Despite heightened geopolitical tensions, rising rate worries and AI valuation woes, Wall Street has delivered strong performance so far this year. State Street SPDR S&P 500 ETF Trust SPY has added about 11.6% in the year-to-date frame. A closer look shows that U.S. stocks capped a strong first half of 2026 and a robust second quarter driven by the strength in semiconductor stocks.
However, the rally lost momentum in the third quarter as investors reassessed lofty AI valuations, heavy capex on the AI theme and higher interest rates. The broader market remains almost flat during this phase.
Unsteady Global Markets
While some recent Big Tech earnings offered fresh cues to Wall Street for a further rally, the undercurrent of the global markets looks anything but steady. Meanwhile, the Middle East tensions persist.
Meanwhile, sticky inflation and rising rate fears are putting pressure on markets. Treasury yields climbed sharply. The Fed enacted a 25-bp rate this this week, with cues of at least one more hike this year.
Time for Dividend Investing?
In such a volatile scenario, dividend exchange-traded funds (ETFs) normally come to the rescue. The hunt for dividends in the equity market is always on, irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are mired in a web of equity market uncertainty, global growth worries and geopolitical crisis, the lure for dividend investing increases further.
Investors should note that not all dividend stocks serve the same purpose. While the high-yield ones are known for offering hefty current income, stocks with dividend growth point to quality investing — a prerequisite to making money in this volatile environment.
Against this backdrop, it makes sense to hold some higher-yielding, dividend-based ETFs. If the Fed hikes rates further, high current income could help investors weather the adverse impact to some extent.
ETFs in Focus
iShares International Select Dividend ETF IDV
The underlying Dow Jones EPAC Select Dividend Index of the fund measures the performance of a select group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time. The $8.62-billion fund yields 5.51% annually and charges 50 bps in fees.
Amplify CWP Enhanced Dividend Income ETF DIVO
The $7.89-billion fund seeks to offer both dividend and option income to investors on a monthly basis.Dividend and option income may provide lower share price volatility versus the overall market during times of broad-based market declines. DIVO is up 6% this year while it yields 6.39% annually. The fund charges 56 bps in fees.