The Omicron variant injected a fresh dose of volatility into the markets, and more is expected in 2022, making low-volatility exchange traded funds (ETFs) a choice worth considering.
InspereX, a company that builds tech platforms for fixed income investments (among other services), notes in a ThinkAdvisor article that 54% of financial advisors surveyed believe that 2022 will bring bullish vibes to the market. It won’t be an encore of this year’s gains, according to 95% of advisors surveyed.
Even before the Omicron variant racked the markets with volatility, indexes were already fluxing up and down amid inflation concerns. Those same factors will also affect the markets next year, according to InspereX’s survey respondents.
“Seven in 10 respondents do not foresee calm equity markets ahead with low volatility and more record highs; in fact, 95% said there could be several equity market corrections in 2022,” the ThinkAdvisor article says. “More than half of advisors said they expected inflation to become a greater challenge but not big enough to end the stock market rally. In addition, only 21% of advisors believe the pandemic’s influence on markets is over, while 39% are unsure and 40% said it was not over.”
Bracing for a Bumpy Ride in 2022
Given the expected volatility in 2022, investors don’t have to settle for a bumpy ride. They can absorb the market shocks with ETFs like the FlexShares US Quality Low Volatility Index Fund (QLV) — with a 0.22% net expense ratio, the added low volatility feature doesn’t come at a high cost.
QLV tracks a proprietary index of U.S. companies that aims for a portfolio bias toward quality and reduced volatility. The index methodology first assesses financial strength and stability based on quality metrics like profitability, management efficiency, and cash flow. The lowest-scoring companies are excluded.
QLV seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Low Volatility Index. The underlying index is designed to reflect the performance of a selection of companies that, in aggregate, possess lower overall absolute volatility characteristics relative to the Northern Trust 1250 Index, a float-adjusted market capitalization-weighted index of U.S.-domiciled large- and mid-capitalization companies.
“The FlexShares US Quality Low Volatility Index Fund (QLV) is designed to provide exposure to US-based companies that possess lower overall absolute volatility and that also exhibit financial strength and stability, which we believe are quality characteristics,” a FlexShares Fund Focus says.
For more news, information, and strategy, visit the Multi-Asset Channel.