Wall Street has just ended a lackluster month of February as the three main indexes ended the month in the red. Immense volatility was also seen on the stock exchanges. The Russian-Ukrainian war saga continues as talks between the countries’ representatives ended without any firm resolution. At the same time, reports indicate that Russia continues to attack Ukraine as the latter’s soldiers and civilians attempt to resist the invasion in key cities. A BBC report says satellite images show an approximately 40-mile-long Russian armored convoy heading towards Ukraine’s capital, Kiev.
In response to the invasion, sanctions against Moscow continue to pile up. The European Union has informed of the imposition of sanctions against more than two dozen Russians, including President Vladimir Putin‘s press secretary (according to a CNBC article). These sanctions were imposed against oil oligarchs, Kremlin officials, propagandists, military figures and bankers who play an influential role in supporting Moscow’s economy.
There is no doubt that the Kremlin’s decision is widely condemned by world leaders, military specialists and grassroots protesters, while provoking violent outrage. Even their local populations do not support Russia’s decision.
According to data released by the Ukrainian Foreign Ministry on February 28, Russian forces suffered heavy losses of about 4,500 men, nearly 200 tanks and about 60 aircraft.
In this context, let’s look at some ETF domains that may be good investment options amid the Russian-Ukrainian conflict:
Geopolitical tensions between Russia and Ukraine have put a strain on global commodity markets. It is undeniable that Russia and Ukraine occupy important positions as producers in the world commodity market. Thus, the escalation of tensions triggered a rally in a wide range of commodities.
The latest developments may slow production activities and impact the export of raw materials and goods. This is true as tensions have raised fears of a supply disruption in an already tight commodity market. A surge in the prices of crude oil, natural gas, grains and metals has already been observed.
It is important to note that commodity ETFs primarily hold futures contracts and there could be rollover costs or returns involved. Therefore, these ETFs are more suitable for short-term trading or hedging activities.
Here are a few commodity ETFs that can be considered as the geopolitical crisis deepens: Teucrium Wheat Bottoms WHEAT, iShares S&P GSCI Commodity Indexed Trust GSG, Teucrium corn bottoms (CORN) and First Trust Global Tactical Commodity Strategy Fund (FTGC) (read: Tensions between Russia and Ukraine escalate: ETF’s strategies for winning).
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and high margins. These stocks also have a track record of stable or increasing sales and earnings growth. Compared to traditional funds, these products help reduce volatility and perform quite well in times of market uncertainty. Additionally, academic research has proven that high-quality companies consistently offer better risk-adjusted returns than the broader market over the long term.
Considering this, we have highlighted some ETFs like iShares MSCI USA Quality Factor ETF QUALITY, Invesco S&P 500 Quality ETF SPHQ, FlexShares Quality Dividend Index Fund (QDF), SPDR MSCI USA ETF StrategicFactors (QUS) and Barron’s 400 ETF (BFOR) targeting this niche strategy. These could enjoy smooth trading and generate above-market returns in the current market environment (read: 4 ETFs to invest in on rising market volatility).
Low Volatility ETFs
The demand for “low volatility” or “minimum volatility” funds typically increases during tumultuous times. These seemingly safe products generally do not rise in bull market conditions, but offer more protection than unpredictable products. Offering more stable cash flows than the broader market, these funds are less cyclical in nature. Here are some options — ETF iShares MSCI USA Min Vol Factor USMV, Invesco S&P 500 Low Volatility ETF SPLV, iShares MSCI Global Min Vol Factor ETF (ACWV) and Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: 5 low-volatility ETFs to bet on rising concerns).
Oil prices rose amid the Russia-Ukraine geopolitical crisis as oil futures hit a more than seven-year high on Feb. 28. Russia’s move drives up oil prices as it is one of the world’s largest oil suppliers. and natural gas. Russia is the world’s second largest oil producer. European refineries mostly source their crude oil from Russia. Notably, Russia also supplies about two-fifths of its natural gas supply to Europe. In fact, Russia has become the largest supplier of natural gas and oil to the European Union in 2021. Not only crude oil, but the protracted war between Ukraine and Russia may also lead to limited oil supplies. edible.
Against this backdrop, investors can take a closer look at the oil commodities space and its associated ETFs like United States Petroleum Fund USO, Invesco DB Oil Fund BOD, United States Brent Oil Fund (NOB) and 12 month U.S. Oil Fund (USL) (see all energy ETFs here)
Investors are paying close attention to cybersecurity stocks as they rallied amid growing panic from cyberattacks. Market experts have warned of the possibility of cyberattacks by Russia in retaliation for Western sanctions. The West continues to isolate Moscow by imposing several sanctions on Russian banks, its sovereign debt as well as Russian President Vladimir Putin and Foreign Minister Sergei Lavrov. In particular, cyberattacks may be part of Russia’s war strategy. Several Ukrainian entities were hacked last week. Additionally, the increasing adoption of breakthrough technologies exposes businesses, governments, and organizations to cyber risks.
Investors looking to tap into the cybersecurity market boom might consider the following ETFs: ETFMG Prime Cyber Security ETF TO HACK, First Trust NASDAQ Cybersecurity ETF CIBR, Global X Cybersecurity ETF (BUG) and iShares Cybersecurity and Technology ETF (IHAK).
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US Oil ETF (USO): ETF Research Reports
Invesco DB Oil ETF (DBO): ETF Research Reports
ETFMG Prime Cyber Security ETF (HACK): ETF Research Reports
iShares MSCI USA Quality Factor ETF (QUAL): ETF Research Reports
Invesco S&P 500 Quality ETF (SPHQ): ETF Research Reports
iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
Teucrium Wheat ETF (WEAT): ETF Research Reports
iShares S&P GSCI CommodityIndexed Trust (GSG): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.