We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The broader market may remain sturdy, volatility levels may be hovering around the decade-low levels, but a trend of aversion in U.S. equities is building lately. Overvaluation concerns have long been a botheration to many investors (read: Dow at Record High: More Upside for ETFs?).
No matter how highs U.S. markets have hit lately, stock market gurus are more concerned about the lack of 5% declines in the market—“an occurrence that isn’t unusual in a normal market environment,” as per an article published on MarketWatch.
To add to this, President Donald Trump’s incendiary rhetoric on North Korea’s nuclear threat halted the market rally lately. Notably, the CBOE Volatility Index jumped the most in five weeks on August 8. The S&P 500 fell the most in the month.
Investors Are Cautious About the Rally
As per billionaire investor Howard Marks, “the Shiller Cyclically Adjusted PE Ratio, known as the Shiller CAPE, is at its highest level since only two other times in the market’s history.” Just before the Great Depression in 1929 and mid-1997 to mid-2001 the CAPE ratio was at higher levels than we are seeing now.
The same was the view of Jeffrey Gundlach's DoubleLine Capital, which bought “some five-month put options on the Standard & Poor's 500 Index” as the CBOE Volatility Index is “ridiculously low” (read: Will Gold ETFs Shine in August?).
U.S. Equities Losing Assets
On August 8, U.S. equities shed about $1.22 billion in assets, as per etf.com. Among the key losers in the U.S. equity ETF universe on August 8, SPDR S&P 500 ETF Trust (SPY - Free Report) , PowerShares QQQ Trust (QQQ - Free Report) , iShares Russell 2000 ETF (IWM - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) , iShares Russell 1000 Value ETF (IWD - Free Report) and Technology Select Sector SPDR Fund (XLK - Free Report) lost about $1.20 billion, $238.4 million, $126.4 million, $115.4 million, $82.1 million and $81.1 million, respectively, in assets.
Investors shifted their focus toward safe-haven trades as evident by 1.5% gains in the gold ETF SPDR Gold Trust (GLD - Free Report) in the last two days (as of August 9, 2017). etf.com data showed that investors added about $79.7 million in alternative ETFs as a part of hedging against market volatility while U.S. Fixed Income ETFs garnered about $333 million in assets (read: 6 ETFs for a Historically Low August).
Inverse ETFs in Focus
All these worries may keep the stock market volatile. Investors can ride out this volatility through inverse ETFs. While there are several options available in the space, we have highlighted five ETFs that are widely spread across a number of sectors and not concentrated on a particular sector or industry (read: Play These Inverse ETFs if Markets Turn Rocky).
The underlying Russell 2000 Index consists of 2,000 of the smallest U.S.-domiciled, publicly traded common stocks.
Bottom Line
As a caveat, investors should note that such products are suitable only for short-term traders as these are rebalanced on a daily basis (see: all the Inverse Equity ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Time to Short U.S. Equities with ETFs?
The broader market may remain sturdy, volatility levels may be hovering around the decade-low levels, but a trend of aversion in U.S. equities is building lately. Overvaluation concerns have long been a botheration to many investors (read: Dow at Record High: More Upside for ETFs?).
No matter how highs U.S. markets have hit lately, stock market gurus are more concerned about the lack of 5% declines in the market—“an occurrence that isn’t unusual in a normal market environment,” as per an article published on MarketWatch.
To add to this, President Donald Trump’s incendiary rhetoric on North Korea’s nuclear threat halted the market rally lately. Notably, the CBOE Volatility Index jumped the most in five weeks on August 8. The S&P 500 fell the most in the month.
Investors Are Cautious About the Rally
As per billionaire investor Howard Marks, “the Shiller Cyclically Adjusted PE Ratio, known as the Shiller CAPE, is at its highest level since only two other times in the market’s history.” Just before the Great Depression in 1929 and mid-1997 to mid-2001 the CAPE ratio was at higher levels than we are seeing now.
The same was the view of Jeffrey Gundlach's DoubleLine Capital, which bought “some five-month put options on the Standard & Poor's 500 Index” as the CBOE Volatility Index is “ridiculously low” (read: Will Gold ETFs Shine in August?).
U.S. Equities Losing Assets
On August 8, U.S. equities shed about $1.22 billion in assets, as per etf.com. Among the key losers in the U.S. equity ETF universe on August 8, SPDR S&P 500 ETF Trust (SPY - Free Report) , PowerShares QQQ Trust (QQQ - Free Report) , iShares Russell 2000 ETF (IWM - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) , iShares Russell 1000 Value ETF (IWD - Free Report) and Technology Select Sector SPDR Fund (XLK - Free Report) lost about $1.20 billion, $238.4 million, $126.4 million, $115.4 million, $82.1 million and $81.1 million, respectively, in assets.
Investors shifted their focus toward safe-haven trades as evident by 1.5% gains in the gold ETF SPDR Gold Trust (GLD - Free Report) in the last two days (as of August 9, 2017). etf.com data showed that investors added about $79.7 million in alternative ETFs as a part of hedging against market volatility while U.S. Fixed Income ETFs garnered about $333 million in assets (read: 6 ETFs for a Historically Low August).
Inverse ETFs in Focus
All these worries may keep the stock market volatile. Investors can ride out this volatility through inverse ETFs. While there are several options available in the space, we have highlighted five ETFs that are widely spread across a number of sectors and not concentrated on a particular sector or industry (read: Play These Inverse ETFs if Markets Turn Rocky).
ETFs to Play
Short S&P500 ETF (SH - Free Report)
This fund provides unleveraged inverse exposure to the daily performance of the S&P 500 index.
Direxion Daily S&P 500 Bear 1x Shares ETF (SPDN - Free Report)
The fund seeks daily investment results of 100% of the inverse (or opposite) of the performance of the S&P 500 Index.
Ranger Equity Bear ETF (HDGE - Free Report)
This ETF is active and does not track a benchmark. Its objective is capital appreciation through short sales of domestically traded equity securities.
Short QQQ ETF (PSQ - Free Report)
It offers inverse unleveraged exposure to the NASDAQ-100 Index.
ProShares Short Russell2000 (RWM - Free Report)
The underlying Russell 2000 Index consists of 2,000 of the smallest U.S.-domiciled, publicly traded common stocks.
Bottom Line
As a caveat, investors should note that such products are suitable only for short-term traders as these are rebalanced on a daily basis (see: all the Inverse Equity ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>