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ETF Areas to Mark as Coronavirus Snaps Dow's 11-Year Bull Run

The stock market rout due to the coronavirus outbreak continues, with the Dow Jones sliding into a bear territory after declining 5.9% on Mar 11. The 30-stock average’s bull market run that had begun in 2009 amid the financial crisis came to a halt after the Dow fell more than 20% from its peak recorded on Feb 12. The Boeing Company’s BA loss of around 18.2% on Mar 11 majorly led to the decline in the Dow. Moreover, World Health Organization’s declaration of COVID-19 as a pandemic yesterday aggravated the stock market rout (Tap These Low-Volatility ETFs to Shrug Off Coronavirus Fears).

Going on, per the Dow Jones Market Data, the Dow’s bear market lasts for 206 trading days. Meanwhile, the average bear period for the S&P 500 is roughly 146 days. It is worth noting here that the S&P 500 and Nasdaq are down by 19% from their highs recorded on Feb 19. An analyst at the Goldman Sachs expects the S&P 500 to slip into the bear territory soon. In this regard, he said “after 11 years, 13% annualized earnings growth and 16% annualized trough-to-peak appreciation, we believe the S&P 500 bull market will soon end.”

Mounting pressure on airline, cruise, hotels, restaurants and travel companies, largely due to travel restrictions and booking cancellations, is being observed. In such a scenario, President Trump’s act of restricting passenger travel from 26 European nations to the United States might not go down well with companies in the above-mentioned industries (read: Wall Street Rises on Trump's Stimulus: ETF & Stock Gainers ).

However, it is being believed that adequate steps by the governments and central banks to control the coronavirus pandemic will help the stock market come out of the bear territory. The Bank of England  has trimmed its benchmark rate by 50 basis points to 0.25% on Mar 11. The Fed also raised the total amount provided by it to banks through overnight repo lending to $175 billion. Going on, after Fed’s emergency rate cut, Trump has come up with a fiscal stimulus package. Trump is now mulling over a “very substantial relief” to the payroll tax. The likely tax incentives will add to the $8.3-billion spending package signed by Trump last week. Additionally, the White House plans to aid airlines and cruise companies, two especially hard-hit industries (read: Emergency Fed Cut Less Effective: ETFs That Should Survive).

Given the situation, let’s look at some ETF types that investors can follow for a smoother sail during these turbulent times.

Inverse ETFs

The rapidly-spreading coronavirus is making investors jittery, sending the global market into a tailspin and resulting in strong demand for inverse or inverse leveraged ETFs. These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Due to their compounding effect, investors can earn higher returns in a shorter period of time, provided the trend remains favorable. However, these funds run the risk of huge losses compared with traditional funds in fluctuating markets. So, investors intending to play against the tumbling Dow Jones, may tap ProShares Short Dow 30 DOG,  ProShares UltraShort Dow30 DXD and ProShares UltraPro Short Dow30 SDOW (read: Coronavirus Triggers Market Bloodbath: 7 Hot Inverse ETF Areas).

Dividend ETFs

In a low-interest rate environment, dividend investing becomes the hot spot. Against this backdrop, dividend ETFs like WisdomTree U.S. Quality Dividend Growth Fund DGRWFlexShares Quality Dividend Defensive Index Fund QDEFWBI 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).

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The Boeing Company (BA): Free Stock Analysis Report
WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
Proshares Short Dow30 (DOG): ETF Research Reports
FlexShares Quality Dividend Defensive ETF (QDEF): ETF Research Reports
ProShares UltraPro Short Dow30 (SDOW): ETF Research Reports
WBI Power Factor High Dividend ETF (WBIY): ETF Research Reports
ProShares UltraShort Dow30 (DXD): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
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