Volatilities in the stock market could continue for a while on the backs of hotter-than-expected macro data, followed by the Fed’s commitment to continue rate hikes until the 2% inflation target is achieved. Therefore, investors can check out ETFs Vanguard S&P 500 ETF (VOO) and SPDR S&P MIDCAP 400 ETF Trust (MDY) for March 2023 to diversify their portfolio.
Resilient consumer spending, despite sky-high inflation and unemployment at a record low, revved up worries of inflation not easing quickly and smoothly as hoped. It raised the odds of interest rate hikes in the upcoming months, and after the Fed's hawkish statements, investors have become more bearish.
On the one hand, experts anticipate an economic downturn amid tenacious rate hikes. On the other hand, some believe in a no-recession scenario. For instance, as per TS Lombard chief U.S. economist Steven Blitz, “There’s going to be a recession, and the Fed is going to push the point and they’re gonna get the unemployment rate to at least 4.5%, in my guess it probably ends up getting up to as high as 5.5%”.
On the flip side, chief economist for Associated General Contractors of America, Ken Simonson, believes the U.S. economy could avoid a recession altogether. Credit Suisse’s Jonathan Golub thinks the economy should not expect a recession until the latter half of 2025.
As market volatilities are not likely to subside anytime soon, it might be wise to diversify one’s portfolio through quality ETFs. Hence, fundamentally strong ETFs VOO and MDY might be the best picks for March 2023.
Vanguard S&P 500 ETF (VOO)
VOO is an ETF launched and managed by The Vanguard Group, Inc. It offers exposure to growth and value stocks of mega and large-cap companies in the U.S. equity market. It tracks the S&P 500 Index using the full replication technique.
As of March 8, VOO’s NAV stands at $366.52. The fund has approximately $275.66 billion in assets under management (AUM). It has an expense ratio of 0.03%, significantly lower than the category average of 0.37%.
VOO’s top holdings are Apple Inc. (AAPL), which has a 6.30% weighting in the fund. It is followed by Microsoft Corporation (MSFT) at 5.39% and Amazon.com, Inc. (AMZN) at 2.67%. The fund has a total of 510 holdings, with the top 10 assets comprising 24.86% of AUM.
The fund pays $5.95 per unit annually as dividends, translating to a yield of 1.62% at the current price level. Its dividend payouts have grown 2.2% CAGR over the past three years and 6.4% CAGR over the past five years. The fund has a four-year average yield of 1.66%.
Its net inflow came in at $2.78 billion over the past three months and $8.82 billion over the past six months. Over the past five days, VOO has gained 1.1% to close the last trading session at $366.55. Moreover, it gained marginally intraday. It has a five-year beta of 1.00.
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 a B grade for Trade and Buy & Hold. It ranks #55 of 274 funds in the B-rated Large Cap Blend ETFs category. Click here to see all ratings for VOO.
SPDR S&P MIDCAP 400 ETF Trust (MDY)
MDY aims to provide before-expenses investment results that correspond with the price and yield performance of the growth and value stocks of mid-cap companies. The fund follows a replication strategy and offers exposure to mid-cap U.S. stocks.
As of March 7, MDY has a $19.50 billion AUM and a NAV of $472.04. Its expense ratio of 0.23% compares to the category average of 0.34%.
MDY’s top holdings include Fair Isaac Corporation (FICO) with a 0.80% weight, Reliance Steel & Aluminum Co. (RS) with a 0.70% weight, Axon Enterprise Inc (AXON) with a 0.69% weight, and Carlisle Companies Incorporated (CSL) with a 0.62% weight. The fund has a total of 401 holdings, with the top 10 assets comprising 5.77% of AUM.
MDY’s annual dividend of $6.05 yields 1.28% on prevailing prices. Its dividend payouts have increased at a 6.2% CAGR over the past three years and an 8.1% CAGR over the past five years. The fund has a four-year average yield of 1.24%.
Over the past year, the fund’s net inflow came in at $169.84 million. Over the past six months, it came in at $491.78 million.
MDY has gained 3.6% over the past three months and 5.3% over the past six months to close its last trading session at $472.39. It has a five-year beta of 1.10.
MDY’s POWR Ratings are consistent with its promising outlook. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Trade and Buy & Hold and a B for Peer. In the A-rated 48-fund Mid Cap Blend ETFs group, it is ranked #2. To see all POWR Ratings for MDY, click here.
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VOO shares were trading at $367.82 per share on Thursday morning, up $1.27 (+0.35%). Year-to-date, VOO has gained 4.69%, versus a 4.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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