Market volatility is rife ahead of the Fed's September rate hike. Moreover, Federal Reserve Governor Christopher Waller is expected to back another 75-bps hike in the upcoming meeting. The CBOE Volatility Index is up 37.1% year-to-date.
Amid such monetary tightening policies, recession fears are rising. According to UBS Group AG (UBS), the odds of a U.S. economic recession soared to 60% last month, vaulting from its June recession odds of 40%.
In addition, Bank of America Corporation's (BAC) Global Fund Manager Survey for August found that 58% of investors expect a recession in the coming months, the highest rate since May 2020.
Given the backdrop, it could be wise to avoid fundamentally weak ETFs iShares 20+ Year Treasury Bond ETF (TLT), VanEck Gold Miners ETF (GDX), iShares MSCI Emerging Markets ETF (EEM), and iShares China Large-Cap ETF (FXI).
iShares 20+ Year Treasury Bond ETF (TLT)
TLT is a popular option for investors seeking exposure to long-dated Treasuries. The index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to 20 years.
With $24.68 billion in assets under management (AUM), TLT's top holdings include United States Treasury Bond 1.875% 15-FEB-2051 with a 12.81% weighting, followed by United States Treasury Bond 2.0% 15-AUG-2051 at 7.31%, and United States Treasury Bond 1.625% 15-NOV-2050 at 6.90%. It has 35 holdings in total.
TLT's dividend payouts have declined at an 8.6% CAGR over the past three years and 17.5% for the past five years. Over the past year, TLT has lost 27.6%.
TLT has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
TLT has an F grade for Trade and a D for Peer. It is ranked #25 out of 40 ETFs in the Government Bonds ETFs group. Click here to see more of TLT POWR Ratings.
VanEck Gold Miners ETF (GDX)
GDX offers investors exposure to some of the largest gold mining companies in the world. The non-diversified fund comprises publicly traded companies involved in the mining of gold and silver.
GDX has $9.85 billion in AUM. Newmont Corporation (NEM) has a 12.43% weighting in the fund as its top holding, followed by Barrick Gold Corporation (GOLD) at 10.26% and Franco-Nevada Corporation (FNV) at 8.76%. It has 56 holdings in total.
Its net outflows came in at $234.78 million over the past month. Moreover, its expense ratio of 0.51% is higher than the 0.48% category average. GDX has lost 20.5% year-to-date.
GDX's POWR Ratings reflect its bleak prospects. It has an overall D rating, equating to a Sell. Also, it has an F grade for Trade and a D for Buy & Hold and Peer.
GDX is ranked #19 of 38 ETFs in the D-rated Precious Metals ETFs group. Click here to see more GDX ratings.
iShares MSCI Emerging Markets ETF (EEM)
EEM is a popular ETF, providing exposure to emerging economies' stock markets. The underlying index includes large and mid-capitalization companies.
The fund has $24.10 billion in AUM. Its top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) with a 6.02% weighting, Tencent Holdings Ltd. (TCEHY) at 3.94%, and Samsung Electronics Co., Ltd. at 3.07%. It has a total of 1242 holdings.
Its net outflows over the past month came in at $1.05 billion. Its expense ratio of 0.68% is higher than the category average of 0.49%. Over the past year, EEM has lost 24.6%.
EEM has an overall D rating, equating to Sell in our POWR Ratings system. It has an F grade for Trade and a D for Peer grade. It is ranked #68 of 100 ETFs in the Emerging Markets Equities ETFs group. Click here to get EEM's rating for Buy & Hold.
iShares China Large-Cap ETF (FXI)
FXI offers exposure to the Chinese equity market. However, the fund consists of just a handful of large-cap stocks and maintains heavy biases toward the financial and energy industries.
FXI has $5.01 billion in AUM. Meituan Class B has a 9.03% weighting in the fund as its top holding, followed by Alibaba Group Holding Ltd. (BABA) at 8.25% and TCEHY at 8.10%. It has a total of 52 holdings. In addition, its 0.74% expense ratio is higher than the category average of 0.64%.
FXI's dividend payouts have declined at a 12.1% CAGR over the past three years and a 7.7% CAGR for the past five years. Over the past year, the fund has lost 28.4%.
The ETF has an overall D rating, translating to Sell in our POWR Ratings system. It has an F grade for Trade. FXI is ranked #9 of 40 ETFs in the F-rated China Equities ETFs group. Click here for Buy & Hold and Peer grade ratings.
TLT shares fell $1.07 (-1.00%) in premarket trading Tuesday. Year-to-date, TLT has declined -27.06%, versus a -14.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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