to fall 4.6% in 2020 as against 4.2% forecasted previously, per the article. In this regard, the economists commented that, “combination of tighter state restrictions and voluntary social distancing is already having a noticeable impact on economic activity,” according to the Bloomberg article.
Notably, the outbreak has already caused an unprecedented collapse of economic activities as governments had to shut down commerce and implement social-distancing measures in an effort to contain the spread of the virus. Although necessary to control the coronavirus outbreak, the halting or rolling back of the reopening process may hurt the investors sentiments and optimism about economic recovery in the near-term.
In such a scenario, investors can take a look at the following ETF strategies to combat the ongoing coronavirus crisis:
Try the Inverse ETFs
The pandemic-induced volatility can boost demand for inverse or inverse-leveraged ETFs. These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Due to their compounding impact, investors can earn higher returns in a shorter period of time, provided the trend remains favorable. However, these funds run the risk of huge losses compared with the traditional funds in fluctuating markets. So, investors intending to play against the tumbling Dow Jones, might tap ProShares Short Dow 30 DOG, ProSharesUltraShort Dow30 DXD and ProSharesUltraPro Short Dow30 (SDOW) (read: ETF Areas for July as Second Wave of Coronavirus Hits Hard).
Dividend ETFs to Bet On
In a low-interest rate environment, dividend investing becomes a hot spot. Against this backdrop, dividend ETFs like WisdomTree U.S. Quality Dividend Growth Fund DGRW, FlexShares Quality Dividend Defensive Index Fund QDEF, WBI Power Factor High Dividend ETF (WBIY) and Schwab US Dividend Equity ETF (SCHD) might be compelling picks (read: A Quick Guide to Dividend Aristocrat ETFs).
Gold ETFs: Popular Safe-Haven Asset
Price of precious metals like gold rises during turbulent market conditions as these are considered safe-haven assets. In the present low-rate environment, gold should do well. Going by new data released by World Gold Council, global net inflows came in at $39.5 billion in bullion-backed ETFs, beating the previous annual inflow record of $23 billion in 2016. Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares (NYSE:GLD) GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust (GLDM) and GraniteShares Gold Trust (BAR) are some of the popular ETFs (read: Gold ETFs See Record Inflows in 1H20 Amid Coronavirus Crisis).
Play the Low-Volatility ETFs
Demand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products generally do not surge in bull market conditions but offer protection against the unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature. Here are some options -- iShares Edge MSCI Min Vol USA ETF USMV, Invesco (NYSE:IVZ) S&P 500 Low Volatility ETF SPLV, iShares Edge MSCI EAFE Minimum Volatility ETF (EFAV), iShares Edge MSCI Min Vol Global ETF (ACWV ), Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: 10 Power-Packed ETFs to Buy for Second-Half 2020).
Non-Cyclical Consumer Staple Sector to the Rescue
This non-cyclical sector is likely to be less hammered by any market crash. The sector can emerge as a true safe haven amid the crisis, as even people on self-quarantine need daily essentials. Investors can consider The Consumer Staples Select Sector SPDR Fund XLP, Vanguard Consumer Staples ETF VDC, iShares U.S. Consumer Goods ETF (IYK) and Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS) (read: Blue Wave to Hit America? Sector ETFs to Win or Lose).
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SPDR Gold Shares (GLD): ETF Research Reports
Consumer Staples Select Sector SPDR ETF (NYSE:XLP): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
iShares Edge MSCI Min Vol USA ETF (USMV): ETF Research Reports
WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
Proshares Short Dow30 (DOG): ETF Research Reports
Vanguard Consumer Staples ETF (VDC): ETF Research Reports
FlexShares Quality Dividend Defensive ETF (QDEF): ETF Research Reports
Invesco SP 500 Low Volatility ETF (SPLV): ETF Research Reports
ProShares UltraShort Dow30 (DXD): ETF Research Reports
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