After experiencing significant volatility since the beginning of the year, the stock market stabilized briefly. However, the benchmark stock indexes have declined again over the past five days on concerns over further sanctions on Russia and the possibility of more extensive interest rate hikes by the Federal Reserve to tame soaring inflation.
Inflation has climbed to a multi-decade high. February data indicated a 7.9% rise, its highest since January 1982. Recession fears loom because inflation is expected to rise higher amid a tight labor market and a surge in crude oil prices. The Federal Reserve has indicated that it will implement aggressive interest rate hikes to stem the skyrocketing inflation. Also, the talks between Russia and Ukraine have failed to make any significant headway, and the United States has imposed a new round of sanctions on Russia. All this should drive further market volatility.
Amid the market uncertainty, ETFs with exposure to booming sectors or stocks could help generate steady returns in a less risky way. Therefore, we think it could be wise to add Energy Select Sector SPDR Fund (XLE – Get Rating), Vanguard Value Index Fund (VTV – Get Rating), SPDR S&P Metals and Mining ETF (XME – Get Rating), First Trust NASDAQ Cybersecurity ETF (CIBR – Get Rating), and iShares U.S. Aerospace & Defense ETF (ITA – Get Rating) to one’s portfolio.
Launched by State Street Global Advisors, Inc., XLE is one of the most popular energy ETFs. It seeks to track the performance of the Energy Select Sector Index and the S&P 500 Index. In addition to the U.S. energy industry, the fund also holds shares of many of the largest oil producers.
With $36.99 billion in assets under management (AUM), XLE’s top holdings include Exxon Mobil Corporation (XOM), with a 22.18% weighting in the fund, followed by Chevron Corporation (CVX) at 21.45%, and EOG Resources, Inc. (EOG) at 4.79%. It currently has 23 holdings in total. Over the past year, the ETF’s fund flows have come in at $833.21 million. In addition, its 0.10% expense ratio compares favorably to the 0.46% category average.
XLE pays an annual dividend of $2.16, which yields 3.75% at the prevailing share price. Its four-year dividend yield stands at 5.45%. Its dividends have increased at a 6.75% CAGR over the past three years and 8.57% over the past five years. Over the past year, the fund has gained 56%.
VTV is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It invests in value stocks of large-cap companies. The fund seeks to track the performance of the CRSP U.S. Large-Cap Value Index, which tracks the investment return of large-capitalization value stocks.
Berkshire Hathaway Inc. (BRK-B) has a 3.15% weighting in the fund as its top holding, followed by UnitedHealth Group Incorporated (UNH) at 2.51% and Johnson & Johnson (JNJ) at 2.43%. VTV has $103.17 billion in AUM. Its fund flows have come in at $9.46 billion over the past three months. Its 0.04% expense ratio is lower than the 0.49% category average.
VTV pays a…