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ETFs to Secure Your Portfolio Amid Uncertain Market Conditions
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After global equities experienced a sharp sell-off earlier this week due to a disappointing July jobs report and the unwinding of yen-funded carry trades, economists raised the likelihood of the U.S. economy slipping into a recession.
Goldman Sachs economists, as quoted on Fox Business, have raised the probability from 15% to 25% that the U.S. economy would enter a recession within the next 12 months. However, they maintain that the economy of the United States appears to be "fine overall,” with the Fed having enough room to reduce interest rates when needed.
JP Morgan (JPM - Free Report) followed suit, raising the odds of a U.S. recession by the end of this year to 35%, an increase of 10% from its earlier projections, as quoted on Yahoo Finance.
However, JPMorgan Chase CEO Jamie Dimon in an interview with CNBC, as quoted on Yahoo Finance, urged to maintain calm after the recent volatility in the market and stated that the U.S. economy has not entered into a recession. However, he still believes that the odds of a recession are more likely than not, highlighting the need to adopt a more cautious approach. Additionally, Dimon believes that the likelihood of a recession outweighs those of a soft landing.
Analysts at Morningstar DBRS, as per CNBC, warned that the current market downtrend, following the recent global sell-off could turn into a “self-fulfilling prophecy,” potentially triggering a recession. They expressed concerns that more market sell-offs may lead to consumers cutting back on spending and business CEOs reducing expenditures, which could result in more economic downturns and potentially a recession.
Warren Buffett’s Cash Surge and Sell-Off Signals
Warren Buffett’s Berkshire Hathaway, in its recently released second-quarter earnings, revealed that the "Oracle of Omaha" sold a record $75.54 billion in net equities during the second quarter, marking the largest single-quarter sell-off in the company's history, according to Yahoo Finance.
Additionally, this marks the seventh consecutive quarter in which Buffett and his team have sold more securities than they’ve purchased. Buffett’s selling has persisted into the third quarter of 2024.
However, the increased net selling by Berkshire Hathaway can be due to projections of increased U.S. corporate tax rates in the future and does send warnings to Wall Street.
Per CNBC, Berkshire Hathaway’s cash reserves surged to a record $276.9 billion last quarter as Warren Buffett sold off significant portions of stock holdings, including Apple.
ETFs in Focus
Below, we highlight a few ETF areas that investors could use to navigate the uncertain environment in a better way to protect themselves from the potential headwinds in the economy.
Investing in these sectors not only shields investor portfolios from downside risks and safeguards investments during market distress but also offers gains when the broader market trends upward. These sectors provide dual benefits, protecting portfolios during market downturns and offering gains when the market trends upward.
Despite the low odds of the U.S. economy falling into a recession, investors can take a cautious approach by increasing their exposure to these funds.
Quality ETFs
Amid market uncertainty, quality investing emerges as a strategic response as a potential buffer against the potential headwinds. This approach prioritizes identifying firms with robust fundamentals, consistent earnings and lasting competitive strengths. Investing in such high-quality companies can mitigate volatility for investors.
Investors can look at funds like iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500Quality ETF (SPHQ - Free Report) , JPMorgan U.S. Quality Factor ETFJQUA and SPDR MSCI USA StrategicFactorsETFQUS.
Consumer Staples ETFs
The potential slowdown in the economy could benefit consumer staple stocks, as these companies manufacture everyday necessities such as food, beverages and household items. Additionally, surging household debt levels could burn a significant hole in consumers’ pockets and prove to be a positive for these funds.
Funds like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , Vanguard Consumer Staples ETF (VDC - Free Report) , iShares U.S. Consumer Staples ETF (IYK - Free Report) and Invesco S&P 500 Equal Weight Consumer Staples ETFRSPS can be beneficial.
Healthcare ETFs
The healthcare sector is non-cyclical, providing a defensive tilt to the portfolio amid market turmoil. Further, the long-term fundamentals remain strong, given encouraging industry trends.
Investors can look at funds like Health Care Select Sector SPDR Fund (XLV - Free Report) , Vanguard Health Care ETF (VHT - Free Report) , iShares Global Healthcare ETFIXJ and iShares U.S. Healthcare ETF (IYH - Free Report) .
Utility ETFs
Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is, thus, considered a defensive investment or a safe haven amid economic turmoil.
Investors should gain from funds like Utilities Select Sector SPDR Fund (XLU - Free Report) , Vanguard Utilities ETF (VPU - Free Report) , Fidelity MSCI Utilities Index ETF (FUTY - Free Report) and iShares U.S. Utilities ETFIDU.
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ETFs to Secure Your Portfolio Amid Uncertain Market Conditions
After global equities experienced a sharp sell-off earlier this week due to a disappointing July jobs report and the unwinding of yen-funded carry trades, economists raised the likelihood of the U.S. economy slipping into a recession.
Goldman Sachs economists, as quoted on Fox Business, have raised the probability from 15% to 25% that the U.S. economy would enter a recession within the next 12 months. However, they maintain that the economy of the United States appears to be "fine overall,” with the Fed having enough room to reduce interest rates when needed.
JP Morgan (JPM - Free Report) followed suit, raising the odds of a U.S. recession by the end of this year to 35%, an increase of 10% from its earlier projections, as quoted on Yahoo Finance.
However, JPMorgan Chase CEO Jamie Dimon in an interview with CNBC, as quoted on Yahoo Finance, urged to maintain calm after the recent volatility in the market and stated that the U.S. economy has not entered into a recession. However, he still believes that the odds of a recession are more likely than not, highlighting the need to adopt a more cautious approach. Additionally, Dimon believes that the likelihood of a recession outweighs those of a soft landing.
Analysts at Morningstar DBRS, as per CNBC, warned that the current market downtrend, following the recent global sell-off could turn into a “self-fulfilling prophecy,” potentially triggering a recession. They expressed concerns that more market sell-offs may lead to consumers cutting back on spending and business CEOs reducing expenditures, which could result in more economic downturns and potentially a recession.
Warren Buffett’s Cash Surge and Sell-Off Signals
Warren Buffett’s Berkshire Hathaway, in its recently released second-quarter earnings, revealed that the "Oracle of Omaha" sold a record $75.54 billion in net equities during the second quarter, marking the largest single-quarter sell-off in the company's history, according to Yahoo Finance.
Additionally, this marks the seventh consecutive quarter in which Buffett and his team have sold more securities than they’ve purchased. Buffett’s selling has persisted into the third quarter of 2024.
However, the increased net selling by Berkshire Hathaway can be due to projections of increased U.S. corporate tax rates in the future and does send warnings to Wall Street.
Per CNBC, Berkshire Hathaway’s cash reserves surged to a record $276.9 billion last quarter as Warren Buffett sold off significant portions of stock holdings, including Apple.
ETFs in Focus
Below, we highlight a few ETF areas that investors could use to navigate the uncertain environment in a better way to protect themselves from the potential headwinds in the economy.
Investing in these sectors not only shields investor portfolios from downside risks and safeguards investments during market distress but also offers gains when the broader market trends upward. These sectors provide dual benefits, protecting portfolios during market downturns and offering gains when the market trends upward.
Despite the low odds of the U.S. economy falling into a recession, investors can take a cautious approach by increasing their exposure to these funds.
Quality ETFs
Amid market uncertainty, quality investing emerges as a strategic response as a potential buffer against the potential headwinds. This approach prioritizes identifying firms with robust fundamentals, consistent earnings and lasting competitive strengths. Investing in such high-quality companies can mitigate volatility for investors.
Investors can look at funds like iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) , JPMorgan U.S. Quality Factor ETF JQUA and SPDR MSCI USA StrategicFactors ETF QUS.
Consumer Staples ETFs
The potential slowdown in the economy could benefit consumer staple stocks, as these companies manufacture everyday necessities such as food, beverages and household items. Additionally, surging household debt levels could burn a significant hole in consumers’ pockets and prove to be a positive for these funds.
Funds like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , Vanguard Consumer Staples ETF (VDC - Free Report) , iShares U.S. Consumer Staples ETF (IYK - Free Report) and Invesco S&P 500 Equal Weight Consumer Staples ETF RSPS can be beneficial.
Healthcare ETFs
The healthcare sector is non-cyclical, providing a defensive tilt to the portfolio amid market turmoil. Further, the long-term fundamentals remain strong, given encouraging industry trends.
Investors can look at funds like Health Care Select Sector SPDR Fund (XLV - Free Report) , Vanguard Health Care ETF (VHT - Free Report) , iShares Global Healthcare ETF IXJ and iShares U.S. Healthcare ETF (IYH - Free Report) .
Utility ETFs
Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is, thus, considered a defensive investment or a safe haven amid economic turmoil.
Investors should gain from funds like Utilities Select Sector SPDR Fund (XLU - Free Report) , Vanguard Utilities ETF (VPU - Free Report) , Fidelity MSCI Utilities Index ETF (FUTY - Free Report) and iShares U.S. Utilities ETF IDU.