Wall Street had a rough day on Jan 27 as all three major indices plunged. The Dow Jones Industrial Average saw its worst trading day since Oct 28, 2020, declining 2.1%. Going on, witnessing its biggest decline in three months, the S&P 500 index plunged 2.6% on the day. The Nasdaq Composite also lost 2.36%,.
The downside can be largely due to some profit-taking trading, disappointing earnings and increased speculative trading activities involving bidding up for heavily shorted stocks like AMC Entertainment (NYSE:AMC) AMC and GameStop GME. In this regard, Adam Crisafulli, founder of Vital Knowledge, said in a note that “market participants have watched the GME phenomena with curiosity and amusement, but the days-long surge in it is eroding market confidence and creating some positioning-driven dislocation,” per a CNBC article. Going on, John Davi, founder and CIO of Astoria Portfolio Advisors, has also said that “we’ve run up so much and this is healthy profit taking. There has been a tremendous market melt-up in the past two months. When the market goes up parabolically, you will see speculative behaviors from a lot of investors,” according to the same CNBC article.
Notably, the world has now witnessed another grim milestone in the coronavirus outbreak as the number of confirmed cases has crossed the 100-million mark, according to Johns Hopkins University data. Going by the latest World Bank figures, considering the world population of about 7.67 billion, the global case numbers are signaling that about one in every 76 people has now had the coronavirus infection, as mentioned in a CNN report.
Data from Johns Hopkins University also reflects that the threshold of 1 million confirmed cases was surpassed globally on Apr 2, 2020, and 10 million on Jun 28, per a CNN report. The 50-million confirmed case mark was hit by Nov 7 before crossing the 90 million cases threshold on Jan 10, 2021, per the same CNN report. It seems like the mutations have increased the spread of coronavirus.
United States has also sadly crossed another glaring mark of more than 25 million coronavirus cases, with the death toll surpassing 400,000. Raising worries, health experts are "extremely" concerned about the new coronavirus variants that have been discovered in the United States, per a CNN report. The same report also states that variants like P.1 and B.1.1.7 (first spotted in the UK) have been detected in the United States.
ETF Strategies to Play
Investors are worried that another round of business restrictions and lockdown measures might derail the economic recovery achieved so far. In such a scenario, investors can take a look at the following ETF strategies to combat the coronavirus crisis:
Dividend ETFs to Take Shelter In
In a low-interest rate environment, dividend investing becomes a hot spot. Against this backdrop, dividend ETFs like WisdomTree U.S. Quality Dividend Growth Fund DGRW, FlexShares Quality Dividend Defensive Index Fund QDEF, WBI Power Factor High Dividend ETF (WBIY) and Schwab US Dividend Equity ETF (SCHD) might be compelling picks (read: ETFs in Focus Post Mixed IBM (NYSE:IBM) Q4 Earnings).
Invest in the ‘New Normal’ Trends
In view of the rising work-from-home and online-shopping trends, increasing digital payments, growing video streaming and soaring video game sales, Internet will remain a major requirement in daily lives. More and more people are spending time at home, in line with social-distancing guidelines due to the pandemic. Against this backdrop, let’s look at some Internet ETFs that will consistently gain traction from the spurt in demand for online gaming, shopping, video streaming and remote working trends, due to the coronavirus crisis: First Trust Dow Jones Internet Index FDN, ARK Next Generation Internet ETF ARKW, Invesco NASDAQ Internet ETF PNQI, O’Shares Global Internet Giants ETF (OGIG) and Global X Internet of Things ETF (SNSR) (read: A Deep Dive into ARK ETFs).
Gold ETFs: Popular Safe-Haven Asset
The year 2020, majorly dominated by the coronavirus pandemic and geopolitical tensions, has been quite promising for safe-haven assets like gold. After peaking on safe-haven demand, gold lost its luster in recent months on COVID-19 vaccine optimism. However, the recent surge in coronavirus cases, U.S.-China trade tensions and super-easy global monetary policies will continue to provide some support. Additionally, weakness in U.S. dollar drove gold price. Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares (NYSE:GLD) GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust (GLDM) and GraniteShares Gold Trust (BAR) are some of the popular ETFs (read: 4 Best Commodity ETFs of 2020).
Bet on Low-Volatility ETFs
Demand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products usually do not surge in bull market conditions but offer protection against unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature. Here are some options -- iShares Edge MSCI Min Vol USA ETF USMV, Invesco S&P 500 Low Volatility ETF SPLV, iShares Edge MSCI EAFE Minimum Volatility ETF (EFAV), iShares Edge MSCI Min Vol Global ETF (ACWV ), Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: American Century Investments Launches Low Volatility ETF (LVOL)).
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GameStop Corp. (NYSE:GME): Free Stock Analysis Report
SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
AMC Entertainment Holdings, Inc. (AMC): Free Stock Analysis Report
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
FlexShares Quality Dividend Defensive ETF (QDEF): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
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