The monstrous August rally that cheered investors has now entered the cursed September, which is historically considered the worst month for the stock market. Per the LPL Financial (NASDAQ:LPLA) data in a Yahoo Finance article, the S&P 500 has fallen about 1% on average in September since 1950.
Notably, Wall Street suffered its worst day in almost three months on Sep 3, especially driven by the sharp sell-off in technology stocks. People rushed to book profits, may be due to worries over lofty valuations, uncertainty over another pandemic stimulus-relief package, budget negotiations and the approaching elections. Even on Sep 8, Dow Jones Industrial Average saw a 2.3% decline. Moreover, S&P 500 lost 2.8% and the Nasdaq Composite was down 4.1% on the same day. In fact, the broader-market index witnessed its worst three-day stretch since June after declining around 7% over the past three days, per a CNBC article.
Investors should not forget that this year has the U.S. Presidential elections as well. Thus, with elections approaching, investors need to prepare for heightened volatility in the broader equities space. Notably, this election year could be worse as the coronavirus pandemic continues to rage. Also, it is being believed that the earnings results in the third and fourth quarter of the ongoing year might not be as encouraging as the second quarter as most analysts are done with adjusting estimates.
Simmering tensions are again being observed between United States and China. The latter recently launched a global data security initiative mentioning principles that should be adhered to in areas ranging from personal information to espionage, per a CNBC article. The move has come in reciprocation to United States’ consistent pressure on China’s largest technology companies. Also, President Trump is seeking to restrict the U.S. relationship with China. In this regard, it is threatening to punish any American company that creates jobs overseas and forbids those that do business in China through federal contracts. The Trump administration is also considering another ban on China’s cotton, per the sources.
ETFs in Focus
Low-volatility products could be intriguing choices for those who want to stay invested in equities during turbulent market conditions. The following options are intriguing:
iShares MSCI USA Min Vol Factor ETF USMV
This fund offers exposure to 194 U.S. stocks with lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. With AUM of $33.68 billion, the product charges 0.15% in expense ratio. It has a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: Prepare for Volatility & Inflation with These ETFs).
Invesco S&P 500 Low Volatility ETF SPLV
This ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 102 securities in its basket. SPLV has amassed $8.70 billion in its asset base. It charges 25 bps in annual fees and has a Zacks ETF Rank #2, with a Medium-risk outlook (read: 2 New Factor-Based ETFs to Endure the Current Volatile Market).
iShares MSCI EAFE Min Vol Factor ETF EFAV
EFAV looks to replicate the performance of international equity securities that have lower risk. The fund tracks the MSCI EAFE Minimum Volatility (USD) Index and holds 269 securities. It has amassed $10.74 billion in its asset base. EFAV charges 20 bps in annual fees and has a Zacks ETF Rank #3 (Hold), with a Low-risk outlook (read: Try These Global Low-Volatility ETFs on Rising Recession Scares).
iShares Edge MSCI Min Vol Global ETF ACWV
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 384 securities. It has AUM of $5.81 billion and charges 20 bps in annual fees. ACWV has a Low-risk outlook.
Invesco S&P 500 High Dividend Low Volatility ETF SPHD
The fund seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S&P 500 Low Volatility High Dividend Index. It holds 51 securities. The fund has AUM of $2.42 billion and charges 30 bps in annual fees. It has a Medium-risk outlook.
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iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
Invesco SP 500 High Dividend Low Volatility ETF (SPHD): ETF Research Reports
iShares MSCI EAFE Min Vol Factor ETF (EFAV): ETF Research Reports
iShares MSCI Global Min Vol Factor ETF (ACWV): ETF Research Reports
Invesco SP 500 Low Volatility ETF (SPLV): ETF Research Reports
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