As market volatility continues to rise, one of the largest dividend exchange-traded funds has significantly increased its investment in the energy sector. This particular fund manages around $70 billion in assets and holds the title of being the second-biggest ETF of this kind. According to FactSet, in recent weeks, approximately $2 billion was added to the fund from new investments made by various investors.
On March 21, the fund significantly increased its holdings in energy stocks, boosting them to 21% from 12%, as per their routine "reconstitution." Its top position remains ConocoPhillips, accounting for 4.7% of the total. This adjustment aimed to align the portfolio more closely with the intended investment goals.
Energy stocks have declined by 7.4% so far this year following the sell-off, outperforming the S&P 500 which has dropped by 13.5%. However, these stocks are highly sensitive to fluctuations in commodity prices, making them quite volatile. According to a report from State Street Global Advisors, the energy sector exhibits the greatest five-year volatility among all sectors. Additionally, oil prices are currently falling, OPEC might increase output, and new steel tariffs could further elevate expenses for companies within the industry.
CFRA analyst Aniket Ullal states that this strategy isn’t fundamentally flawed, yet cautious investors may prefer funds like the Vanguard Dividend Appreciation ETF or the iShares Core Dividend Growth ETF. These alternatives concentrate on firms that consistently increase their dividends instead of merely offering high yields; they each maintain an energy sector weighting below 6%. In comparison, the Schwab ETF boasts a dividend yield of 3.8%, whereas the Vanguard Dividend has one of 1.8%, and the iShares Core Dividend stands at 2.3%. "While these options provide greater returns," he cautions, "they also come with increased risks."
Write to Ian Salisbury at ian.salisbury@barrons.com
Last Week
Markets
Worldwide stock markets declined as anticipation mounted for President Donald Trump’s "Liberation Day" tariffs. Meanwhile, gold prices climbed and Treasury yields dropped slightly. Within the U.S., the S&P 500 index shed 4.6% over the quarter, while the Nasdaq 100 tumbled 8.3%, with NVIDIA dropping 19% and Tesla plummeting 36%. When details emerged about new tariffs—a general rate of 10% across all imported goods, higher rates specifically targeting China, Vietnam, Japan, and the EU, yet exempting Russia, particularly concerning semiconductor products—the S&P further dipped an additional 4.8%. This led to retaliatory measures from countries like China, which imposed a 34% tax hike on American exports, along with ongoing trade discussions. Despite robust employment figures showing steady job gains in March, the value of the US dollar weakened during this period. Over the course of the week, significant declines were observed: the Dow Jones Industrial Average sank by 7.9%; the S&P 500 Index decreased by 9.1%; and the NASDAQ Composite slid by 10%.
Companies
Following the ousting of a key FDA official, shares in biotechnology and vaccines plummeted; workforce reductions impacted Health and Human Services. Companies heavily involved in Asia, such as Apple, faced significant declines due to new U.S. tariffs. The White House halted financial support to institutions like Harvard, Princeton, and Brown. In investment news, SoftBank committed to leading an $8 billion funding round for OpenAI, valuing the company at $300 billion. Additionally, first-quarter Tesla delivery figures dropped by 13% compared to last year’s numbers.
Deals
Elon Musk’s AI firm, xAI, acquired X, formerly known as Twitter, for $33 billion. Right-wing network Newsmax made its debut at $10 per share and witnessed its stock surge more than 700%, only to later drop significantly. Rocket Companies announced plans to acquire mortgage servicer Mr. Cooper Group for $9.4 billion. Under pressure from China, CK Hutchison refrained from signing off on the sale of ports to an entity led by BlackRock. The White House postponed making a call on TikTok.
Next Week
Wednesday 4/9
The higher tariff rates On specific nations highlighted by the White House on April 2, new tariffs will be implemented. A base tariff rate of 10% applies to imports from all these countries starting April 5. These increased rates encompass a 34% duty on products coming from China, 24% from Japan, and 20% from the EU. In response, China declared 34% tariffs on every American product set to take effect on April 10, narrowing down the timeframe for potential talks significantly.
The Federal Open Market The committee has released the minutes from its mid-March monetary policy gathering. During this session, the central bank decided to keep the federal funds rate steady at 4.25%–4.5%.
Thursday 4/10
The Bureau of Labor The statistics agency will release the consumer price index for March. Experts predict a yearly rise of 2.6%, which is down by two-tenths from February’s figure. When excluding fluctuating food and energy costs—the so-called core CPI—it is anticipated to climb by 3%, as opposed to the previous 3.1%.
Friday 4/11
The unofficial start The start of the first-quarter earnings season begins with major banks and brokerage firms announcing their reports. BlackRock, JPMorgan Chase, Morgan Stanley, and Wells Fargo all publish their results prior to the market opening.
The Numbers
230
The number of new U.S. exchange-traded fund (ETF) products launched in the initial three months set a record since 2015.
37%
Revenue decrease experienced by the major Chinese real estate company Country Garden in 2024. The losses decreased to $6.1 billion.
7.4
By what factor does Nvidia’s mean revenue per staff member ($3.62 million) exceed that of Intel’s ($490,000)?
11 M
The number of U.S. homes keeping chickens in their backyards has risen to 5.8 million since 2018.
Write to Robert Teitelman at bob.teitelman@dowjones.com
