Investors Love These ETF Areas Amid Virus-Led Bear Market

Wall Street’s 11-year-old bull market came to a halt on Mar 12 as all three key U.S. equity gauges — the S&P 500, the Dow Jones and the Nasdaq Composite — are now in a bear market. The three indexes lost about 9.5%, 10% and 9.4% on Mar 12, respectively, despite the Fed’s $ the United Kingdom ) to contain the spread of the virus, dealing a major blow to global trade.

Investors should also note that the Dow Jones recorded the steepest single-day slump on Mar 12 was the fastest on record for the S&P and Nasdaq,” as indicated by the Dow Jones Market Data Group.

With people on quarantine and activities slowly coming to a halt, recession fears are tightening its grip on markets. Oil prices too have been on a freefall, with United States Oil Fund (NYSE:USO) LP USO losing 39.5% in the past month (as of Mar 13). United States Brent Oil Fund LP (ASX:BNO) was down 41% in the same time period.

ETF Areas In Favor Amid Market Downturn

Against this backdrop, one must be on the lookout for ETF areas amassing assets amid such a severe market downturn. Below we highlight a few such areas that garnered a solid asset base during Mar 5-11. Notably,the S&P 500 lost 12.4% during this period. The Dow Jones was off 13.1% and the Nasdaq Composite retreated 11.8%.

Short-Term U.S. Treasuries

Safe-haven trade and an emergency Fed rate cut boosted the buying of U.S. treasuries which dragged down bond yields. Notably, benchmark U.S. treasury yield touched a record low of 0.54% on Mar 9.

Investors mainly flocked to short-term U.S. treasuries. These bonds have lower default risks than the longer ones. Moreover, as on Mar 9, one-month U.S. treasury yielded (0.57%) higher than 10-year bonds (0.54%). However, the spread between 10-year and one-month yield widened to 40 bps on Mar 11.

Overall, ETFs like iShares 1-3 Year Treasury Bond ETF per etf.com .

S&P 500

Many market watchers are of the view that the latest selloff is a ‘the market has gone ahead and priced in too severe of an adverse scenario .”

Such words of assurance and undervaluation of equities may be viewed as a lucrative entry point to the S&P 500 by some investors. After all, there has been substantial monetary easing globally. Fiscal stimulus in small measures is being rolled out. The U.S. economy was on a decent footing before the virus attacked.

All these fiscal and monetary support should improve the risk/reward of investing, per JPMorgan (NYSE:JPM). Vanguard S&P 500 ETF Is the Virus-Induced Stock Selloff Overdone? ETFs to Buy Now ).

Gold

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Who can miss the traditional safe-haven asset? SPDR Gold Trust (P:GLD) (TSXV:GLD) raked in about $998.8 million. In the present low-rate environment, gold should do well. Also, there are talks that inflation will creep up soon. And gold is viewed as a hedge against inflation as well (read: TIPS ETFs in a Sweet Spot: Here's Why ).

Consumer Staples

It is a non-cyclical sector and is likely to be less hammered by any market crash. The sector can emerge as a true safe haven amid the latest crisis as even people on self-quarantine need daily essentials. In 2008 crisis too, Consumer Staples Select Sector SPDR Fund Beat Virus With 2 Sector ETFs & Stocks That Survived 2008 Crisis ).

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Written By: Zacks Investment Research