The coronavirus pandemic is sweeping the world, and its spread hasn't yet slowed in many key places. Millions of residents have been ordered not to go to work and to remain at home as much as possible, and that's having a huge impact not only on people's daily lives but also on the broader economy.
The stock market has suffered dramatically from the COVID-19 outbreak as well, sending some investors into a near panic as their portfolio balances continue to drop. Amid all the declines, a select handful of exchange-traded funds have held up extremely well, with some even managing to gain ground. Here, we'll look at what have emerged as coronavirus safe havens to see whether they're worth investing in right now.
WTMF data by YCharts. One-month return as of noon EDT March 23.
Seeking safety in bonds
The economic consequences of the pandemic haven't just hurt stocks. They've also prompted policymakers to cut interest rates as much as possible in an effort to try to prevent a recession from being any worse than it's already likely to be. With investors willing to accept little or no interest to keep their money safe, bond investments have done very well.
iShares 20+ Year Treasury Bond (TLT +0.61%) has been one of the best-performing bond ETFs in the market, because with its ownership of long-term Treasury bonds, it's among the most sensitive to interest rate movements. As rates have come down, prices of Treasuries have soared, and that's helped the iShares ETF to generate a healthy positive return over the past month.
If bond rates keep falling, then the iShares bond ETF will keep doing well. If yields bounce higher, however -- as is possible if the economy doesn't take as big a hit as many fear -- then the ETF could be vulnerable to a reversal.
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Looking beyond stocks
The futures markets offer a wide array of different investments, ranging from commodities like crops, energy products, and metals to currencies and interest rates. Investors in futures have to keep a lot of information in mind as they invest, including supply and demand dynamics and the peculiarities of certain individual markets.
WisdomTree Managed Futures ETF (NYSE: WTMF) has the goal of trying to earn positive returns no matter what the stock market is doing, by investing in a number of different investments that have returns that aren't correlated with each other. What that means is that when one futures market goes down, another often goes up, and the WisdomTree futures ETF uses a methodology designed to try to get positive performance overall. That's worked over the past month, picking up nearly 2%.
Over longer periods of time, however, the WisdomTree futures ETF hasn't done quite as well, losing ground steadily over the past five years. If stocks rebound, then it's possible that money will come out of the alternative investments that the ETF favors, and that could lead to a reversal of fortune for the fund.
All that glitters
Gold has traditionally been a safe-haven investment during times of trouble, and although that hasn't been entirely true with the coronavirus outbreak, gold has still managed to hold up better than stocks. The price of gold is down about 6% from where it was a month ago, and as policymakers have announced plans to loose monetary policy even further, the yellow metal has seen gains.
SPDR Gold Trust (GLD 1.90%) is an easy way to get exposure to gold, with each share representing roughly one-tenth of an ounce of the precious metal. Its price tracks that of gold bullion quite closely.
From an investing standpoint, gold has been volatile, moving in and out of favor at various times. A huge run-up during the 2000s gave way to weak performance throughout much of the 2010s. Gold has its advocates, but unless you time the market perfectly, it hasn't given the kind of long-term returns that stock investors have seen.
Be careful
It's understandable to look at alternatives to stocks right now, given how hard the stock market's getting hit. These alternatives have been ports during the coronavirus storm so far. Over the long run, it's likely that top high-quality stocks will outshine these ETFs -- but those looking for short-term relief could continue to benefit from them.
