Trump’s protectionist stance on trade has kept investors on their toes, leading to sluggish trading on Wall Street. This is especially true, as a series of tariff talks between the United States and its other major allies are intensifying fears of a trade war and could even trigger a global recession.
In fact, the major indices saw their biggest one-day drop in many weeks on Jun 25 and the Dow bearishly closed below its 200-day moving average – a closely watched level – for the first time in two years. Meanwhile, the CBOE Volatility index, also known as fear gauge, soared 25% yesterday.
Notwithstanding the political ills, the economic fundamentals remain sound given the raft of upbeat data, which shows that the economy is hot with unemployment dropping to 3.8% — the lowest level since 2000; consumer spending and confidence on the rise, and recovery in retail sales.
Further, a massive $1.5-trillion tax cut will create an economic surge, boosting job growth and reflation trade. It will further accelerate earnings, leading to increased dividend and buyback activities. Additionally, the tax repatriation will allow companies to bring offshore cash back home, paving the way for increased mergers and acquisitions. A combination of all these factors bodes well for the stock market.
In order to make the most of the encouraging trend amid volatility, investors should apply some hedge techniques to their equity portfolio. While there are a number of ways to do this, we have highlighted five volatility hedged ETFs that could prove beneficial amid market turbulence. Investors should note that these funds have the potential to stand out and might outperform the simple vanilla funds in case of rising volatility.
How to Play
DeltaShares S&P 500 Managed Risk ETF (DMRL – Free Report)
This ETF seeks to track the S&P 500 Managed Risk 2.0 Index, which is designed to simulate a downside-protected portfolio by utilizing a framework that includes targeted volatility and a synthetic option overlay to hedge the downside risk of the portfolio. DMRL has accumulated nearly $439 million in its asset base and trades in a light volume of 14,000 shares. It charges 35 bps in fees per year.
