Heading into the Election Day on November 8, the race for the White House is tightening. This is especially true as Clinton’s edge of 12 points over Republican Donald Trump on October 23 narrowed to one point this week as per the ABC News/Washington Post tracking poll. The polls from RealClearPolitics showed Clinton’s lead of just 2.2 points, down from 7 points two weeks ago (read: Clinton vs. Trump: Best Stocks & ETFs to Bet On).
While Hillary Clinton is still expected to win the final vote, the increased momentum for Donald Trump has made investors jittery. The tightening has sent tremors across the financial stock markets, with the S&P 500 logging in the longest stretch of an eight-day decline since the financial crisis.
This looks like a strange pre-election move given that the stock market generally marches higher the week before a presidential election. In fact, the S&P 500 saw an average gain of 1.8% the week before all presidential elections since 1928, according to a study by Bespoke.
Notably, the index is down 1.1% in the initial two days of the election week this year. If the stock market continues to drop for the next three days, it would be the third decline in 23 presidential elections. The S&P 500 fell 0.2% in the 1968 presidential election week and 1.4% in the 1988 presidential election week (read: 5 ETFs to Buy as Election Uncertainty Looms).
How to Play?
Amid heightened uncertainty over the outcome of the election, investors’ could definitely protect their portfolio by hoarding their cash in the ETF world. Below, we highlight four ETFs that look to offer stability or even profit going into the Election Day:
iPath S&P 500 VIX Short-Term Futures ETN VXX
The CBOE Volatility Index (VIX) is often known as the ‘fear index’ as it tends to outperform when investors are skittish about the market’s current direction. And this is exactly the case right now as the ETN tracking this benchmark, VXX, climbed 7.9% in the last couple of sessions. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months VIX futures contracts. The note has amassed $1.9 billion in AUM and trades in heavy volume of more than 28.1 million shares a day on average. It charges 89 bps in fees per year.
SPDR Gold Trust ETF GLD
Gold is viewed as a store of value amid difficult times. The price of gold broke the $1300 level on election fears with products tracking this bullion like GLD adding 1.3% over the past couple of sessions. The fund tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $39.5 billion and expense ratio of 0.40%. Volume is heavy, exchanging 10.8 million shares in hand per day on average. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: Will Silver ETFs Outshine Gold in 2017?).
iShares 20+ Year Treasury Bond ETF TLT
The U.S. government bonds tracking the long end of the yield curve often carry a safe haven status. The flight-to-safety on election fears led these bonds higher and pushed the yields lower. Though the ultra-popular long-term Treasury ETF – TLT – lost a modest 0.3% in the past two sessions on Fed actions, it will likely gain in the next few days as more investors pile into American debt ahead of elections. The fund tracks the ICE U.S. Treasury 20+ Year Bond Index, charging 15 bps in annual fees. It has AUM of $6.7 billion and an average daily volume of about 8.3 million shares. Holding 33 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.49 years and effective duration of 17.82 years. TLT has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook (read: Should You Buy or Sell Treasury ETFs Now?).
iShares Edge MSCI Min Vol USA ETF USMV
Low volatility products generate impressive returns or often outperform in an uncertain market while providing significant protection as these funds include more stable stocks that have experienced the least price movement in their portfolio. As such, USMV could be a great pick with AUM of $13 billion and an expense ratio of 0.15% though it was down 0.4% over the past couple of days. It offers exposure to 176 U.S. stocks having lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. The fund is well spread across a number of securities with none holding more than 1.54% of assets. The fund trades in solid average daily volume of 3.9 million shares and has a Zacks ETF Rank of 2 with a Medium risk outlook.
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4 Ways to Hedge Your Portfolio Before Presidential Election
Heading into the Election Day on November 8, the race for the White House is tightening. This is especially true as Clinton’s edge of 12 points over Republican Donald Trump on October 23 narrowed to one point this week as per the ABC News/Washington Post tracking poll. The polls from RealClearPolitics showed Clinton’s lead of just 2.2 points, down from 7 points two weeks ago (read: Clinton vs. Trump: Best Stocks & ETFs to Bet On).
While Hillary Clinton is still expected to win the final vote, the increased momentum for Donald Trump has made investors jittery. The tightening has sent tremors across the financial stock markets, with the S&P 500 logging in the longest stretch of an eight-day decline since the financial crisis.
This looks like a strange pre-election move given that the stock market generally marches higher the week before a presidential election. In fact, the S&P 500 saw an average gain of 1.8% the week before all presidential elections since 1928, according to a study by Bespoke.
Notably, the index is down 1.1% in the initial two days of the election week this year. If the stock market continues to drop for the next three days, it would be the third decline in 23 presidential elections. The S&P 500 fell 0.2% in the 1968 presidential election week and 1.4% in the 1988 presidential election week (read: 5 ETFs to Buy as Election Uncertainty Looms).
How to Play?
Amid heightened uncertainty over the outcome of the election, investors’ could definitely protect their portfolio by hoarding their cash in the ETF world. Below, we highlight four ETFs that look to offer stability or even profit going into the Election Day:
iPath S&P 500 VIX Short-Term Futures ETN VXX
The CBOE Volatility Index (VIX) is often known as the ‘fear index’ as it tends to outperform when investors are skittish about the market’s current direction. And this is exactly the case right now as the ETN tracking this benchmark, VXX, climbed 7.9% in the last couple of sessions. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months VIX futures contracts. The note has amassed $1.9 billion in AUM and trades in heavy volume of more than 28.1 million shares a day on average. It charges 89 bps in fees per year.
SPDR Gold Trust ETF GLD
Gold is viewed as a store of value amid difficult times. The price of gold broke the $1300 level on election fears with products tracking this bullion like GLD adding 1.3% over the past couple of sessions. The fund tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $39.5 billion and expense ratio of 0.40%. Volume is heavy, exchanging 10.8 million shares in hand per day on average. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: Will Silver ETFs Outshine Gold in 2017?).
iShares 20+ Year Treasury Bond ETF TLT
The U.S. government bonds tracking the long end of the yield curve often carry a safe haven status. The flight-to-safety on election fears led these bonds higher and pushed the yields lower. Though the ultra-popular long-term Treasury ETF – TLT – lost a modest 0.3% in the past two sessions on Fed actions, it will likely gain in the next few days as more investors pile into American debt ahead of elections. The fund tracks the ICE U.S. Treasury 20+ Year Bond Index, charging 15 bps in annual fees. It has AUM of $6.7 billion and an average daily volume of about 8.3 million shares. Holding 33 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.49 years and effective duration of 17.82 years. TLT has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook (read: Should You Buy or Sell Treasury ETFs Now?).
iShares Edge MSCI Min Vol USA ETF USMV
Low volatility products generate impressive returns or often outperform in an uncertain market while providing significant protection as these funds include more stable stocks that have experienced the least price movement in their portfolio. As such, USMV could be a great pick with AUM of $13 billion and an expense ratio of 0.15% though it was down 0.4% over the past couple of days. It offers exposure to 176 U.S. stocks having lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. The fund is well spread across a number of securities with none holding more than 1.54% of assets. The fund trades in solid average daily volume of 3.9 million shares and has a Zacks ETF Rank of 2 with a Medium risk outlook.
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 >>