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Low-Volatility ETFs to Buy as IMF Cuts Global Growth Outlook

Sweta Jaiswal, FRM

The International Monetary Fund has cut global growth expectations for this year to the lowest since 2009. According to IMF, the global economy is expected to expand 3% this year in comparison to July’s forecast of 3.2%. The global growth estimate for 2020 has also been slashed to 3.4% from 3.5%. Moreover, IMF expects growth in advanced economies to decline to 1.7% in 2019 from 2.3% in the previous year.

In this regard, Gita Gopinath IMF’s Chief Economist has mentioned in the report that “with a synchronized slowdown and uncertain recovery, the global outlook remains precarious”(read: Momentum ETFs in Focus on Trade Deal Optimism).

Trade War to be Blamed?

Slowing global economic growth largely due to trade war tensions has been the major reason for the fifth straight cut in global growth outlook. China's economic growth is expected to drop to 6.1% in 2019 from 6.6% last year. Moreover, the growth rate in the United States is expected to slow from 2.9% in the previous year to 2.4% in 2019.

Notably, the trade war scenario seems to be a little complicated. Beijing recently expressed its interest in conducting another round of talks before the ‘phase 1’ deal gets signed, per a Bloomberg report. This is raising questions over the successful completion of the truce deal (read: Dividend Growth ETFs to Sail Through Trade Uncertainty). 

Brexit Suspense

The Eurozone economy has been struggling due to declining demand for goods and services. The persistent global trade disputes and the prolonged process involving Britain’s exit from the European Union have been primary reasons for the slowdown. Thus, IMF expects growth in the U.K. of 1.2% for 2019 in comparison to 1.4% last year (read: Eurozone ETFs in Focus on Weak PMI Data).

Why Opt for Low-Volatility ETFs?

Although countries have adopted measures for peace, the probability of a truce is low. Given the sensitivity of the matter, trade war uncertainty will continue to affect markets. Thus, low-volatility products could be intriguing choices for those who want to stay invested in equities but like the idea of focusing on minimum volatility. Low-volatility ETFs generally tend to offer positive risk-adjusted gains though not enormous.

iShares Edge MSCI Min Vol USA ETF USMV

This fund offers exposure to 212 U.S. stocks with lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. With AUM of $36.07 billion, the product charges 0.15% in expense ratio. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 Amazing ETF Strategies for the Fourth Quarter).

Invesco S&P 500 Low Volatility ETF SPLV

This ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 100 securities in its basket. SPLV has amassed $12.85 billion in its asset base. It charges 25 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Low-Beta ETFs to Tap Amid Stock Market Selloff).

iShares Edge MSCI EAFE Minimum Volatility ETF EFAV

EFAV looks to replicate the performance of international equity securities that have lower risk. The fund tracks the MSCI EAFE Minimum Volatility (USD) Index and holds 280 securities. It has amassed $12.11 billion in its asset base. EFAV charges 20 bps in annual fees and has a Zacks ETF Rank #3 with a Low risk outlook (read: Time to Buy Global Low-Volatility ETFs?).

iShares Edge MSCI Min Vol Global ETF ACWV

The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 446 securities. It has an AUM of $5.61 billion in the asset base. ACWV charges 20 bps in annual fees and has a Low risk outlook.

Invesco S&P 500 High Dividend Low Volatility ETF SPHD

The fund seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S&P 500 Low Volatility High Dividend Index. It holds 50 securities. The fund has an AUM of $3.47 billion in the asset base. SPHD charges 30 bps in annual fees and has a Medium risk outlook.

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