The positive inflow of economic data in recent weeks has fostered prospects of a ‘no landing’ scenario where the economy would continue to fly high without experiencing a recession or slowdown.
The nation’s hiring has chugged of late, with the Labor Department reporting that employers added a robust 517,000 jobs in January, which is more than 2.7 times increase than market expectations. Also, the unemployment rate decreased to a 53-year low of 3.4%, depicting strong labor market resilience.
However, yields have climbed more quickly on short-term Treasury than on longer-term bonds, indicating a red flag that a recession is looming. Last week the yield on the 10-year Treasury dropped more than 0.85 percentage points below the two-year yield, making the most inverted curve since 1981.
An uncertain market environment conventionally necessitates the need to load up defensive players. Fundamentally strong Exchange-Traded Funds (ETFs), Vanguard S&P 500 ETF (VOO) and SPDR S&P 500 ETF Trust (SPY), could be added to one’s retirement portfolio for steady returns.
Vanguard S&P 500 ETF (VOO)
VOO is an ETF launched and managed by The Vanguard Group, Inc. It offers exposure to stocks of mega and large-cap companies in the U.S. equity market by tracking the S&P 500 Index using the full replication technique.
With $282.26 billion in AUM, VOO’s top holding is Apple Inc. (AAPL), which has a 6.04% weighting in the fund. It is followed by Microsoft Corporation (MSFT) at 5.55% and Amazon.com, Inc. (AMZN) at 2.32%. The fund has a total of 506 holdings, with the top 10 assets comprising 24.34% of AUM.
VOO’s expense ratio is 0.03%, significantly lower than the category average of 0.37%. The fund pays $5.95 per unit annually as dividends, translating to a yield of 1.59% at the current price level. It saw a net inflow of $441.19 million over the past month and $22.02 billion over the past year. Its five-year monthly beta is 1.00.
Over the past month, VOO has gained 3.6% to close the last trading session at $379.35. The fund’s NAV was $379.31 as of February 13, 2023.
VOO’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VOO has an A grade for Trade and a B for Buy & Hold. It ranks #116 of 274 funds in the B-rated Large Cap Blend ETFs category. Click here to see all ratings for VOO.
SPDR S&P 500 ETF Trust (SPY)
SPY is one of the largest and most heavily-traded ETFs launched and managed by State Street Global Advisors, Inc. The fund aims to provide before-expenses investment results that correspond with the price and yield performance of the S&P 500 Index. It follows a replication strategy and offers exposure to large-cap U.S. stocks.
As of February 10, the fund’s NAV stands at $408.03. It has an AUM of approximately $377.32 billion. The fund’s expense ratio of 0.09% is lower than the category average of 0.37%.
SPY’s top three holdings are AAPL with a 6.60% weighting, MSFT with a 5.75% weighting, and AMZN with a 2.55% weighting. The fund has a total of 505 holdings, with its top 10 assets comprising 25.63% of its AUM.
The fund’s net inflow came in at $5.14 billion over the past six months and $3.49 billion over the past year. It has a five-year monthly beta of 1.00.
The ETF has gained 3.6% over the past month to close the last trading session at $412.83. SPY has a trailing-12-month dividend of $6.32, which yields 1.55% on the current price level. It has a four-year average yield of 1.60%.
SPY’s POWR Ratings reflect its promising prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.
SPY has an A grade for Trade and a B for Buy & Hold. It is ranked #113 in the same category. To see SPY’s rating for Peer, click here.
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VOO shares were trading at $379.51 per share on Tuesday morning, up $0.16 (+0.04%). Year-to-date, VOO has gained 8.02%, versus a 7.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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