Rightly so, many investors are celebrating September’s potential rate cuts as a great opportunity for equity strategies.
However, several headwinds remain that might suggest caution. Month after month, the jobs report has signaled that the labor market is slowing down at a faster rate than expected.
Some analysts see the jobs data as a signal that it may be more difficult to reach a soft landing. With recession worries continuing to bubble up, equities could be exposed to more pockets of volatility in the months ahead.
While recession worries and other headwinds may raise eyebrows, investors should stay engaged with the equity market for now. Upcoming rate cut opportunities and cooling economic data can support equity growth across the cap spectrum.
“We see multiple factors driving market volatility: resurgent recession fears due to some softer economic data, pre-U.S. election jitters and profit-taking as investors make room for new stock issues,” a recent BlackRock report noted. “Yet U.S. corporate earnings have proved resilient. All sectors beat expectations for Q2 earnings, driving broad improvement in profit margins.”
Stay Engaged in Equities
To maintain low-volatility engagement in the equity market, consider the Natixis Gateway Quality Income ETF (GQI). For a portfolio, this fund offers a one-two punch of equity participation and current income.
GQI is an actively managed ETF that invests in large- and mid-cap equities through a quality lens. By cultivating a portfolio of companies with strong balance sheets and robust competitive advantages, GQI can build capital appreciation while mitigating potential volatility in the asset class.
To foster more income for investors, GQI’s portfolio is paired with a distinct option overlay. This strategy is used on half of the equity portfolio, providing a nice mix of yield and long-term returns.
The flexibility of the option strategy, combined with GQI’s active management, gives the fund wiggle room to work around bouts of equity volatility. Additionally, additional cash flow from the call options can create a buffer against some of the loss that equities may face.
Currently, GQI is offering extremely competitive results. As of September 11th, 2024, the fund has a 30-day SEC yield of 9.88%. GQI also provides strong capital appreciation, with the fund’s NAV rising 9.36% year-to-date.
For more news, information, and analysis, visit the Portfolio Construction Channel.
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