The multi-decade-high inflation has cooled for the second consecutive month in November, indicating that the Fed’s aggressive interest rate hikes might have yielded results. However, with signs of continuing rate hikes through 2023 until inflation falls below 2%, the stock market will likely remain under pressure this year.

According to economists polled in a monthly survey conducted by Bloomberg, the likelihood of a US recession in 2023 jumped to 70%. Comerica Bank chief economist Bill Adams told Bloomberg, “The US economy is facing big headwinds from surging interest rates, high inflation, the end of fiscal stimulus, and weak export markets abroad.”

On top of it, the World Bank cut its global growth forecast from its mid-2022 projections. The institution slashed its growth outlook for the global economy to 1.7% for 2023.

Given this uncertain backdrop, it might be wise to diversify one’s portfolio through quality ETFs. Hence, fundamentally strong ETFs Vanguard Consumer Staples Fund (VDC), ProShares Short S&P500 (SH), and Invesco Dynamic Large Cap Value ETF (PWV) could be wise investments now.

Vanguard Consumer Staples Fund (VDC)

Tracking the MSCI US IMI 25/50 Consumer Staples index, VDC provides targeted exposure to the U.S. consumer staples sector. It is a potentially useful tool for those looking to shift their portfolio toward low-beta holdings.

As of January 10, VDC’s NAV stands at $193.09. The fund has approximately $6.86 billion in assets under management (AUM). It has an expense ratio of 0.10%, significantly lower than the category average of 0.45%.

As of November 30, 2022, Procter & Gamble Company (PG) is the top holding of VDC, with a 12.35% weighting, followed by Coca-Cola Company (KO) and PepsiCo, Inc. (PEP), with 8.74% and 8.54% weightings, respectively.

The fund’s net inflow came in at $83 million over the past three months and $5.12 million over the past month. Over the past three months, VDC has gained 12.1% to close its last trading session at $193.08. Moreover, it has gained marginally over the past five days. The fund has a five-year beta of 0.65.

The ETF’s trailing-12-month dividend of $4.54 yields 2.35% on the current price level. Its dividend payouts have increased at a CAGR of 4.8% and 4.3% over the past three years and five years, respectively. 

It is no surprise that VDC has an overall A rating, which translates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

VDC has an A grade for Trade, Peer, and Buy & Hold. It is ranked #2 out of the 48 ETFs in the B-rated Consumer-Focused ETFs group. Click here to see the POWR Ratings for VDC.

ProShares Short S&P500 (SH)

SH is an inverse ETF launched and managed by ProShare Advisors LLC. It is designed to deliver inverse exposure to the S&P 500. The fund might be an option for active investors looking to either hedge existing exposure or bet on a decline in large-cap U.S. securities. 

As of January 10, the fund’s NAV stands at $15.70. It has an AUM of approximately $3.09 billion. The fund’s expense ratio of 0.89% is lower than the category average of 1.02%.

SH’s top three holdings are S&P 500 INDEX Swap BNP Paribas with a negative 24.83% weighting, S&P 500 INDEX SWAP JP Morgan Securities with a negative 17.28% weighting, and S&P 500 INDEX SWAP Goldman Sachs International with a negative 15.16% weighting.

The fund’s net inflow came in at $308.54 million over the past month and $74.61 million over the past five days. It has a five-year monthly beta of negative 0.92.

The ETF has gained marginally over the past month to close the last trading session at $15.69. SH has a trailing-12-month dividend of $0.05, which yields 0.32% on the current price. It has a four-year average yield of 0.67%.

SH’s POWR Ratings reflect its promising prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.

SH has an A grade for Trade and Peer and a B for Buy & Hold. It is ranked first in the 50-fund Inverse Equities ETFs group. To see the POWR Ratings for SH, click here.

Invesco Dynamic Large Cap Value ETF (PWV)

PWV is based on the Dynamic Large Cap Value Intellidex℠ Index (Index). The fund normally invests at least 90% of its total assets in common stocks that comprise the Index. This asset class might be appealing to investors building a long-term portfolio.

As of January 10, PWV has a NAV of $47.65. Its AUM stands at approximately $839.90 million. Its expense ratio of 0.58% compares with the category average of 0.39%.

As of January 9, the fund’s top three holdings include Abbott Laboratories (ABT), with a 3.60% weight, Philip Morris International Inc. (PM), with a 3.54% weight, and Merck & Co Inc. (MRK), with a 3.53% weight.

Its net inflows came in at $31.09 million over the past three months and $4.72 million over the past five days. It has a five-year beta of 0.88. The fund has gained 12.4% over the past three months to close its last trading session at $47.63. It had gained 7.9% over the past six months.

The fund’s trailing-12-month dividend of $1.08 yields 2.27% on the current share price. It has a four-year average yield of 2.34%.

PWV’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall A rating, which equates to a Strong Buy in our proprietary rating system.

PWV has a Trade and Buy & Hold grade of A. In the B-rated, 86-ETF Large Cap Value ETFs group, it is ranked #31. Click here to see the additional POWR Ratings for PWV (Peer).

VDC shares were trading at $193.56 per share on Wednesday morning, up $0.48 (+0.25%). Year-to-date, VDC has gained 1.04%, versus a 2.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Sristi Suman Jayaswal

The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...

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