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5 ETFs for Protection From Market Crash

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After a solid rally, the U.S. stock market took a huge beating on Jun 11. Concerns over a second wave of coronavirus infection has resurfaced as some states which reopened weeks ago have reported strong uptick in case counts or hospitalization.

The Federal Reserve’s dim outlook in the latest FOMC meeting about the domestic economy added to the chaos. This is especially true as the central bank warned that the U.S. economy will contract by 6.5% in 2020 before rebounding 5% next year. It predicts that the unemployment rate will fall to 9.3% by the end of this year. Though this is down from 13.3% in May, it will be substantially above the 3.5% rate recorded in February — a near 50-year low. The central bank also kept rates at the current low levels through 2022 and has pledged to continue pumping in stimulus until the economy is back on track (read: Inverse ETFs Gain on Powell's Economic Warning).

The risk-off trade is likely to continue at least in the near term. Notably, the three major indexes posted their biggest single-day declines since Mar 16. The Dow Jones Industrial Average slumped as much as 7.1% while the S&P 500 tumbled almost 6%.

Against such a scenario, we have highlighted five ETFs that could benefit investors’ portfolio. These products could provide some shelter from the crisis and would be in focus in the weeks ahead. In fact, these funds have seen strong trading in the last trading session amid the broad market sell-off:

AdvisorShares Dorsey Wright Short ETF (DWSH - Free Report)

This is an actively managed ETF that short sells U.S. large-cap securities with the highest relative weakness within an investment universe primarily, comprising large-capitalization U.S.-traded equities. It holds 100 stocks in its basket with consumer discretionary taking the largest share at 22.8% while energy and healthcare round off the next two spots. The product trades in lower average daily volume of 236,000 shares and has accumulated $90.3 million in its asset base. It charges higher annual fee of 3.07% and has surged 10.4% on the day (read: Top & Flop ETFs at Half-Way Q2).

AGFiQ US Market Neutral Anti-Beta Fund (BTAL - Free Report)

The fund has the potential to generate positive returns regardless of the direction of the stock market as long as low beta stocks outperform high beta stocks. It invests in low-beta securities and at the same time shorts high-beta stocks of approximately equal dollar amounts within each sector. It seeks to deliver the spread return between low and high-beta stocks. This can easily be done by tracking Dow Jones U.S. Thematic Market Neutral Anti-Beta Index. The ETF has AUM of $151 million and an expense ratio of 2.11%. It trades in average daily volume of 209,000 shares and has gained 6.6% amid broad market sell-off on Jun 11.

AGFiQ US Market Neutral Momentum Fund

This ETF provides exposure to the “momentum” factor by investing long in U.S. equities that have had above-average total returns and shorting those securities that have had below-average total returns. It follows the Dow Jones U.S. Thematic Market Neutral Momentum Index, charging investors 87 bps in annual fees. The product has accumulated $5.3 million in its asset base while trading in average daily volume of 9,000 shares. It has added 6.1% on a day.

Cambria Tail Risk ETF (TAIL - Free Report)

This fund seeks to mitigate significant downside market risk as it invests in a portfolio of "out of the money" put options purchased on the U.S. stock market. The TAIL strategy offers the potential advantage of buying more puts when volatility is low and fewer puts when volatility is high. While a portion of the fund's assets will be invested in the basket of long put option premiums, the majority of fund assets will be invested in intermediate-term U.S. Treasuries. The product has amassed $201 million in its asset base and charges 59 bps in annual fees from investors. It trades in average daily volume of 216,000 shares and is up 2.5% on the day.

Direxion Daily S&P 500 Bear 1X Shares (SPDN - Free Report)

This ETF also offers unleveraged inverse exposure to the daily performance of the S&P 500 index. It has accumulated $155.2 million in its asset base while trading in average daily volume of 348,000 shares. The fund is cheap relative to other inverse products as it charges just 45 bps in annual fees. It has gained 5.9% on the day (read: Uncertain About Single Stock Pick? Play S&P 500 ETFs).

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