As of March 24, the S&P 500 is about 6% off its all-time high. Rising geopolitical risk in the Middle East, slowing economic growth, and a stagnant jobs market are all contributing to lower investor sentiment. How bad these conditions will get and how long they could last are unclear, but there doesn’t appear to be a short-term end in sight.
With volatility still on the high side, these four ETFs should be on your radar as we kick off the second quarter. Each represents a unique way to approach equity investing right now and could be facing very different outlooks.
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ETFs to keep on your radar in April
The broad U.S. equity market remains under pressure, primarily from the uncertainty in the Middle East. What has essentially become a closure of the Strait of Hormuz has sent energy prices soaring, forcing investors to rethink their outlooks on interest rates, inflation, and economic growth.
The current correction in the Vanguard S&P 500 ETF (VOO 1.70%) is the deepest in about a year. But geopolitical conflicts are often short term in nature, and markets can rally quickly if there’s a resolution. With the U.S. and Iran considering negotiations, stock prices could change quickly.
Vanguard S&P 500 ETF
Today’s Change
(-1.70%) $-10.09
Current Price
$582.96
Key Data Points
Day’s Range
$582.03 – $590.83
52wk Range
$442.80 – $641.81
Volume
12M
The more interesting option right now is the Vanguard FTSE Developed Markets ETF (VEA 0.69%). International stocks performed very well relative to the S&P 500 in January and February. But they’ve lagged badly since the conflict in Iran started in March. The foreign equity narrative largely remains the same, though. Earnings growth rates are improving, and valuations are compelling relative to the United States. If events in the Middle East finally start to de-escalate, we could see the return of international stock outperformance.
Vanguard FTSE Developed Markets ETF
Today’s Change
(-0.69%) $-0.43
Current Price
$62.05
Key Data Points
Day’s Range
$61.83 – $62.72
52wk Range
$45.14 – $70.55
Volume
24M
Low-volatility and value stocks have followed a similar path this year. Geopolitical risks have undone a lot of that recent outperformance, but there’s no question that a lot of value remains unlocked. The iShares MSCI USA Minimum Volatility Factor ETF (USMV 1.18%) could be a primary beneficiary when this upward trend returns. Its strategy allows for the inclusion of growth areas, such as tech, while minimizing overall portfolio volatility. It could be an interesting way to potentially play both sides of the coin.
Finally, the State Street Utilities Select Sector SPDR ETF (XLU +0.57%) continues to hold up remarkably well. Even though the past few years have been a risk-on story, utilities have benefited from the data center buildout and the corresponding energy demand that’s coming with it. The direction of interest rates remains a concern as these are often heavily indebted companies. But an extended conflict in the Middle East could derail this sector’s momentum.
David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard FTSE Developed Markets ETF and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.