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U.S. equities remain under pressure as geopolitical risk tied to the conflict in Iran continues to dominate market sentiment. As of March 24, the S&P 500 is about 6% below its all-time high, with rising Middle East risk, slowing economic growth, and a stagnant jobs market all contributing to weaker investor confidence.
With volatility still elevated and no clear near-term resolution in sight, investors are looking at different portfolio positioning approaches heading into Q2. The following four ETFs are highlighted for April, reflecting distinct ways to express views on equities amid the current environment.
The broad U.S. equity market is facing uncertainty largely driven by developments in the Middle East. The effective closure of the Strait of Hormuz has pushed energy prices higher, prompting investors to reassess expectations for interest rates, inflation, and economic growth.
In the Vanguard S&P 500 ETF (VOO), the current correction is described as the deepest in about a year. The article notes that geopolitical conflicts can be short-lived and that markets may rally quickly if there is a resolution. It also points to ongoing U.S. and Iran negotiations as a factor that could lead to rapid changes in stock prices.
The Vanguard FTSE Developed Markets ETF (VEA) is presented as a more interesting option for April. The article says international stocks performed well relative to the S&P 500 in January and February, but have lagged since the Iran-related conflict began in March.
While the foreign equity narrative is described as largely unchanged—supported by improving earnings growth rates and valuations that are compelling versus the United States—the article suggests that if Middle East tensions start to de-escalate, international stock outperformance could re-emerge.
The article also notes that low-volatility and value stocks have followed a similar pattern this year. It attributes the reversal of recent outperformance to geopolitical risks, while arguing that value remains “unlocked.”
As a potential way to position for a return of that upward trend, it highlights the iShares MSCI USA Minimum Volatility Factor ETF (USMV). The strategy is described as allowing exposure to growth areas, including technology, while minimizing overall portfolio volatility.
Finally, the State Street Utilities Select Sector SPDR ETF (XLU) is described as holding up remarkably well. Although the past few years have been characterized as a risk-on environment, the article says utilities have benefited from the data center buildout and the related energy demand.
It also flags interest rates as a key concern because utilities are often heavily indebted. The article warns that an extended conflict in the Middle East could derail momentum for the sector.
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