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ETF Strategies to Combat Coronavirus Outbreak

Sweta Jaiswal, FRM

The latest coronavirus outbreak in China has claimed 17 lives as of Jan 22, reminding us of the Severe Acute Respiratory Syndrome (SARS) coronavirus eruption in 2002-2003. The SARS outbreak was responsible for nearly 800 deaths worldwide, rattling the financial markets. Notably, about 570 confirmed cases have been registered so far. Chinese authorities have implemented strict travel restrictions for the central cities of Huanggang, Ezhou and Wuhan.

Resultantly, the world’s major indices are taking a hit. Chinese stocks have also seen the steepest decline in more than eight months. Moreover, U.S. benchmark indexes started retracting from record highs witnessed last week. In fact, the U.S. Centers for Disease Control and Prevention has announced the first case of coronavirus in the United States. Notably, the United States is the fifth country to report a coronavirus case after China, Thailand, Japan and South Korea (read: Sector ETFs & Stocks to Gain/Lose on Coronavirus Outbreak).

ETF Strategies to Follow

The Lunar New Year holiday is on Jan 25. It is a time when millions of people will be traveling to and from China. But, the outbreak is impacting travel-related stocks and luxury brands. Even oil prices have slipped to the lowest in seven weeks on fears of reduced demand. Given the situation, let’s look at some ETF strategies that investors can follow for a smooth sail in these turbulent times.

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Dividend ETFs

In a low-interest rate environment, dividend investing has been the hot spot and seems an excellent choice for 2020. Against this backdrop, dividend ETFs like WisdomTree U.S. Quality Dividend Growth Fund DGRW, FlexShares Quality Dividend Defensive Index Fund QDEF, WBI Power Factor High Dividend ETF WBIY and Schwab US Dividend Equity ETF SCHD might be compelling picks (read: 7 Dividend ETFs That Offer Growth in 2020).

REIT ETFs

Real estate investment trusts (REITs) have had a good run on the bourses in 2019. A dovish Fed can be cited as the main driving factor. When interest rate drops, mortgage rates fall, making real estate or refinancing mortgages more affordable. This in turn boosts real estate sales. These funds offer outsized yields and act as good investing options when increased safe-haven trades keep yields at check. In view of this, investors can consider ETFs like JPMorgan BetaBuilders MSCI US REIT ETF (BBRE), iShares Core U.S. REIT ETF USRT, Nuveen Short-Term REIT ETF NURE, Invesco S&P 500 Equal Weight Real Estate ETF EWRE) and Schwab U.S. REIT ETF SCHH (read: Homebuilder ETFs Shining in 2020: Will This Continue?).

Metals ETFs

Prices of precious metals like gold and silver rise during chaotic market conditions. This enhances the appeal of iShares Silver Trust SLV, Invesco DB Silver Fund DBS, SPDR Gold Trust ETF GLD, iShares Gold Trust IAU and Aberdeen Standard Physical Palladium Shares ETF PALL (read: Palladium ETF Continues to Surge in 2020: What Lies Ahead?).

Treasury Bonds

Heightened global uncertainty brings this safe asset into the limelight. The yield on the benchmark 10-year Treasury note was lower at around 1.7482%, while the yield on the 30-year Treasury bond fell to 2.1957%. Notably, the prices of treasury bonds rise as yields fall. Investors can consider iShares 20+ Year Treasury Bond ETF TLT, 25+ Year Zero Coupon U.S. Treasury Index Fund ZROZ and Vanguard Extended Duration Treasury ETF EDV.

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SPDR Gold Shares (GLD): ETF Research Reports
 
iShares Silver Trust (SLV): ETF Research Reports
 
Invesco DB Silver ETF (DBS): ETF Research Reports
 
WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
 
PIMCO 25+ Year Zero Coupon U.S. Treasury ETF (ZROZ): ETF Research Reports
 
Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
 
iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
 
iShares Gold Trust (IAU): ETF Research Reports
 
Aberdeen Standard Physical Palladium Shares ETF (PALL): ETF Research Reports
 
Invesco S&P 500 Equal Weight Real Estate ETF (EWRE): ETF Research Reports
 
Schwab U.S. REIT ETF (SCHH): ETF Research Reports
 
WBI Power Factor High Dividend ETF (WBIY): ETF Research Reports
 
iShares Core U.S. REIT ETF (USRT): ETF Research Reports
 
Nuveen Short-Term REIT ETF (NURE): ETF Research Reports
 
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Zacks Investment Research
 
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