Markets have been straining under challenges aggravated by the financial sector chaos and several macroeconomic headwinds. Consequently, the magnified recessionary concerns and associated volatilities are anticipated to persist for a while.
Therefore, investors might delve into some quality ETFs, Vanguard FTSE Developed Markets ETF (VEA), Vanguard FTSE Emerging Markets ETF (VWO), and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) this month.
The Consumer Price Index (CPI) rose just 0.1% month-over-month in March and 5% from a year ago, below the estimates of 0.2% and 5.1%, respectively. However, core inflation grew by 0.4% for the month and 5.6% year-over-year.
Talking about the likelihood of a future rate hike, economist Sung Won Sohn, president of SS Economics and Loyola Marymount University professor, said in a statement, “On the surface, price pressures are lessening. But when the box is opened, [core inflation] accelerated to the highest rate since May 2021. This is well over the 2% target set by the central bank.” He anticipates more interest rate hikes.
Moreover, the collapse of the two U.S. regional banks has exacerbated challenges for the Fed’s inflation fight. The resultant credit tightening could dampen demand and aid the Fed in bringing down the sticky inflation. However, this is feared to trigger an economic slowdown. Furthermore, the fears magnified after the Fed’s minutes warned of a mild recession.
Hence, amid escalating recession risks, investing in dividend-focused ETFs might be a wise choice to boost one’s portfolio now. Hence, fundamentally strong ETFs VEA, VWO, and BIL could be solid buys in April.
Vanguard FTSE Developed Markets ETF (VEA)
VEA is an ETF launched and managed by The Vanguard Group, Inc. It invests in stocks of companies operating across diversified sectors. The fund invests in growth and value stocks of companies across diversified market capitalization. It seeks to track the performance of the FTSE Developed All Cap ex US Index.
As of April 13, VEA had $110.02 billion in AUM and a NAV of $46.40. Its gross expense ratio of 0.05% is lower than the category average of 0.40%.
VEA’s top holding is Nestlé S.A. (NSRGY), with a 1.43% weighting, followed by ASML Holding N.V. (ASML), with 1.17%, and Samsung Electronics Co. Ltd., with a 1.06% weighting. It has a total of 4,075 holdings currently, with its top 10 assets comprising 10.04% of its AUM.
The fund pays $1.30 annually as dividends. This translates to a 2.83% yield at prevailing prices. Its dividend payouts have grown 0.1% and 0.7% CAGRs over the past three and five years, respectively. The fund has a four-year average yield of 2.94%.
VEA’s fund inflows came in at $7.92 billion over the past year and $4.20 billion over the past six months. VEA has gained 25.9% over the past six months and 7.3% over the past month to close the last trading session at $46.50.
VEA’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
VEA has an A grade for Trade and Buy & Hold. Of the 80 ETFs in the A-rated European Equities ETFs group, it is ranked #1. Click here to access VEA’s rating for Peer.
Vanguard FTSE Emerging Markets ETF (VWO)
Launched and managed by The Vanguard Group, Inc., VWO invests in public equity markets of the global emerging region. It invests in stocks of companies operating across diversified sectors. VWO tends to attract longer-term investors.
As of April 13, VWO had $72.14 billion in AUM and a NAV of $40.72. Its gross expense ratio of 0.08% is lower than the category average of 0.50%.
Its top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), with a 4.79% weighting in the fund, followed by Tencent Holdings Ltd. (TCEHY) at 3.77%, and Alibaba Group Holding Ltd. (BABA) at 2.36%. It currently has 5,602 holdings in total, with its top 10 assets comprising 17.80% of its AUM.
The fund pays $1.50 annually as dividends. This translates to a 3.71% yield at prevailing prices. Its dividend payouts have grown 1.9% and 6.9% CAGRs over the past three and five years, respectively. The fund has a four-year average yield of 2.91%.
The fund’s net inflows came in at $2.68 billion over the past year and $2.31 billion over the past six months. VWO has gained 13% over the past six months and 4.6% past month to close its last trading session at $40.88.
It’s no surprise that VWO has an overall B rating, equating to Buy in our proprietary POWR Ratings system.
VWO has an A grade for Trade and a B for Buy & Hold. Within the 100 ETFs in the B-rated Emerging Markets Equities ETFs group, VWO is ranked #23. To see VWO’s rating for Peer, click here.
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
Employing a representative sampling strategy, BIL seeks to track the performance of an index designed to measure the performance of public obligations of the U.S. Treasury that have a remaining maturity of greater than or equal to one month and less than three months.
As of April 13, BIL had $29.40 billion in AUM and a NAV of $91.59. Its gross expense ratio of 0.14% compares to the category average of 0.15%.
As of April 13, the fund’s top holdings include United States Treasury Bills 0.0% 02-MAY-2023 with a 9.27% weight, United States Treasury Bills 0.0% 18-MAY-2023 with an 8.41% weight, and United States Treasury Bills 0.0% 15-JUN-2023 with an 8.19% weight. The fund has a total of 19 holdings, with its top 10 assets comprising 69.68% of its AUM.
The fund pays $2.18 annually as dividends. This translates to a 2.38% yield at prevailing prices. Its dividend payouts have grown at 10.7% and 23.7% CAGRs over the past three and five years, respectively. The fund has a four-year average yield of 0.90%.
Over the past year, the fund’s net inflow came in at $15.61 billion. Its net inflow stood at $4.09 billion over the past six months. BIL has gained marginally over the past five days and intraday to close its last trading session at $91.63.
BIL’s strong fundamentals are 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 ETF has an A grade for Trade, Buy & Hold, and Peer. In the 33-ETF A-rated Ultra-Short Term Bonds group, it is ranked #2. Click here to see all POWR Ratings for BIL.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
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VEA shares were trading at $46.37 per share on Friday morning, down $0.13 (-0.28%). Year-to-date, VEA has gained 10.90%, versus a 8.43% 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.
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