April has been full of surprises the past few years, and not necessarily good ones. Two years ago, the S&P 500 fell 4% in April as inflation rates remained high and expectations for rate cuts dropped. Last year, President Donald Trump's Liberation Day tariffs threw the markets into a tizzy, as stocks tanked early in the month only to recover on a tariff pause later in the month.
This year, markets are dealing with war in Iran and geopolitical uncertainty that are impacting energy prices and could have knock-on effects throughout the economy.
One thing the market hates is uncertainty, and we have it in spades right now. That means you could go bargain hunting for cheap stocks with high upside, but it also means that it's wise to have some ballast in your portfolio -- investments that are safe, low in volatility, and made to navigate choppy markets.
Here are two exchange-traded funds (ETFs) that are built for these highly uncertain times.
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1. Federated Hermes U.S. Strategic Dividend ETF
In uncertain markets, it is good to have an ETF that is actively managed, because the portfolio management team can make changes to the fund to smooth out the short-term volatility while maintaining long-term performance. The Federated Hermes U.S. Strategic Dividend ETF (FDV 0.28%) is one actively managed ETF that does just that.
The fund management team focuses on stocks that generate income and long-term capital appreciation, investing primarily in high-dividend-paying U.S. stocks with dividend growth potential. High dividend yields are critical in down markets because they provide the potential for higher returns when they are invested back into the ETF.
NYSEMKT: FDV
Key Data Points
Plus, the dividend-paying stocks are often stable investments -- value stocks that tend to perform well when the broader markets do not. Currently, the top three holdings are Paychex, Chevron, and PNC Financial.
The portfolio has a beta of 0.59, which means it is significantly less volatile than the overall market based on the designated baseline beta of 1. So, when the market drops, say, 10%, this ETF would drop about 6%.
The ETF's returns are also strong. While the ETF doesn't yet have a five-year track record, it is up 7.5% year to date, 12.5% over the past 12 months, and 11.5% on average over the past three years.
2. Franklin International Low Volatility High Dividend ETF
I wrote about the merits of the Franklin International Low Volatility High Dividend ETF (LVHI +0.20%) in March, and it remains a great option in April.
Like the Federated Hermes ETF, the Franklin Low Volatility High Dividend ETF is actively managed, and that has been beneficial in this type of market for the reasons stated above. And like the Federated Hermes ETF, it focuses on stable, dividend-paying stocks that are less volatile. The added feature of this ETF is that it is diversified globally, with international stocks from nearly 20 countries.
The portfolio management team looks for stocks with a combination of high dividends, low volatility, and sustainable earnings. It results in a portfolio of high-quality companies from across the globe that tend to perform steadily in all different types of environments -- and that really shows up when the broader markets are down.
NYSEMKT: LVHI
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The outperformance this year for LVHI is staggering, as the ETF is up nearly 11% year to date. Over the past 12 months, as of April 6, it has returned 36.5%, which beats the S&P 500 and the MSCI World Index.
The ETF also has solid longer-term results, with average annualized returns of 15% and 10% over the past three- and five-year periods, respectively. But when the broader markets are negative, this ETF really shows its strength and becomes an invaluable part of a portfolio.
It should be noted that Franklin also offers a U.S. version, the Franklin U.S. Low Volatility High Dividend ETF (LVHD 0.32%), which deploys a similar strategy, but for U.S. stocks. It has also performed well, up 7.2% year to date and 11.4% over the past 12 months.
