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Long/Short ETFs to Survive Market Turmoil

Sanghamitra Saha

The key U.S. indices’ prolonged streak of gains faltered on Mar 22 as the latest Fed meeting triggered concerns regarding the U.S. economic health. Notably, the central bank dimmed its outlook about the U.S. economy to a large extent. Also, subdued data from the eurozone and Brexit worries contributed to the global growth issues.

As a result, the yield curve flattened in the United States. Per Refinitiv Tradeweb data, the spread between the three-month Treasury bill and the 10-year note rate turned negative — though briefly — for the first time since 2007, per CNBC.com. This inverted yield curve sparked recessionary fears, marring risk-on sentiments.

We believe overvaluation concerns this year have also played its role in triggering the stock market selloff. The market was “up about 20 percent from Christmas Eve’s bottom”, thus calling for some correction at this point of time.  This is especially true given that stocks have become about 17% pricier in the last two months while profits are fading. Analysts’ earnings estimates for the first quarter and second quarter of 2019 are declining (read: Is Market Overvalued? 5 Cheap Top-Ranked ETFs to Play (Revised)).

Overall, SPDR S&P 500 ETF SPY, SPDR Dow Jones Industrial Average ETF DIA, Invesco QQQ Trust QQQ, all-world ETF iShares MSCI ACWI ETF ACWI, Europe ETF Vanguard FTSE Europe ETF VGK and emerging market ETF iShares MSCI Emerging Markets ETF EEM lost about 1.9%, 1.8%, 2.2%, 2.1%, 2.3% and 2.9%, respectively on Mar 22.

No wonder, investors sought safety and increasingly placed their bets on long/short ETFs to find a way around the volatility. Below we highlight a few of these that have beaten the Friday market blues and surpassed the S&P 500 (see all Long-Short ETFs here).

AGFiQ US Market Neutral Anti-Beta BTAL — Up 2.1% on Mar 22

The underlying Dow Jones U.S. Thematic Market Neutral Anti-Beta Index is a long/short market neutral index that is dollar-neutral.

AGFiQ US Market Neutral Momentum MOM – Up 0.7% on Mar 22

The underlying Dow Jones U.S. Thematic Market Neutral Momentum Index is a long/short market neutral index that is dollar-neutral. Its expense ratio is 1.88% annually.

WisdomTree Dynamic Long/Short U.S. Equity Fund DYLS – Up 0.10% on Mar 22

The WisdomTree Dynamic Long/Short U.S. Equity Index includes long equity positions and short equity positions. It charges 48 bps in fees.

Gadsden Dynamic Growth ETF GDG – Up 1.3% on Mar 22

The Gadsden Dynamic Growth ETF is an actively-managed ETF. It seeks to achieve its investment objective by investing around 80% of its total assets with exposure to global equity securities based on a long-term view of macroeconomic factors & approximately 20% of its total assets to add or reduce exposure to one or more asset classes based on a short-term view of the market. It charges 88 bps in fees.

WisdomTree Dynamic Bearish U.S. Equity Fund DYB – Up 1.9% on Mar 22

The underlying WisdomTree Dynamic Bearish U.S. Equity Index includes long equity positions or long U.S. Treasury positions and short equity positions. It charges 48 bps in fees (read: Best & Worst ETFs of Last Week).

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SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
iShares MSCI Emerging Markets ETF (EEM): ETF Research Reports
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
WisdomTree Dynamic Long/Short U.S. Equity Fund (DYLS): ETF Research Reports
 
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
 
AGFiQ US Market Neutral Anti-Beta Fund (BTAL): ETF Research Reports
 
Invesco QQQ (QQQ): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
WisdomTree Dynamic Bearish U.S. Equity Fund (DYB): ETF Research Reports
 
Gadsden Dynamic Growth ETF (GDG): ETF Research Reports
 
AGFiQ US Market Neutral Momentum Fund (MOM): ETF Research Reports
 
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