A growing concern that rising cases of COVID-19 globally could slow economic growth caused U.S. stocks to tumble earlier this week. Increasing hedging activity in the options market against a significant market decline, and a fall in Treasury yields, indicate that investors are fearful. So, amid an expected market downturn, we think it could be wise to bet on low-volatility ETFs, specifically iShares MSCI USA Min Vol Factor (USMV), Invesco S&P 500 Low Volatility (SPLV), and Legg Mason (NYSE:LM) Low Volatility High Dividend (LVHD). Let’s discuss. U.S. stocks declined sharply on the first trading day of this week on concerns over rising COVID-19 cases worldwide caused primarily by the Delta variant of COVID-19. While the broader market has since recovered, slowing economic growth could sustain market bearishness in the near term.
On July 19, the 10-year Treasury yield saw its biggest one-day drop since March 23, 2020, reflecting concerns over global economic growth. Furthermore, according to a Reuters article, in recent weeks hedges against a big market drop have increased in the options market, indicating investors are fearful of a market correction.
So, as we approach late summer, which, historically, has been known for market volatility, it could be wise to bet on low-volatility ETFs now. We think the low beta values of iShares MSCI USA Min Vol Factor ETF (USMV), Invesco S&P 500 Low Volatility ETF (SPLV), and Legg Mason Low Volatility High Dividend ETF (LVHD) make them ideal picks now.