Despite the Federal Reserve’s restrictive policies since last year to control inflation, the latest Consumer Price Index (CPI) data showed that inflation rose by 0.5% sequentially and 6.4% year-over-year. Moreover, the hotter-than-expected jobs data from last month suggests that there is still work to be done to achieve the Fed’s 2% inflation target.
If inflation fails to slow down and the jobs market continues to remain tight, then the Fed might be forced to raise the benchmark interest rate higher than it had previously predicted. Goldman Sachs predicted interest rates to rise three more times this year, taking the rates to a peak range of 5.25-5.5%.
Amid this uncertain macroeconomic environment, investors could look to buy Exchange-Traded Funds (ETFs) with diversified holdings to keep their portfolios stable against market volatility.
To that end, it could be wise for investors to buy ETFs Vanguard Total Bond Market Index Fund (BND), Vanguard Emerging Markets Stock Index Fund (VWO), and SPDR S&P MIDCAP 400 ETF Trust (MDY).
Vanguard Total Bond Market Index Fund (BND)
BND is an exchange-traded fund launched and managed by The Vanguard Group, Inc. The fund invests in investment-grade debt securities, including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities. It seeks to track the performance of the Bloomberg U.S. Aggregate Float Adjusted Index.
BND has $87.36 billion in assets under management (AUM). Its top holdings include Agency Bond, with an 11.51% weighting, followed by Mortgage-backed Securities at 0.90%. It currently has 9,640 holdings in total.
Over the past three months, the ETFs fund flow has been $4.19 billion. In addition, BND’s 0.03% expense ratio compares favorably to the 0.41% category average. As of February 16, 2023, its net asset value (NAV) stood at $72.35. Over the past three months, the fund has gained marginally to close the last trading session at $72.38.
BND’s POWR Ratings reflect this promising outlook. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BND has a B grade for Trade and Buy & Hold. Of the 49 ETFs in the B-rated Intermediate-Term Bond ETFs group, BND is ranked #14. Click here to see BND’s rating for Peer.
Vanguard Emerging Markets Stock Index Fund (VWO)
VWO is an ETF launched and managed by The Vanguard Group, Inc. It invests in public equity markets of the global emerging region. It invests in stocks of companies operating across diversified sectors. It seeks to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index.
VWO has a $73.27 billion AUM. Its top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), with a 4.84% weighting in the fund, followed by Tencent Holdings Ltd. (TCEHY) at 3.97%, and Alibaba Group Holding Ltd. (BABA) at 2.81%. It currently has 4,603 holdings in total.
The ETF’s 0.08% expense ratio is considerably lower than the 0.49% category average. VWO has seen $2.28 billion in net inflows over the past three months. As of February 16, 2023, its NAV stood at $40.95. VWO has gained 5.3% year-to-date to close the last trading session at $41.04.
It’s no surprise that VWO has an overall B rating, equating to Buy in our proprietary POWR Ratings system.
VWO has a B grade for Trade. Within the 100 ETFs in the B-rated Emerging Markets Equities ETFs group, VWO is ranked #8. To see VWO’s ratings for Buy & Hold and Peer, click here.
SPDR S&P MIDCAP 400 ETF Trust (MDY)
MDY is an ETF launched and managed by State Street Global Advisors, Inc. It invests in public equity markets of the United States. The fund invests in stocks of companies operating across diversified sectors. The fund invests in growth and value stocks of mid-cap companies. It seeks to track the performance of the S&P MidCap 400 Index.
With $20.08 billion AUM, MDY’s major holdings include Fair Isaac Corporation (FICO) with a 0.77% weighting in the fund, followed by Reliance Steel & Aluminum Co. (RS) at 0.60%, and Hubbell Incorporated (HUBB) at 0.59%. It currently has 402 holdings in total.
The ETF’s 0.23% expense ratio compares favorably to the 0.34% category average. Over the past three months, the ETFs fund flow has been $219.32 million. As of February 16, 2023, its NAV stood at $487.17. The fund has gained 6.4% over the past three months to close the last trading session at $487.06.
MDY’s POWR Ratings reflect solid prospects. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
In addition, MDY has an A for Trade and Buy & Hold grades. Within the 48 ETFs in the A-rated Mid Cap Blend ETFs group, it is ranked #3. Get MDY’s rating for Peer here.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
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BND shares were trading at $72.38 per share on Friday morning, down $0.00 (0.00%). Year-to-date, BND has gained 0.99%, versus a 6.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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