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5 ETFs for a Historically Low August

Zacks Investment Research

The month of August started off on a shaky note for Wall Street with Fed imposed rising rate concerns and severity in the U.S.-Sino trade relations coming to the forefront.The Trump administration is reportedly considering a hike in tariffs from 10% to 20% on $200 billion worth of Chinese goods, after a 25% tariff announcement on $50 billion worth of goods.

5 ETFs for a Historically Low August

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The progress on U.S.-China trade relations is niggling, with Morgan Stanley analysts estimating an 81-basis-point impact on global growth if there are 25% tariff hikes across all imports from China and Europe, with U.S. growth decelerating by 1.0 percentage point and China’s by 1.5 points, per Reuters.

On the other hand, given a solid U.S. economy’s growth momentum, the labor market’s well-being and an uptick in inflation, the Fed now appears on track to hike rates in September. Gradual ceases of cheap money inflows have probably weighed on stocks.

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In fact, a consensus carried out from 1950 to 2017 shows that August ended up offering positive stock returns in 37 years and negative returns in 31 years, per moneychimp.com, with an average return of negative 0.27%.

If history is any guide, the month can easily be touted as subdued. Against this historical market performance, let’s take a look at the ETFs that can come across as intriguing bets for the month.

Vanguard Healthcare ETF (NYSEARCA:VHT)

As per Equityclock, healthcare enjoys seasonal strength in August. This sector is less ruffled by economic fluctuations due to its non-cyclical nature. The sector provides a defensive tilt to the fund’s portfolio in a volatile market caused by trade war fear. Also, decent earnings, rising M&A and a positive regulatory backdrop should help the fund.

ProShares Investment Grade-Interest Rate Hedged (BATS:IGHG)

By investing in investment grade bonds portfolios like IGHG, investors can alleviate rising rate worries through an interest rate hedge approach using U.S. Treasury futures. Since the fund targets a duration of zero, this could be an intriguing play right now when the Fed is eyeing two more hikes this year. The fund yields about 3.57% annually.

Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD)

In a bid to safety, a look at dividend-focused quality ETFs also makes sense. The fund SCHD measures the performance of high dividend-yielding U.S. stocks that have a record of consistently paying dividends.

Invesco India Portfolio (NYSEARCA:PIN)

The momentum of India investing has been solid lately. Though its central bank raised interest rate on Aug 1 to the highest in two years to fight inflation and stabilize the currency amid strengthening U.S. dollar, there was no pullback in India investing. Several India ETFs hit a one-month high on Aug 1.

Per analysts, “most investors are short and this quarter’s earnings are better than expected on aggregate,” quoted on Bloomberg. In the year-to-date frame, the fund is off 0.45 (as of Aug 1, 2018). This has made the valuation appealing and pushed the fund higher in a month by about 7.6%.

Global X SuperDividend Alternatives ETF (NASDAQ:ALTY)

The underlying Indxx SuperDividend Alternatives Index of the fund tracks the performance of the highest dividend yielding securities in each category of alternative investments, as defined by the Index Sponsor.

The fund has focus on BDCs and Private Equity (27.89%), REITs (22.84%), Covered Call Strategies (13.11%) and MLPs (10.09%), thus offering a spread-out exposure. The product yields a solid 6.89% annually. So, investors should benefit out of this benchmark-beating yield.

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