Following the Fed's latest policy decision on September 16, Federal Reserve Chairman Jerome Powell Press discussed the "new normal" in which interest rates are likely to rise through the end of 2023, or even beyond.
Since they crashed during the fleeting days of the Great Recession of 2008/09, they have not increased significantly, meaning that by the time we reach 2023 it could be at least 15 years before they start to rise again.
Powell highlighted some concerns, saying that "the outlook for the economy is extremely uncertain and will depend in large part on our success in controlling the virus," and also stressed that "a full economic recovery is unlikely. until people are convinced that it is safe to participate in a wide variety of activities again. "
The Bank of England reiterated this message in addressing the challenges facing the UK economy and the interest rate outlook, paving the way for negative interest rates.
Following Mr. Powell levels rose, putting broader indices under pressure. While investors began to worry about how to invest during the new normal, many Wall Street darlings like Apple (NASDAQ 🙂 ended the week in the red.
As the coronavirus continues to affect the economy and interest rates are likely to remain low in the coming years, here we will look at two exchange-traded funds (ETFs) that can benefit in this environment:
1. Legg Mason Low Volatility High Dividend ETF
Current Price: $ 29.71
52 Week Range: $ 21.20 – $ 34.69
Dividend Yield: 3.94%
Expense Ratio: 0.27% per year, or $ 27 with an investment of $ 10,000
The lowest interest rates mean that it is becoming increasingly difficult to find valuable investments with passive income. Meanwhile, the jerkiness in the stock markets can sometimes be frightening for small investors. For such market participants, the Leg Mason Low Volatility High Dividend ETF (NASDAQ 🙂 may be worth a look. This low-volatility fund can provide a smoother ride even when the markets fall.
LVHD, which currently has 76 holdings, provides exposure to US-based companies with relatively high dividend yields and low price and profit volatility. No individual sector exceeds the 25% weighting.
The top sector allocation is Consumer Staples (17.37%), followed by Utilities (16.67%), Real Estate (15.96%), Healthcare (12.22%), Industry (10.88%), Information Technology ( 9.59%)), Financial Services (6.82%), Communication Services (6.48%). Materials (2.21%) and Consumer Discretionary (1.22%).
The fund's ten largest holdings make up more than 26% of its net assets, which is approximately $ 700 million. United Parcel Service (NYSE :), Public Storage (NYSE :), Kimberly-Clark (NYSE :), Eaton (NYSE 🙂 and AbbVie (NYSE 🙂 top the list.
So far in the year, LVHD has decreased by nearly 13%. However, since its low in March, the ETF is up about 45%. Unlike many other moment names, the September sell-off hasn't hit the ETF dramatically, with LVHD dropping only around 1% so far this month, from $ 30.03 in August, close to $ 29.71 on Friday. In comparison, many high-flying tech stocks are down double digits. The fund's lagging P / E and PB ratios are 15.5% and 3.6% respectively, long-term investors may want to consider buying the dips.
2. Amplify International Online Retail ETF
Current Price: $ 39.91
52 week range: $ 18.57- $ 41.50
Dividend Yield: 0.12%
Expense Ratio: 0.69% per year, or $ 69 with an investment of $ 10,000
Since COVID-19 accelerated the shift to online shipping, interest in e-commerce businesses is also gaining momentum.
The Amplify International Online Retail ETF (NYSE 🙂 may be suitable for those who believe that the volume of e-commerce transactions outside the US will continue to grow.
XBUY, which has 50 holdings, tracks the EQM International Ecommerce index, which was established in 2019.
The ten largest holdings make up nearly 30% of the fund, with net assets of approximately $ 10 million. In other words, although it is still a relatively small fund, no company is big enough to strongly influence XBUY's price. The top ten holdings are Oisix (T :), ASOS (OTC :), Demae-Can (T :), Fiverr International (NYSE :), Ocado (LON :), Webjet (ASX :), Kogan.com (ASX: ), Airtrip (T :), Shop Apotheke Europe (BE 🙂 and Zalando (OTC :).
The sector allocation is Traditional Retail (53.0%), Marketplace (35.3%) and Travel (11.7%). In terms of country weighting, Japan and China top the list at around 20% each. Next in line are the UK (14.1%), Germany (10.9%), Australia (6.2%), Argentina (4.6%) and Israel (4.4%).
Year-to-date, the fund is up more than 41%. In fact, it hit a record high on September 2. As the US market decline spreads to other countries, investors may decide to take some money off the table. Any drop to the $ 35 level would make the fund more attractive.
The shift from brick-and-mortar to online platforms is likely to fuel the growth of many names in the fund in the coming quarters. However, as this is a small and young fund, it should generally not have a large weighting in an individual portfolio.
Finally, those interested in more US-centric e-commerce can research the ProShares Online Retail (NYSE 🙂 or the Amplify Online Retail ETF (NASDAQ 🙂
