Market volatility is rife ahead of the Fed’s September rate hike. Moreover, Federal Reserve Governor Christopher Waller is expected to back another 75-bps hike in the upcoming meeting. The CBOE Volatility Index is up 37.1% year-to-date.
Amid such monetary tightening policies, recession fears are rising. According to UBS Group AG (UBS), the odds of a U.S. economic recession soared to 60% last month, vaulting from its June recession odds of 40%.
In addition, Bank of America Corporation’s (BAC) Global Fund Manager Survey for August found that 58% of investors expect a recession in the coming months, the highest rate since May 2020.
Given the backdrop, it could be wise to avoid fundamentally weak ETFs iShares 20+ Year Treasury Bond ETF (TLT - Get Rating), VanEck Gold Miners ETF (GDX - Get Rating), iShares MSCI Emerging Markets ETF (EEM - Get Rating), and iShares China Large-Cap ETF (FXI - Get Rating).
iShares 20+ Year Treasury Bond ETF (TLT - Get Rating)
TLT is a popular option for investors seeking exposure to long-dated Treasuries. The index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to 20 years.
With $24.68 billion in assets under management (AUM), TLT’s top holdings include United States Treasury Bond 1.875% 15-FEB-2051 with a 12.81% weighting, followed by United States Treasury Bond 2.0% 15-AUG-2051 at 7.31%, and United States Treasury Bond 1.625% 15-NOV-2050 at 6.90%. It has 35 holdings in total.
TLT’s dividend payouts have declined at an 8.6% CAGR over the past three years and 17.5% for the past five years. Over the past year, TLT has lost 27.6%.
TLT has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
TLT has an F grade for Trade and a D for Peer. It is ranked #25 out of 40 ETFs in the Government Bonds ETFs group. Click here to see more of TLT POWR Ratings.
VanEck Gold Miners ETF (GDX - Get Rating)
GDX offers investors exposure to some of the largest gold mining companies in the world. The non-diversified fund comprises publicly traded companies involved in the mining of gold and silver.
GDX has $9.85 billion in AUM. Newmont Corporation (NEM) has a 12.43% weighting in the fund as its top holding, followed by Barrick Gold Corporation (GOLD) at 10.26% and Franco-Nevada Corporation (FNV) at 8.76%. It has 56 holdings in total.
Its net outflows came in at $234.78 million over the past month. Moreover, its expense ratio of 0.51% is higher than the 0.48% category average. GDX has lost 20.5% year-to-date.
GDX’s POWR Ratings reflect its bleak prospects. It has an overall D rating, equating to a Sell. Also, it has an F grade for Trade and a D for Buy & Hold and Peer.
GDX is ranked #19 of 38 ETFs in the D-rated Precious Metals ETFs group. Click here to see more GDX ratings.
iShares MSCI Emerging Markets ETF (EEM - Get Rating)
EEM is a popular ETF, providing exposure to emerging economies’ stock markets. The underlying index includes large and mid-capitalization companies.
The fund has $24.10 billion in AUM. Its top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) with a 6.02% weighting, Tencent Holdings Ltd. (TCEHY) at 3.94%, and Samsung Electronics Co., Ltd. at 3.07%. It has a total of 1242 holdings.
Its net outflows over the past month came in at $1.05 billion. Its expense ratio of 0.68% is higher than the category average of 0.49%. Over the past year, EEM has lost 24.6%.
EEM has an overall D rating, equating to Sell in our POWR Ratings system. It has an F grade for Trade and a D for Peer grade. It is ranked #68 of 100 ETFs in the Emerging Markets Equities ETFs group. Click here to get EEM’s rating for Buy & Hold.
iShares China Large-Cap ETF (FXI - Get Rating)
FXI offers exposure to the Chinese equity market. However, the fund consists of just a handful of large-cap stocks and maintains heavy biases toward the financial and energy industries.
FXI has $5.01 billion in AUM. Meituan Class B has a 9.03% weighting in the fund as its top holding, followed by Alibaba Group Holding Ltd. (BABA) at 8.25% and TCEHY at 8.10%. It has a total of 52 holdings. In addition, its 0.74% expense ratio is higher than the category average of 0.64%.
FXI’s dividend payouts have declined at a 12.1% CAGR over the past three years and a 7.7% CAGR for the past five years. Over the past year, the fund has lost 28.4%.
The ETF has an overall D rating, translating to Sell in our POWR Ratings system. It has an F grade for Trade. FXI is ranked #9 of 40 ETFs in the F-rated China Equities ETFs group. Click here for Buy & Hold and Peer grade ratings.
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TLT shares fell $1.07 (-1.00%) in premarket trading Tuesday. Year-to-date, TLT has declined -27.06%, versus a -14.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
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Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
More Resources for the Stocks in this Article
Ticker | POWR Rating | Industry Rank | Rank in Industry |
TLT | Get Rating | Get Rating | Get Rating |
GDX | Get Rating | Get Rating | Get Rating |
EEM | Get Rating | Get Rating | Get Rating |
FXI | Get Rating | Get Rating | Get Rating |