Aggravated by the recent banking failures and associated recessionary risks, market volatility is anticipated to remain anchored for quite some time. Therefore, investors might delve into some quality ETFs iShares Core S&P Mid-Cap ETF (IJH) and Vanguard High Dividend Yield ETF (VYM) for 2023 to diversify their portfolio.
Macroeconomic headwinds and the recent regional banking collapses have weighed heavily on investor sentiments. The current economic scenario has raised fears of an impending recession.
The chief economist at Wells Fargo, Jay Bryson, discussing the banking sector chaos, commented, “There will be real and lasting economic repercussions from this, even if all the dust settles well.” He added, “I would raise the probability of a recession given what’s happened in the last week.”
Also, Goldman Sachs (GS) slashed the 2023 Gross Domestic Product (GDP) forecast by 0.3 percentage points to 1.2% and raised its recession probability from 25% to 35%. Furthermore, the chief economist of Apollo Global Management, Torsten Slok, said he is bracing for a hard landing given the present crisis.
As market volatilities and recessionary fears are not likely to ease anytime soon, it might be wise to diversify one’s portfolio through quality ETFs. Hence, fundamentally strong ETFs IJH and VYM could be ideal investments that might help investors to hedge against a potential market downturn.
iShares Core S&P Mid-Cap ETF (IJH)
IJH seeks to track the investment results of an index composed of mid-capitalization U.S. equities and offers a balanced portfolio of stocks, including close to 400 individual names and spreading exposure relatively evenly.
As of March 20, IJH has $64.82 billion AUM and a NAV of $241.20. Its expense ratio of 0.05% compares to the category average of 0.31%.
IJH’s top holdings include Axon Enterprise Inc. (AXON) with a 0.71% weight, Reliance Steel & Aluminum Co. (RS) with a 0.69% weight, Hubbell Incorporated (HUBB) with a 0.62% weight, and Lattice Semiconductor Corporation (LSCC) with a weight of 0.60%. The fund has a total of 412 holdings, with the top 10 assets comprising 5.97% of AUM.
IJH’s annual dividend of $4.07 yields 1.69% on prevailing prices. Its dividend payouts have increased at a 6.8% CAGR over the past three years and a 12.5% CAGR over the past five years. The fund has a four-year average yield of 1.48%.
Over the past six and three months, the fund’s net inflow came in at $3.38 billion and $1.40 billion, respectively.
IJH has gained 1.7% over the past six months and intraday to close its last trading session at $241.34. It has a five-year beta of 1.10.
IJH’s POWR Ratings are consistent with its promising outlook. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Buy & Hold and Peer. In the 48-fund Mid Cap Blend ETFs group, it is ranked first.
To see all POWR Ratings for IJH, click here.
Vanguard High Dividend Yield ETF (VYM)
VYM is an exchange-traded fund managed by The Vanguard Group, Inc. The ETF offers exposure to dividend-paying large-cap companies that exhibit value characteristics within the U.S. equity market.
As of March 20, VYM has a $50.28 billion AUM and a NAV of $102.23. Its expense ratio of 0.06% compares to the category average of 0.47%.
VYM’s top holdings include Exxon Mobil Corporation (XOM) with a 3.25% weight, JPMorgan Chase & Co. (JPM) with a 3% weight, Johnson & Johnson (JNJ) with a 2.90% weight, and The Procter & Gamble Company (PG) with a 2.33% weight. The fund has a total of 440 holdings, with the top 10 assets comprising 23.4% of AUM.
VYM pays $3.24 annually as dividends, which translates to a yield of 3.31% at the current price. Its dividend payout has grown 6.6% CAGR over the past five years. The fund has a four-year average yield of 3.11%.
VYM’s fund flows came in at $2.78 billion over the past month and $4.09 billion over the past six months.
VYM has gained marginally over the past six months to close the last trading session at $102.20. The fund has a beta of 0.82.
It’s no surprise that VYM has an overall B rating, which equates to Buy in our POWR Ratings system.
VYM has a B grade for Buy & Hold and Peer. It is ranked first among 86 funds in the Large Cap Value ETFs group.
Beyond what we have discussed above, additional ratings for VYM can be found here.
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IJH shares were trading at $246.25 per share on Tuesday morning, up $4.91 (+2.03%). Year-to-date, IJH has gained 1.80%, versus a 3.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
2 ETFs to Help Hedge Against a Potential Recession StockNews.com
