9 ETF Ways to Guard Against S&P 500's Losing Streak

Sanghamitra Saha

Updated Fri, 4 Nov 2016, 3:02 pm

True to fears of thousands of market participants, the S&P 500 finally exhibited its ‘longest losing streak in eight years” as the world is preparing for the D-day of the U.S. presidential election. Such a steep decline is not new in an election year as Market Watch had noticed such an eight-day long slump in 1996 and 2008 as well.

The uncertainty flared up as the popularity of the democratic candidate Clinton and republican candidate Trump is almost the same at the eleventh hour, snapping Clinton’s fairly strong lead for a longer period. As of November 3, polls showed that both candidates have about 45% chances of winning. Actually, matters became worse when FBI started probing into democratic candidate Hillary Clinton’s emails just days before the presidential election (read: 5 ETFs to Buy as Election Uncertainty Looms).

Moreover, the market is speculating a December rate hike by the Fed. Bets over policy tightening in December rose to 78%, the highest since March. Fears of a cease in cheap money inflows put U.S. equities to bed.

The other reason behind the crash in the key U.S. equity gauge is the less likelihood of an output curb deal by the OPEC in late November amid reluctance shown by Iraq and Iran. Oil fell to the lowest level since September on increasing global supplies (read: Inverse Oil ETFs in Focus as Iraq Threatens OPEC Deal).

OPEC production hit an all-time high last month and the U.S. Energy Information Administration indicated a jump of 14.4 million barrels in crude supplies last week. This was the record weekly crude inventory build-up for the U.S. The U.S. crude ETF United States Oil USO retreated over 9.8% in the last five days (as of November 3, 2016).

No wonder, the S&P 500 is on a downhill ride due to a whirlpool of worries, instead of cheering the likely return of its earnings into the growth zone after six long quarters. Investors must be interested in guarding the portfolio against such a steep decline. For them, we have highlighted a few ETF options. These options in fact fared positively in the last five days when the S&P 500 was reeling in the red.

X-Links Long/Short Equity ETN CSLS

The index is designed to correlate to the historical performance of the Credit Suisse Long/Short Equity Hedge Fund Index. It gives exposure to a long/short equity strategy as indicated by long and short positions in various market measures (read: After Goldman, DB Warns About S&P 500: Play Alternative ETFs).

U.S. Market Neutral Anti-Beta Fund BTAL

Investors who want to shift their focus to investing in low beta stocks during this uncertain market environment can consider adding BTAL ETF to their portfolio. The underlying index of the fund identifies the lowest beta stocks and goes long on them, while at the same time goes short on the highest beta stocks.

U.S. Market Neutral Value Fund CHEP

The fund looks to track the Dow Jones U.S. Thematic Market Neutral Value Index. The index rebalances monthly by picking the most undervalued stocks as long positions and the most overvalued stocks as short positions, of almost equal dollar amounts, within each sector. The net expense ratio of the fund is 0.75%.

PowerShares Multi-Strategy Alternative Portfolio ETF LALT

This is an actively managed fund that seeks to achieve a positive total return with low correlation to the broader securities markets by investing in a combination of equity securities, financial futures contracts, forward currency contracts and other securities.

Global X Permanent ETFPERM

The fund looks to follow the Solactive Permanent Index which tracks the price movements of an equal-weighted multi asset class portfolio consisting of 25% Short Term US Government Bonds, 25% Long Term US Government Bonds, 25% Precious Metals (20% Gold / 5% Silver) and 25% Equities divided into several sub-categories.

iPath S&P 500 VIX ST Futures ETN VXX

Rising skepticism toward the market can best be tapped by investing in volatility exchange traded products like VXX (read: ETF Strategies to Implement Now).

ProShares Short S&P500 SH

ProShares Short S&P500 looks to offer exposure to the opposite of the daily performance of the S&P 500 and is thus a winning proposition in the current market scenario (read: Believe in George Soros? Short S&P 500 with These ETFs).

iShares 1-3 Year International Treasury Bond ETF ISHG

With ultra-easy monetary policies still being practiced in other developed economies, investors can take a look at this international Treasury ETF. The fund is heavy on Japan (22.76%) followed by France (9.08%) and Italy (8.79%).

O'Shares FTSE Asia Pacific Quality Dividend ETFOASI

The fund offers exposure to the high quality large and mid-cap stocks of Asia that exhibit relatively low volatility and high dividend yields. The fund yields about 2.54% annually.

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9 ETF Ways to Guard Against S&P 500's Losing Streak