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Investors Most Bearish Since 2009: Hedge With These ETFs

Sanghamitra Saha
Companies In The News Are: TSLA, SYMC, AVGO, CGC, OMN

The S&P 500 Index is less than 1% shy of a record, but fund managers are unsure of this ascent, per a survey from Bank of America Merrill Lynch. The survey of 179 global managers supervising around half trillion dollars in assets indicated that pessimism has stemmed from concerns over U.S.-led trade-war fears and a looming global recession. Probably, this is why some view this bull market as the most-hated one.

Probably corroborating the fears, the chief of European Central Bank, Mario Draghi, said the bank may cut interest rates and add more economic stimulus to the economy should the need arise. The Fed is also widely expected to cut rates later this year.

At the time of writing, according to CME FedWatch tool, there is a 48.5% chance of a 50-bp rate cut in the Sep 18 meeting, followed by a 33.4% probability of a 25-bp rate cut, 12.3% likelihood of a 75-bp rate cut and only 5.8% probability of a no-rate-cut scenario (read: ETF Strategies to Win If Powell Enacts Rate Cuts).

Coming to China’s trade war front, analysts do not expect a resolution in the upcoming G-20 meeting. Things suddenly took a turn for the worse for Europe. Trump took to Twitter after Draghi announced the possibility of more stimulus, which lowered the euro against the greenback. President Trump nearly accused Euro zone of resorting to unfair trade practices via currency game. So, tensions prevail over the geopolitical landscape.

Moreover, investors should note that though low rates are good for stocks and bonds, “lower interest rates will simply enlarge the bubble.” Volume is still low in the market as evident from 1.18 times relative volume of SPDR S&P 500 ETF SPY. This means there is less faith in the ongoing rally, per an article published on MarketWatch.

Probably this is why the below-mentioned, low-volatility, buy-write and diversified products are trading at a 52-week high. Investors can resort to these products at their highs to hedge their portfolio.          

Russell 1000 Low Vol ETF SPDR ONEV

The underlying Russell 1000 Low Volatility Focused Factor Index reflects the performance of a segment of large-capitalization U.S. equity securities demonstrating a combination of core factors high-value, high-quality, and low-size characteristics, with a focus factor comprising low-volatility characteristics. It charges 20 bps in fees.    

JPM U.S. Minimum Volatility ETF (JMIN)

The underlying JP Morgan US Minimum Volatility Index measures the performance of U.S. equity securities selected using a rules-based process that is designed to have lower volatility than the Russell 1000 Index. It charges 12 bps in fees.         

Flexshares Real Assets Allocation Index Fund (ASET)

The underlying Northern Trust Real Assets Allocation Index reflects the performance of a universe of inflation sensitive securities operating in the following sectors: global infrastructure, global real estate and global natural resources. The fund charges 57 bps in fees.

Fidelity Low Volatility Factor ETF (FDLO)

The underlying Fidelity U.S. Low Volatility Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with lower volatility than the broader market. It charges 29 bps in fees (read: Why You Should Bet on Low Volatility ETFs in June).

SSGA US Large Cap Low Vol Index SPDR LGLV

The underlying SSGA US Large Cap Low Volatility Index is designed to track the performance of U.S. large capitalization companies that exhibit low volatility. It charges 12 bps in fees.

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Fidelity Low Volatility Factor ETF (FDLO): ETF Research Reports
 
SPDR Russell 1000 Low Volatility Focus ETF (ONEV): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
SPDR SSgA US Large Cap Low Volatility Index ETF (LGLV): ETF Research Reports
 
FlexShares Real Assets Allocation Index Fund (ASET): ETF Research Reports
 
JPMorgan U.S. Minimum Volatility ETF (JMIN): ETF Research Reports
 
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