This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today's article features Gary Stringer, president and chief investment officer of Memphis, Tennessee-based Stringer Asset Management.
While the U.S. stock market is nearing all-time highs, some of our favored economic indicators have weakened. Their weakening suggests sluggish economic growth ahead, and their deterioration will likely make equity markets more vulnerable. Some of these areas showing weakness include the following:
- Credit Conditions: a flat-to-inverted yield curve (10-year Treasury vs. 1-year Treasury)
- Monetary Conditions: liquidity growth (M1) slowing significantly
- Survey Data: the JPMorgan Global PMI Composite for May showed the slowest global economic growth since June 2016 and the lowest level of business confidence since that data set began in 2012.
We expect global economic growth to continue along with higher equity prices, subject to bouts of volatility.
Our longer-term view of U.S. economic fundamentals remains positive based on a growing labor force, positive productivity trends and a lack of inflationary pressure.
However, investors may want to add exposure to holdings that generally exhibit attractive return consistency and relatively low correlation to more traditional equity holdings, including those that tend to be less sensitive to interest rate changes.
There are several options for investors looking for ETF that fit this theme.
A few of those options include the SPDR SSGA U.S. Large Cap Low Volatility ETF (LGLV), the Invesco S&P 500 ex-Rate Sensitive Low Volatility ETF (XRLV) and the First Trust Horizon Managed Volatility Domestic ETF (HUSV).
At the time of writing, Stringer Asset Management held USMV among its universe of ETFs included in its suite of ETF Portfolios. Stringer Asset Management is a Memphis, Tennessee third-party investment manager and ETF strategist. Contact Stringer Asset Management at 901-800-2956 or at [email protected]. For a complete list of relevant disclosures, please click here.