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Time for Low-Volatility & Equal-Weight ETFs as Market Rally Falters?
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On Aug 20, 2024, all three key U.S. indexes ended the day in the red, marking a halt in their longest rally of the year. The S&P 500 dipped by about 0.2%, ending its eight-day streak of gains—the longest since November. The Dow Jones Industrial Average also fell about 0.2%, losing less than 100 points, while the Nasdaq Composite slumped around 0.3%.
Investors are now focused on Fed Chair Jerome Powell's upcoming speech at the Jackson Hole economic symposium on Friday. Wall Street expects Powell’s hint for a likely rate cut in September, possibly even a 0.5% reduction, depending on upcoming labor data.
Meanwhile, Lowe’s (LOW - Free Report) stock dropped after the company revised its annual profit and sales forecasts downward in its quarterly earnings report. Home Depot (HD) also reported weakened consumer demand for major purchases. The results indicated subdued consumer demand in the United States.
Gold Prices Surge
In commodities, gold resumed its rally, surpassing $2,520 an ounce and reaching a new record high. The metal’s price has increased over 20% this year, thanks to geopolitical tensions, enhancing its appeal as a safe-haven asset and expectations of Fed rate cut and a likely subdued greenback.
Time for Low-Volatility & Equal-Weight ETFs?
Notably, the market breadth is broadening. The S&P 500 equal-weighted index, which is less influenced by large tech stocks, reached a new record high. Sectors such as Utilities ETF (XLU - Free Report) , Consumer StaplesETF (XLP - Free Report) , and Health Care ETF (XLV - Free Report) are hitting 52-week highs, while Financials ETF (XLF - Free Report) are at a record level because of hope of a steepening of the yield curve.
JPMorgan US equity strategist Abby Yoder noted a broadening of market participation, indicating a healthy state of the Wall Street, as quoted on Yahoo Finance. The S&P 500 is up nearly 18% this year, outpacing the equal-weighted index’s 9% gain. The proportion of S&P 500 companies outperforming the index has surged to 58%, the highest level since November 2022.
ETFs in Focus
Against this backdrop, below we highlight a few ETFs that could be intriguing picks at the current level.
The underlying S&P 500 Low Volatility Index consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months. The fund charges 25 bps in fees and yields 2.29% annually.
The underlying MSCI USA Minimum Volatility (USD) Index is composed of U.S. equities that, in the aggregate, have lower volatility characteristics relative to the broader U.S. equity market. The fund charges 15 bps in fees and yields 1.65% annually.
The underlying 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. The fund charges 30 bps in fees and yields 4.05% annually.
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Time for Low-Volatility & Equal-Weight ETFs as Market Rally Falters?
On Aug 20, 2024, all three key U.S. indexes ended the day in the red, marking a halt in their longest rally of the year. The S&P 500 dipped by about 0.2%, ending its eight-day streak of gains—the longest since November. The Dow Jones Industrial Average also fell about 0.2%, losing less than 100 points, while the Nasdaq Composite slumped around 0.3%.
Investors are now focused on Fed Chair Jerome Powell's upcoming speech at the Jackson Hole economic symposium on Friday. Wall Street expects Powell’s hint for a likely rate cut in September, possibly even a 0.5% reduction, depending on upcoming labor data.
Meanwhile, Lowe’s (LOW - Free Report) stock dropped after the company revised its annual profit and sales forecasts downward in its quarterly earnings report. Home Depot (HD) also reported weakened consumer demand for major purchases. The results indicated subdued consumer demand in the United States.
Gold Prices Surge
In commodities, gold resumed its rally, surpassing $2,520 an ounce and reaching a new record high. The metal’s price has increased over 20% this year, thanks to geopolitical tensions, enhancing its appeal as a safe-haven asset and expectations of Fed rate cut and a likely subdued greenback.
Time for Low-Volatility & Equal-Weight ETFs?
Notably, the market breadth is broadening. The S&P 500 equal-weighted index, which is less influenced by large tech stocks, reached a new record high. Sectors such as Utilities ETF (XLU - Free Report) , Consumer Staples ETF (XLP - Free Report) , and Health Care ETF (XLV - Free Report) are hitting 52-week highs, while Financials ETF (XLF - Free Report) are at a record level because of hope of a steepening of the yield curve.
JPMorgan US equity strategist Abby Yoder noted a broadening of market participation, indicating a healthy state of the Wall Street, as quoted on Yahoo Finance. The S&P 500 is up nearly 18% this year, outpacing the equal-weighted index’s 9% gain. The proportion of S&P 500 companies outperforming the index has surged to 58%, the highest level since November 2022.
ETFs in Focus
Against this backdrop, below we highlight a few ETFs that could be intriguing picks at the current level.
Invesco S&P 500 Equal Weight ETF (RSP - Free Report)
The underlying S&P 500 Equal Weight Index equally weights the stocks in the S&P 500 Index. The fund charges 20 bps in fees.
Invesco S&P 500 Low Volatility ETF (SPLV - Free Report)
The underlying S&P 500 Low Volatility Index consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months. The fund charges 25 bps in fees and yields 2.29% annually.
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report)
The underlying MSCI USA Minimum Volatility (USD) Index is composed of U.S. equities that, in the aggregate, have lower volatility characteristics relative to the broader U.S. equity market. The fund charges 15 bps in fees and yields 1.65% annually.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report)
The underlying 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. The fund charges 30 bps in fees and yields 4.05% annually.