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5 Hot ETFs to Rescue if Trump Trade Wavers

The Wall Street saw sell-offs in the first trading day of Q2. The S&P 500, the Dow Jones Industrial Average and Nasdaq shed about 0.2%, 0.1% and 0.8%, respectively, on April 3 (read: ETFs Deserving a Close Watch If Health Care Plans Fail).

Disappointing auto sales and uncertainty over the materialization of Trump’s pro-growth promises after his failure to pull off the Health Care bill due to want of support weighed on the broader market.

The fear of stretched valuations is also rife after an astounding rally in the last five months on Trump’s repeated pledges for fiscal reflation. The S&P 500 is trading at about 18 times earnings estimates for the next 12 months, above its long-term average of 15.

Though all is not lost yet, inability to pull off policies any further by the Trump administration will thin down all hopes built so far in investors’ minds. Renewed worries over oil prices on surging U.S. crude output might also aggravate risks.

Also, we are now gearing up for the Q1 2017 earnings season. But earnings projections have fallen ahead of the reporting cycle from 10.6% expected at the end of 2016 to 6.6% expected currently. Agreed, the days of earnings recession are over but concerns prevail.

Probably sensing this turbulence in the market, the benchmark U.S. treasury yields have been slipping lately with the yield dipping to 2.35% on April 3, down 5 percentage points from the previous trading day. Demand for safe haven Treasury bond ETFs have increased. Long-term, U.S. Treasury bond ETF iShares 20+ Year Treasury Bond TLT gained about 0.8% on April 3.

While these safe haven bets have always been there to pacify investors’ jittery nerves, they can also seek refuge to alternative or low volatile or quality ETFs. Below we highlight five such products that are hot now and hit a 52-week high on April 3, the day the key Wall Street indices were in the red (read: Why Did International ETFs Outperform in March?).

ETFs to Benefit

Legg Mason International Low Volatility High Dividend ETF LVHI

With the international market being better-positioned right now, investors can hedge U.S.-related risks by targeting international products. And if this can be done by a low volatile and high dividend product, the bet should be safer.

LVHI has a double-digit weight in U.K., Switzerland, Germany and Singapore. The fund charges 40 bps in fees and was up 0.3% on April 3 (read: A New Low Volatility International ETF for Dividend Lovers).

ProShares Morningstar Alternatives Solution ETF ALTS

The underlying index of the fund provides diversified exposure to alternative asset classes while increasing risk-adjusted portfolio returns when joined with a gamut of traditional investments. The fund charges 95 bps in fees and added 0.4% on April 3.

The IQ Merger Arbitrage ETF MNA

Investors should note that “cross-border M&A had its strongest start since 2007, driving first-quarter global volumes up 7%.” This was possible because of the Trump rally, which made many U.S. companies wealthier and foreign acquisitions inexpensive, as per an article published on Reuters.

The fund looks to track the performance of the IQ Merger Arbitrage Index. The index seeks to achieve capital appreciation by investing in global companies for which there has been a public announcement of a takeover by an acquirer.

This differentiated approach is based on a passive strategy of owning certain announced takeover targets with the goal of generating returns that are representative of global merger arbitrage activity. The fund charges 75 bps in fees (read: Can M&A ETFs Surge in 2H?).

WisdomTree CBOE S&P500 PutWriteStrat ETF PUTW

The underlying index of the fund – CBOE S&P 500 PutWrite Index – is designed to sell a sequence of one-month, at-the-money, S&P 500 Index puts and invest cash at one- and three-month Treasury Bill rates. The product charges 38 bps and lost about 0.3% on April 3.

RiverFront Dynamic US Dividend Advantage ETF RFDA

This active ETF seeks to achieve its investment objective by choosing in a portfolio of U.S. companies with the potential for dividend growth. The fund focuses on factors like value, quality and momentum while picking stocks. It charges 52 bps in fees.

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ISHARS-20+YTB (TLT): ETF Research Reports
LM-INT LV HD (LVHI): ETF Research Reports
IQ-MERGER ARB (MNA): ETF Research Reports
PRO-SH MSTR ALT (ALTS): ETF Research Reports
RVR-DY US DV AV (RFDA): ETF Research Reports
WISTR-CBOESP5PW (PUTW): ETF Research Reports
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