During market volatility, ETFs in gold, commodities, utilities, and consumer staples often perform well because they represent safer, defensive investments. Gold and commodities act as inflation hedges, while utilities and consumer staples offer stability since they provide essential services and goods that remain in demand regardless of economic conditions.
To that end, SPDR Gold Shares (GLD), The Utilities Select Sector SPDR Fund (XLU), and Vanguard Consumer Staples Index Fund ETF Shares (VDC) could be great choices to hedge against market volatility.
Amid September's uncertainty, the utility sector remains attractive for its defensive nature and resilience in volatile markets, as it provides essential services like electricity and water. Consumer staples such as food, beverages, and household goods also see steady demand. With expected interest rate cuts, utility and consumer-focused ETFs may offer stability, appealing to risk-averse investors seeking consistent returns.
Furthermore, gold performs well in volatile markets due to its role as a safe-haven asset. It offers portfolio diversification, serves as a store of value, and hedges against systemic risks and inflation.
Given this backdrop, let’s evaluate the aforementioned ETF picks for protection against volatility this September.
SPDR Gold Shares (GLD)
GLD is an exchange-traded fund launched and managed by World Gold Trust Services, LLC. The fund invests in commodity markets, specifically in gold. It tracks the performance of the price of gold bullion. SPDR Gold Trust was formed on November 12, 2004, and is domiciled in the United States. The investment seeks to reflect the performance of the price of gold bullion, minus the expenses of the Trust’s operations.
With $70.18 billion in AUM, the fund has a total of one holding Gold with 100% weighting.
GLD has an expense ratio of 0.40%, lower than the category average of 0.48%. It currently has a NAV of $237.98. Its fund inflows came in at $4.36 billion over the past six months.
GLD has gained 33.1% over the past year and 26.9% over the past nine months to close the last trading session at $237.34.
GLD’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has an A grade for Buy & Hold and Trade and a B for Peer. It is ranked first out of 38 ETFs in the Precious Metals ETFs group. To see all the POWR Ratings for GLD, click here.
The Utilities Select Sector SPDR Fund (XLU)
XLU is an exchange-traded fund launched by State Street Global Advisors, Inc. It is managed by SSGA Funds Management, Inc. It invests in the public equity markets of the United States, specifically in stocks of companies operating across the utilities sector. It invests in both growth and value stocks of companies with diversified market capitalizations. The fund seeks to track the performance of the Utilities Select Sector Index by using a full replication technique.
With $18.48 billion in assets under management (AUM), XLU’s top holding is NextEra Energy, Inc. (NEE) with a 14.61% weighting, followed by Southern Company (SO), with an 8.22% weighting, and Duke Energy Corporation (DUK) with 7.61% weighting. It has a total of 33 holdings.
XLU has an expense ratio of 0.09%, lower than the category average of 0.44%. It currently has a NAV of $78.53. Its fund inflows came in at $3.12 billion over the past six months.
The ETF pays an annual dividend of $2.19, which yields 2.77% on the current price. It has a four-year average dividend yield of 3.09%. Its dividend payouts have increased at a CAGR of 3.6% over the past three years and 3.5% over the past five years.
XLU has gained 24.9% over the year-to-date and 24.6% over the past six months to close the last trading session at $79.08.
XLU’s POWR Ratings reflect this promising outlook. XLU’s overall A rating equates to a Strong Buy in our proprietary rating system.
XLU has an A grade for Buy & Hold, Peer, and Trade. Of the 13 ETFs in the B-rated Utility ETFs group, it is ranked first. Click here to access all of XLU’s POWR Ratings.
Vanguard Consumer Staples Index Fund ETF Shares (VDC)
VDC is an exchange-traded fund launched and managed by The Vanguard Group, Inc. The fund invests in the public equity markets of the United States, focusing on stocks of companies operating in the consumer staples sector. It invests in growth and value stocks across diversified market capitalizations. The fund seeks to track the performance of the MSCI US Investable Market Index (IMI)/Consumer Staples 25/50 by using the full replication technique.
With $7.31 billion in assets under management (AUM), VDC’s top holding is Procter & Gamble Company (PG) with an 11.48% weighting, followed by Costco Wholesale Corporation (COST), with a 10.90% weighting, and Walmart Inc. (WMT), with 8.78%. It has a total of 106 holdings.
VDC has an expense ratio of 0.10%, lower than the category average of 0.46%. It currently has a NAV of $220.64. Its fund inflows came in at $169.82 million over the past three months.
VDC pays an annual dividend of $5.22, which yields 2.38% on the current price. It has a four-year average dividend yield of 2.41%. Its dividend payouts have increased at a CAGR of 5.7% over the past three years and 7.4% over the past five years.
VDC has gained 8.2% over the year-to-date and 21.4% over the past nine months to close the last trading session at $219.79.
VDC’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
VDC has an A grade for Buy & Hold, Peer, and Trade. In the B-rated Consumer-Focused ETFs group, it is ranked #3 out of 48 ETFs. Click here to access all of VDC’s POWR Ratings.
What To Do Next?
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GLD shares were trading at $237.59 per share on Wednesday afternoon, up $0.25 (+0.11%). Year-to-date, GLD has gained 24.28%, versus a 19.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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