While it is broadly expected that the pace of interest rate hikes may be dialed down to 50-basis points this month, concerns over terminal interest rates being higher than expected and its effect on the U.S. economy have kept markets on edge.

November’s employment statistics and service sector growth signaled enough resilience in the economy to keep the Fed worried and markets volatile. Obsessed with the increasing probability and the severity of an economic downturn due to interest rate hikes, the S&P 500 registered five consecutive sessions of losses until Wednesday.

With market volatility expected to continue in the near term, it could be wise for investors to increase exposure to instruments and assets whose prospects are robust enough to remain relatively unaffected by the turbulence.

Hence, Energy Select Sector SPDR ETF (XLE), Vanguard Short-Term Bond ETF (BSV), and Vanguard Health Care ETF (VHT) could be ideal investments in a choppy market.

Energy Select Sector SPDR ETF (XLE)

XLE is a sectoral ETF launched by State Street Global Advisors, Inc. and is currently managed by SSGA Funds Management, Inc. The fund offers concentrated exposure to major U.S. energy businesses, including companies in the oil, gas, and consumable fuels and energy equipment and services industries.

With $39.64 billion in AUM, XLE’s top holding is Exxon Mobil Corporation (XOM) which has a 22.76% weighting in the fund. It is followed by Chevron Corporation (CVX) at 19.66% and Schlumberger NV (SLB) at 5.20%. The fund has a total of 25 holdings.

XLE has an expense ratio of 0.10%, lower than the category average of 0.46%. The fund pays $2.16 annually as dividends. This translates to a 3.75% yield at the current price, higher than the category average of 2.21%.

XLE’s net inflow came in at $246.28 million over the past three months. The fund has a beta of 1.66.

Due to the geopolitics-driven supply shortage that dominated the energy landscape for most of this year, XLE has gained 48.1% year-to-date to close the last trading session at $84.74. The fund’s NAV was $84.74 as of December 8, 2022.

XLE has an overall rating of B, which translates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

XLE has grade B for Trade, Buy & Hold, and Peer. The fund is ranked #9 of 45 funds in the B-rated Energy Equities ETFs category.

Vanguard Short-Term Bond ETF (BSV)

BSV is a fixed-income ETF launched and managed by The Vanguard Group, Inc. It offers exposure to investment-grade, dollar-denominated debt issued in the US with maturities between one and five years.

With $37.45 billion in AUM, BSV’s holding primarily consists of United States Treasury Notes of varying maturities. The fund’s expense ratio is 0.04%, lower than the category average of 0.41%.

BSV pays $1.12 annually as dividends, translating to a yield of 1.38% at the current price. It saw a net outflow of $376.06 million over the past month. Its beta is negative 0.01.

BSV has gained 1.7% over the past month to close the last trading session at $75.57. The fund’s NAV was $75.54 as of December 8, 2022.

BSV’s robustness is reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The fund also has grade A for Trade and Buy & Hold.

BSV tops the list of 32 funds in the A-rated Ultra-Short Term Bonds category.

Click here to see all ratings for BSV.

Vanguard Health Care ETF (VHT)

VHT is a sectoral ETF launched and managed by The Vanguard Group, Inc. The fund provides exposure to firms stretching across multiple industries in the low-volatility healthcare sector.

With $17.40 billion in AUM, VHT’s top holding is UnitedHealth Group Incorporated (UNH) which has a 9.09% weighting in the fund. It is followed by Johnson & Johnson (JNJ) at 7.99% and Eli Lilly and Company (LLY) at 5.11%. The fund has a total of 397 holdings.

VHT diversifies its holdings by applying limits on regulated investment companies, such that no group entity exceeds 25% of the index weight, and the aggregate weight of issuers with over 5% weight in the index is capped at 50% of the portfolio.

VHT has an expense ratio of 0.10%, lower than the category average of 0.53%. The fund pays $3.11 annually as dividends. This translates to a yield of 1.21% at the current price, which is higher than the category average of 0.36%.

VHT’s net inflow came in at $279.88 million over the past three months and $895.4 million over the past year. The fund has a beta of 0.81.

VHT has gained 5.7% over the past month to close the last trading session at $254.91 million. The fund’s NAV was $254.82 as of December 8, 2022.

VHT’s fundamental strength is also reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has grade A for Trade, Buy & Hold, and Peer.

VHT is ranked #2 of 41 stocks in the A-rated Health & Biotech ETFs category.

XLE shares were trading at $83.24 per share on Friday afternoon, down $1.50 (-1.77%). Year-to-date, XLE has gained 54.78%, versus a -15.73% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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