FINSUM + Magnifi: The Best Minimum Volatility ETFs
(October 2020)
If there were ever a time for minimum volatility ETFs, it is now. Minimum volatility ETFs are a name for a broad group of funds that seek to minimize volatility by choosing a basket of stocks that have historically been more placid than their cohort. With virus numbers rising again, and a potentially very turbulent election, many think markets are going to be highly volatile—or just sharply negative—for the rest of the year. With that in mind, here are some of the best low volatility ETFs: BlackRock’s iShares Edge MSCI Min Vol USA ETF (USMV), the Invesco S&P 500 Low Volatility ETF (SPLV), and the iShares Edge MSCI USA Quality Factor ETF (QUAL).
FINSUM + Magnifi: Why the Volatility Isn’t Going Anywhere
(September 2020)
For the last several weeks the market has been mired in a rut of high volatility, mostly to the downside. Investors seem to have the impression that it will abate at any moment, but the reality is that a calming seems unlikely. This is for two reasons. Firstly, we are nearing the end of the month and quarter, and stocks are still up significantly on the quarter. This means many investors are likely to take some gains and rotate into fixed income—a negative for equities. Secondly, anxiety about the election seems to be rising, which should keep the markets volatile.
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FINSUM + Magnifi: This Volatility is the Second Leg of a Bear Market say Analysts
(September 2020)
The volatility and losses over the last four weeks have been more severe than most imagined they would be. What started as the market “taking a breather” has morphed into very significant losses and a market teetering on the brink of returning to a bear market. Now a chorus of Wall Street analysts are saying something similar: this may indeed be the next phase of a bear market. Aside from the short-term warning sign of large investors taking profits, the long-term driver of the next phase of a bear market might be the rise of deflation. With so many workers losing their jobs, and automation taking over in many areas, deflation seems quite likely. If that happens, an extended bear market reaching into 2021 may take hold.
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FINSUM + Magnifi: How Failing Stimulus Plans Could Stoke Volatility
(September 2020)
One of the things the market has been banking on is a new fiscal stimulus package from the government. In particular, Congress has been squabbling over a new package for several weeks and now seem to be further apart than ever. The situation has grown so bad that the conversation is turning more towards blame than the typical narrative of “a package will be coming very soon”. In many ways the economy is relying on such a deal and that is why it is so crucial to markets. Tens of millions of Americans are going to need aid in order to carry on like they did pre-COVID, and if a stimulus deal does not appear, the country risks a much deeper recession than if stimulus were to arrive.
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FINSUM + Magnifi: How to Protect Against Market Risk with ETFs
(September 2020)
Markets have been very bumpy lately, and many think the topsy-turvy nature of stocks will continue until the election. Therefore, investors may want some protection from the volatility. With that in mind there is a breed of ETFs that specialize in exactly that. Many different providers offer such ETFs and there are different methodologies for doing so. One of the most common and effective is simply to track an index of the stocks with the lowest volatility over a set time period, for example the preceding twelve months. Some of the funds in this area include State Street’s SPDR Large Cap Low Volatility Index ETF, the Invesco S&P Low Volatility ETF, and the iShares Edge MSCI USA Min Vol Factor ETF.
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