Four corners of the dangerous stock market reportedly seem to show some immunity to coronavirus fears.
Despite the spread of coronavirus being bad for stocks — and many exchange-traded funds that hold them — alternative energy, long-dated U.S. Treasuries, gold, and real-estate investment trusts have shown some immunity, Barron's said.
Barron’s offered a handful of ETFs across the four industries to consider amid such volatility:
- Alternative Energy: Invesco Solar ETF (TAN) and ALPS Clean Energy ETF (ACES) were up 27% and 23% respectively for the year through Monday but slid nearly 4% Tuesday. "Less demand for energy could hurt the sector, but alternative power producers have the benefit of hope that they will gradually supplant fossil fuel in the future," Barron's said
- Long-Dated U.S. Treasuries: "If industrial commodities are likely to respond poorly to a pandemic, high- quality bonds, seen as a haven asset, are likely to do better," Barron's said. The Pimco 25+ Year Zero Coupon U.S. Treasury ETF (ZROZ) was up nearly 17% for the year through Monday. "U.S. Treasuries tend to rally when investors are fearful, and that should continue if the disease spreads more," Barron's said The Vanguard Extended Duration Treasury Index ETF (EDV) was up 15% for the year through Monday. This fund also owns long-term zero-coupon U.S. Treasuries.
- Gold: The SPDR Gold Shares ETF (GLD) was up more than 9% for the year, including a nearly 1% gain on Monday. Gold is another asset that often performs strongly when investors are fearful, Barron's explained.
- Real-Estate Investment Trusts: "Real-estate funds have performed strongly, posting gains of around 6%, including a 1% drop on Monday. Real-estate investment trusts, or REITs, pay out 90% of their net income in order to qualify for favorable tax treatment, so they often trade in line with Treasuries, another income-yielding investment, especially when the latter are posting big moves," Barron's said. The bottom line is that REIT shares could remain more stable than the rest of the stock market.
Wall Street's main indexes looked set to gain ground on Wednesday after suffering their worst four-day percentage fall in more than a year on fears of the economic damage from the global spread of the coronavirus, Reuters said.
The Dow has lost more than 1,900 points in the past two days alone, while the Nasdaq has slid 8.9% from its peak.
The S&P 500, which is down 7.8% from its intraday record high hit last Wednesday, has lost about $1.74 trillion in market capitalization in the last two sessions, according to S&P Dow Jones Indices senior analyst Howard Silverblatt.
However, with panic-inducing headlines everywhere, investors who had been stockpiling reasons to bail are exiting positions with less fear of looking foolish, Bloomberg explained.
“There’s certainly people who have doubted this rally all the way up and will now use this as an opportunity to exit,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co. “The one consistent call I’ve heard for the past four or five years is that a recession is coming and certainly this emboldens those people who believe that. It may mean we have further downside to go.”
The bull market, approaching its 11-year anniversary, has always irritated a category of skeptics who say that without Federal Reserve largess the U.S. economy would have long ago stopped expanding. Recession anxiety rose last year when short- and long-term Treasury rates inverted, an indicator that has reliably preceded past downturns.
At the same time, acting on any such belief has been enormously costly. Roughly $4 trillion of share value has been added to U.S. equities since October. Before last week the S&P 500 had fallen on successive days just once in 2020.
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