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.
5 Long/Short ETFs to Protect Your Portfolio Against Volatility
Read MoreHide Full Article
The Federal Reserve chief Powell indicated yesterday that the U.S. central bank may raise interest rates farther and faster than previously expected in order to tame inflation as the latest economic data points came in stronger than expected. U.S. prices jumped an unexpected 0.5% from December to January, while monthly retail sales and jobs data have been stronger than expected.
Over the last year, the Fed has raised its benchmark rate to more than 4.5% -- the highest rate since 2007 - responding to prices rising at the fastest clip in decades. Powell said that he could push the bank to hike rates above the 5% to 5.5% officials had forecast in December. Markets are now pricing in an almost 70% probability of a 50-basis point rate hike at the Fed's March 21-22 policy meeting, according to CME's FedWatch tool, up from about a 30% a day ago, per Reuters.
"Powell has essentially opened the door to 50 basis point hike," said Chris Weston, head of research at Pepperstone, as quoted on Reuters. Shorter-term Treasury yields continued its rise on Mar 7, 2023. Six-month U.S. treasury yields spiked 10 bps from the day before to 5.32% on Mar 7, 2023. The U.S. 10-year benchmark treasury yields fell one-bp to 3.97% on Mar 7, 2023 due to the flight to safety.
In response to Powell’s comments,SPDR S&P 500 ETF Trust (SPY - Free Report) , SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) and Invesco QQQ Trust (QQQ - Free Report) lost about 1.53%, 1.74% and 1.23% on Mar 7, 2023, respectively. Market volatility-measuring exchange-traded product iPath.B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) added about 2.2% on that day.
Why to Pick Long/Short ETFs
Against this backdrop, to bypass the equity market weakness, investors may rev up their exposure to long/short ETFs. Investing in long-short ETFs seems prudent now as it offers ways to seek profits and protection simultaneously. Long-short investing strategy takes long positions in securities that are expected to gain and short positions in securities that are expected to decline. Below we highlight a few long/short ETFs that have beaten the S&P 500 (up 0.41%) past week.
Hull Tactical’s process allows it to adapt to evolving market conditions and factor relationships and react to sudden shifts in market and economic conditions. The expense ratio of the fund is 1.00%.
Franklin Systematic Style Premia ETF FLSP – Up 1.80%
This ETF is active and does not track a benchmark. The fund looks to maintain a relatively low correlation to traditional asset classes and to deliver positive returns in rising or falling markets. The fund looks to keep risk within pre-determined bounds, investing in four style factors: Quality, Value, Momentum and Carry; within and across multiple asset classes. The fund charges 65 bps in fees.
The Convergence investment process captures the best attributes of both quantitative and fundamental methods. This "quantamental" investment approach combines the bottom-up fundamental methods of its experienced managers, along with tools and technologies to efficiently organize vast amounts of investment data. The expense ratio of the fund is 1.56% annually.
Changebridge Capital Long/Short Equity ETF (CBLS - Free Report) – Up 1.49%
The Changebridge Long/Short Equity ETF looks to attain long-term capital appreciation while minimizing volatility. The fund also intends to generate positive alpha via both the long and short portfolios over the course of an entire investment cycle. The fund has the potential to enhance an investor’s return profile while reducing risk. The expense ratio of the fund is 1.70% annually.
Global X S&P 500 Covered Call ETF (XYLD - Free Report) – Up 1.34%
The underlying Cboe S&P 500 BuyWrite Index seeks to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. XYLD looks to generate income through covered call writing, which historically produces higher yields in periods of volatility. The fund yields 12.73% annually and charges 60 bps in fees.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Long/Short ETFs to Protect Your Portfolio Against Volatility
The Federal Reserve chief Powell indicated yesterday that the U.S. central bank may raise interest rates farther and faster than previously expected in order to tame inflation as the latest economic data points came in stronger than expected. U.S. prices jumped an unexpected 0.5% from December to January, while monthly retail sales and jobs data have been stronger than expected.
Over the last year, the Fed has raised its benchmark rate to more than 4.5% -- the highest rate since 2007 - responding to prices rising at the fastest clip in decades. Powell said that he could push the bank to hike rates above the 5% to 5.5% officials had forecast in December. Markets are now pricing in an almost 70% probability of a 50-basis point rate hike at the Fed's March 21-22 policy meeting, according to CME's FedWatch tool, up from about a 30% a day ago, per Reuters.
"Powell has essentially opened the door to 50 basis point hike," said Chris Weston, head of research at Pepperstone, as quoted on Reuters. Shorter-term Treasury yields continued its rise on Mar 7, 2023. Six-month U.S. treasury yields spiked 10 bps from the day before to 5.32% on Mar 7, 2023. The U.S. 10-year benchmark treasury yields fell one-bp to 3.97% on Mar 7, 2023 due to the flight to safety.
In response to Powell’s comments,SPDR S&P 500 ETF Trust (SPY - Free Report) , SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) and Invesco QQQ Trust (QQQ - Free Report) lost about 1.53%, 1.74% and 1.23% on Mar 7, 2023, respectively. Market volatility-measuring exchange-traded product iPath.B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) added about 2.2% on that day.
Why to Pick Long/Short ETFs
Against this backdrop, to bypass the equity market weakness, investors may rev up their exposure to long/short ETFs. Investing in long-short ETFs seems prudent now as it offers ways to seek profits and protection simultaneously. Long-short investing strategy takes long positions in securities that are expected to gain and short positions in securities that are expected to decline. Below we highlight a few long/short ETFs that have beaten the S&P 500 (up 0.41%) past week.
ETFs in Focus
Hull Tactical US ETF (HTUS - Free Report) – Up 2.83%
Hull Tactical’s process allows it to adapt to evolving market conditions and factor relationships and react to sudden shifts in market and economic conditions. The expense ratio of the fund is 1.00%.
Franklin Systematic Style Premia ETF FLSP – Up 1.80%
This ETF is active and does not track a benchmark. The fund looks to maintain a relatively low correlation to traditional asset classes and to deliver positive returns in rising or falling markets. The fund looks to keep risk within pre-determined bounds, investing in four style factors: Quality, Value, Momentum and Carry; within and across multiple asset classes. The fund charges 65 bps in fees.
Convergence Long/Short Equity ETF (CLSE - Free Report) – Up 1.77%
The Convergence investment process captures the best attributes of both quantitative and fundamental methods. This "quantamental" investment approach combines the bottom-up fundamental methods of its experienced managers, along with tools and technologies to efficiently organize vast amounts of investment data. The expense ratio of the fund is 1.56% annually.
Changebridge Capital Long/Short Equity ETF (CBLS - Free Report) – Up 1.49%
The Changebridge Long/Short Equity ETF looks to attain long-term capital appreciation while minimizing volatility. The fund also intends to generate positive alpha via both the long and short portfolios over the course of an entire investment cycle. The fund has the potential to enhance an investor’s return profile while reducing risk. The expense ratio of the fund is 1.70% annually.
Global X S&P 500 Covered Call ETF (XYLD - Free Report) – Up 1.34%
The underlying Cboe S&P 500 BuyWrite Index seeks to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. XYLD looks to generate income through covered call writing, which historically produces higher yields in periods of volatility. The fund yields 12.73% annually and charges 60 bps in fees.