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4 ETF Strategies to Follow Amid Global Growth Slowdown

Sanghamitra Saha

In early April, The International Monetary Fund (IMF) slashed its global growth forecast to the lowest level since the financial crisis and cautioned about considerable downside risks to the global economy, including trade tensions, sections of political instability and mounting debt levels. This is the third time in six months that the fund has downgraded its outlook.

The organization now has forecast global growth of 3.3% for this year. The forecast fell by 0.2 percentage points from the January report. The IMF has estimated a decline in growth this year for 70 % of the global economy. However, the update released in April kept the growth rate for 2020 unchanged at 3.6%. The IMF warned that growth in China "may surprise on the downside" and risks from Brexit may "remain heightened (read: Why These Chinese Sector ETFs Are Crushing S&P 500 in 2019).”

Having said this, the IMF expects the global economy to pick up in the second half of this year, thanks to dovish policies from central banks, which can stimulate growth.


Against this backdrop, below we highlight a few ETF strategies that can be beneficial in the coming days.

Bet on Treasury ETFs

Citing global growth worries, many central banks from developed economies — including the Fed and the ECB — have been acting dovish. This should keep long-term rates on the lower side. According to Citigroup, the U.S. economy has slowed down with only the labor market appearing steady. Under such circumstances, 10-year Treasury yields may fall to 2.3%, per Citi.

If that holds good, investors can profit out from iShares 20+ Year Treasury Bond ETF TLT and SPDR Barclays International Treasury Bond BWX. TLT and BWZ yield respectively about 2.65% and 1.22% annually. Investors should also note that treasuries are considered as safe haven and are likely to perform well in turbulent times (read: Declining Yields Make These Bond ETFs Attractive).

Dividend ETFs Are Real Saviors

Dividends or regular current income could save investors even if there is capital loss. So, one can bank on these high momentum dividend ETFs like Reality Divcon Leaders Dividend ETF LEAD,Victory Dividend Accelerator ETF VSDA and Invesco International Dividend Achievers ETF PID (read: 4 Dividend ETFs to Pick Amid Moderately Dovish Fed Minutes).

Bank on Quality

Quality ETFs are relatively safe and can help investors fight the looming economic slowdown. In this regard, funds like VanEck Vectors Morningstar International Moat ETF MOTI, FlexShares Quality Dividend Index Fund QDF, O'Shares FTSE Europe Quality Dividend ETF OEUR and Invesco S&P SmallCap Quality ETF XSHQ could be at investors’ disposal (read: Recession Fear Negligible: Will Small-Cap Growth ETFs Rally?).

Time to Bet on Emerging Markets

Investors should notice in the table that emerging Europe and emerging Asia did not experience any growth rate cut for this year; in fact, Europe has seen an upgrade in forecast for 2020. With Brexit delayed for six more months and Fed and ECB being dovish, investors can bet on emerging Europe ETFs like VanEck Vectors Russia ETF RSX and iShares MSCI Poland ETF EPOL. An oil price boom is especially great for the oil-importing nation Russia (read: ETFs & Stocks to Ride on Oil's Biggest Quarter in Decade).

As far as emerging Asia is concerned, KraneShares Emerging Markets Healthcare Index ETF KMED is a good pick.

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SPDR Bloomberg Barclays International Treasury Bond ETF (BWX): ETF Research Reports
Reality Shares DIVCON Leaders Dividend ETF (LEAD): ETF Research Reports
iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
iShares MSCI Poland ETF (EPOL): ETF Research Reports
Invesco International Dividend Achievers ETF (PID): ETF Research Reports
VanEck Vectors Morningstar International Moat ETF (MOTI): ETF Research Reports
VanEck Vectors Russia ETF (RSX): ETF Research Reports
VictoryShares Dividend Accelerator ETF (VSDA): ETF Research Reports
FlexShares Quality Dividend Index Fund (QDF): ETF Research Reports
Cambria Global Asset Allocation ETF (GAA): ETF Research Reports
First Trust CEF Income Opportunity ETF (FCEF): ETF Research Reports
KraneShares Emerging Markets Healthcare Index ETF (KMED): ETF Research Reports
Multi-Asset Diversified Income Index Fund (MDIV): ETF Research Reports
Invesco S&P SmallCap Quality ETF (XSHQ): ETF Research Reports
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