Concerns over the long-term impact of virus spooked investors causing equity markets to see significant losses similar to those seen during the Global Financial Crisis in 2008.
Most notably, 9 March was branded ‘Black Monday’ as the largest indices for leading economies were hit with significant losses when markets opened after the weekend. This was caused as the price of oil fell 30% when OPEC and its allies failed to agree on a production cut when demand reached a nine-year low.
Between New Years and Black Monday, the S&P 500 and the FTSE 100 had fallen 15.7% and 21.6%, respectively.
While large-cap equities and various industries are being heavily impacted by the outbreak in such a short space of time, are there any exposures that could be more immune during this period of uncertainty?
WisdomTree Physical Gold ETF (PHAU)
One of the most popular safe haven investors flock to in times of volatility and spiralling markets is gold. While the S&P 500 and FTSE 100 fell double digits, the price of gold did the opposite. Over the same period, the price of gold climbed 10.3%, peaking at $1,700/oz.
In tandem with the gold price rally, PHAU has similarly seen its net asset value (NAV) climb 8.7%.
Gold ETFs saw record inflows in February, bolstering the global assets under management (AUM) to $157bn. With the intervention of central banks implementing quantitative easing and rate cuts, the demand for gold ETFs, just like its price, could continue going up.
First Trust Cloud Computing UCITS ETF (FSKY)
With a significant number of companies mandating employees to work from home for significantly long periods, cloud computing is going to become vital for businesses to run as usual.
FSKY offers exposures to companies that offer these services and products.
It is split into three segments which each offer different exposures to cloud computing. Firstly the pure-play cloud service providers, secondly companies that offer goods and services for cloud computing, and finally companies that indirectly support the use of cloud computing technology.
FSKY enables investors to utilise the likely growth in demand for these products over the coming weeks as even more workers are encouraged to work remotely.
Its top holdings include Microsoft (5.4%), Amazon (5.1%), Alphabet (4.7%) and Oracle (4.4%) and comes with a total expense ratio (TER) of 0.6%.
VanEck Vectors Video Gaming & eSports UCITS ETF (ESGB)
For similar reasons, the ESGB is likely to benefit from consumers spending more time at home with a need for entertainment.
ESGB is comprised of companies that generate at least 50% of its revenue from video gaming and eSports. Some of its largest holdings include gaming giants Blizzard and Nintendo which account for 6.3% and 4.8% of the fund, respectively.
Having launched in July last year, it has accumulated $60m assets under management with a TER of 0.55%.
iShares USD Treasury Bond 20+yr UCITS ETF (IDTL)
In conditions where most exposures are producing negative returns year-to-date, an exposure managing to stay positive is long-duration government bonds in the US and UK. IDTL had a YTD performance of 13.9% by February’s end.
Its price continued to climb in the first couple of weeks in March as a result of two rate cuts by the Federal Reserve which was reduced to zero. Additionally, in tandem with the rate cuts, $700bn was pumped into the economy as the Fed increases its holdings in Treasury securities by $500bn and mortgage-backed securities by £200bn.
There is an expectation that further cuts could be made if the US economy continues to struggle which is becoming increasingly likely. This would see long-duration Treasury bonds like IDTL continue to positively perform.
iShares Core UK Gilts UCITS ETF (IGLT)
Earlier this month, the Bank of England cut its base rate from 0.75% to 0.25% and, similar to the Fed, is likely to implement further cuts in the coming weeks. This could benefit UK gilts making IGLT an attractive option at a low fee of 0.07%.
The European Central Bank has avoided cutting rates which goes against expectations after Italy went into lockdown. The ECB's main rate sits in negative territory at -0.5%.
Weixu Yan, head of ETF research at Close Brothers Asset Management, told ETF Stream: “While there is no risk-free area to invest in, it is crucial that investors think long-term; those who manage to stay calm and pragmatic in the face of volatility are likely to reap the rewards in the future.”