18 Jun Investors are buying Amazon and low-volatility ETFs as uncertainty reigns supreme
(This is a wrap-up of the key money moving discussions on CNBC’s “Worldwide Exchange” exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day.) Investors are looking for opportunities in the Magnificent Seven and for ways to play the potential for more volatility in the market with Middle East tensions continuing. Worldwide Exchange pick: Amazon (AMZN) Jeff Kilburg of KKM Financial said Amazon is a smart buy even in a volatile market and credits its year to date decline to profit taking. “The way they are doing custom chips, the way they are approaching AWS (Amazon Web Services) … I’m excited,” said Kilburg. “Going back to Q4, Q1 of this year I was pounding the table concerned about Mag 7 being overconcentrated. What have we seen? A massive repricing, reevaluation of Mag-Seven. Right here, right now it makes sense.” According to FactSet, Amazon trades just below 32 time forward earnings. On Jan. 28, it traded at nearly 38 time forward earnings. The Fed and the bond market Philip Straehl of Morningstar sees opportunity in intermediate bonds in the current market environment. “The fiscal backdrop has been a source of some volatility on the long end, we like Treasurys as an investment we, we do favor the intermediate part of the curve,” said Straehl. “We continue to think the news cycle around the budget bill that is going to make its way through Congress in the weeks to come is going to provide an impetus for a bit more volatility.” Straehl added the short end of the curve could become more attractive if the Federal Reserve has a more hawkish outlook than expected. Lauren Goodwin of New York Life Investments sees continued volatility in the bond market, especially at the long end of the curve due in part to foreign investors reducing their purchases. “The dynamic … is real, it is happening. We are seeing it not only among retail but the most sophisticated institutional investors even if it’s just on the margin questioning their geographic allocation,” she said. Goodwin added she doesn’t expect the Fed to respond to this trend in the near term, but they could take action in the future. “The role that the Fed could play in the long term is a buyer of last resort. Engage in some financial repression with respect to maintaining some Treasury market volatility. We don’t think we are anywhere near that stage in policy management of the issue. We anticipate that dollar depreciation will continue on the margin … Treasury market volatility especially on the long end is a reality for investors.” Investing in Low Volatility ETFs Steve Sosnick of Interactive Brokers believes investors need to consider investing in low-volatility stocks and ETFs due to the geopolitical uncertainty. “Lower Beta, high divided stocks are definitely a way to stay invested while insulating yourself,” Sosnick said. “High Beta is great when the market is going up, but not when the market is floundering. If you want to stay invested dividends provide a lot of ballast.” Sosnick highlighted the Vanguard Russell 1000 Value ETF (VONV) along with the Vanguard U.S. Minimum Volatility ETF (VFMV) as two ways to the play the current market environment. Both have outperformed the S & P 500 year to date.