Low Beta ETFs To Buy As Bulls Play Hide & Seek

The stock market bulls are playing hide and seek as the Dow Jones Industrial Average has been trading in wild swings this week. The blue-chip index fluctuated in a range of 1,600 and 1,200 on Monday and Tuesday, respectively, marking the two biggest intraday ranges in history. The index also swung in a range of more than 500 points on Wednesday, indicating heightened volatility.

Renewed concerns over faster-than-expected rates hike have shaken complacency off the stock market. The panic was created late last week after the January jobs data, which showed that wages increased at the fastest pace in more than eight years. The strong number has sparked fears of inflation that might force the Fed to adopt speedy rate hikes.

The Fed intends to increase interest rates three times this year but the rise in inflation could lead to four hikes. Higher-than-expected rise in interest rates would lead to a rise in borrowing cost, thereby dulling the appeal for equities. As a result, bond yields have risen sharply with 10-year yields climbing to 2.845% from 2.77% at the start of the month. Further, political turmoil and threats of overvaluation are also weighing on the bull market, which is drawing closer to its ninth anniversary.

However, the stock market is currently in a much better condition thanks to encouraging domestic and international fundamentals, better-than-expected corporate earnings and the new tax legislation. The massive $1.5-trillion tax cuts will create an economic surge, boosting job growth and earnings of corporates.

About halfway through the earnings season, the picture appears to be solid with all around strength and momentum. Not only is an above-average proportion of companies beating top and bottom-line expectations, but estimates for the current period are also materially going up, the per Earnings Trends.

Investors seeking to remain invested in the equity world could consider low beta ETFs & stocks as long as the chaos prevails.