We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is This a Bear Market Rally? ETF Strategies to Win
Read MoreHide Full Article
Wall Street just logged the best weekly performance of 2023 last week. The S&P 500 advanced 5.9%, the Dow Jones added 5.1% and the Nasdaq surged 6.6% last week on hopes that the Federal Reserve is done with its rate-hiking campaign. U.S. benchmark treasury yields slumped to 4.57% on Nov 3 from 4.88% recorded at the start of the week.
However, rising rate worries resurfaced again as Minneapolis Fed President Neel Kashkari said it’s too soon to declare that the fight against inflation is over, though price pressures are easing. Yields rose across the curve on Nov 6, 2023.
Is This a Bear Marker Rally?
Morgan Stanley strategist Wilson believes that this is just a bear market rally rather than a start of a prolonged uptrend, as quoted on CNBC. Earnings revisions have been weak and the latest U.S. jobs data came in at soft.
Both technical and fundamental support for stock gains appear to be missing, with considerable weakening observed in earnings revisions breadth over the past two months. Although there has been a 7.5% earnings surprise for the S&P 500, beating the 4.5% historical average, the surprise in sales has touched its lowest point since 2019, the analysts highlighted, as quoted on investing.com.
ETF Strategies to Win
Against this backdrop, below we highlight a few ETF strategies that may win in a bear market rally.
Time for Low-Volatility ETFs
Low-volatility ETFs have the potential to outpace the broader market in an uncertain environment providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to defensive sectors that usually have a higher distribution yield than the broader markets. iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) and Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) are two such examples in this regard.
Play Quality ETFs
No wonder, such a volatile environment calls for quality investments. SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) measures the equity market performance of large and mid-cap companies across the U.S. equity market. It aims to represent the performance of a combination of three factors: value, quality, and low volatility.
Time for Dividend Growth ETFs & High Dividend-Low Volatility ETFs?
Companies that have the willingness and ability to pay and grow their dividend over time are called dividend aristocrats. Such activities make them quality picks. U.S.-based dividend growth ETFs include SPDR S&P Dividend ETF (SDY - Free Report) , which charges 35 bps in fees and yields 2.79% annually.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) is a winning combination of high dividend and low volatility – the need of the hour. The S&P 500 Low Volatility High Dividend Index comprises of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility. It yields 4.71% annually.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is This a Bear Market Rally? ETF Strategies to Win
Wall Street just logged the best weekly performance of 2023 last week. The S&P 500 advanced 5.9%, the Dow Jones added 5.1% and the Nasdaq surged 6.6% last week on hopes that the Federal Reserve is done with its rate-hiking campaign. U.S. benchmark treasury yields slumped to 4.57% on Nov 3 from 4.88% recorded at the start of the week.
However, rising rate worries resurfaced again as Minneapolis Fed President Neel Kashkari said it’s too soon to declare that the fight against inflation is over, though price pressures are easing. Yields rose across the curve on Nov 6, 2023.
Is This a Bear Marker Rally?
Morgan Stanley strategist Wilson believes that this is just a bear market rally rather than a start of a prolonged uptrend, as quoted on CNBC. Earnings revisions have been weak and the latest U.S. jobs data came in at soft.
Both technical and fundamental support for stock gains appear to be missing, with considerable weakening observed in earnings revisions breadth over the past two months. Although there has been a 7.5% earnings surprise for the S&P 500, beating the 4.5% historical average, the surprise in sales has touched its lowest point since 2019, the analysts highlighted, as quoted on investing.com.
ETF Strategies to Win
Against this backdrop, below we highlight a few ETF strategies that may win in a bear market rally.
Time for Low-Volatility ETFs
Low-volatility ETFs have the potential to outpace the broader market in an uncertain environment providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to defensive sectors that usually have a higher distribution yield than the broader markets. iShares MSCI USA Min Vol Factor ETF (USMV - Free Report) and Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) are two such examples in this regard.
Play Quality ETFs
No wonder, such a volatile environment calls for quality investments. SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) measures the equity market performance of large and mid-cap companies across the U.S. equity market. It aims to represent the performance of a combination of three factors: value, quality, and low volatility.
Time for Dividend Growth ETFs & High Dividend-Low Volatility ETFs?
Companies that have the willingness and ability to pay and grow their dividend over time are called dividend aristocrats. Such activities make them quality picks. U.S.-based dividend growth ETFs include SPDR S&P Dividend ETF (SDY - Free Report) , which charges 35 bps in fees and yields 2.79% annually.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) is a winning combination of high dividend and low volatility – the need of the hour. The S&P 500 Low Volatility High Dividend Index comprises of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility. It yields 4.71% annually.