5 ETFs To Hedge Against Market Volatility

Renewed trade war fear is once again playing foul in Wall Street, leading to huge volatility. This is especially true given that President Donald Trump raised previously delayed tariffs on Chinese goods worth $200 billion on May 10 midnight. Trump then blacklisted Chinese firm Huawei Technologies and 26 of its affiliates, forbidding them from doing business with American companies.

The move has escalated fears of lingering trade war between the two world’s two largest economies that would crimp global sales growth. However, temporary exemption to Huawei, which will allow it to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets for 90 days has reignited optimism.

Additionally, a strong economy, which bodes well for the stock market, supported the ascent. The U.S. economy added jobs consecutively for 103 consecutive months, representing the longest-ever streak of job creation. The unemployment rate has dropped to 3.6% — the lowest in nearly 50 years — while wages rose at an annual rate of 3.2% in April, the ninth consecutive month of more than 3% growth.

Strong hiring and increasing wages will boost consumer spending and keep the economy on a solid growth path. The American economy expanded at a faster-than-expected rate of 3.2% in the first quarter of 2019, marking the best GDP growth to start the year since 2015. Americans are also feeling optimistic with consumer sentiment hovering at a 15-year high in early May. Additionally, a surge in oil price and the Fed’s decision of not raising interest rates this year after seven hikes over the past two years are favoring consumers.

In order to make the most of the encouraging trend amid volatility, investors should apply some hedging techniques to their equity portfolio. While there are number of ways to do this, we have highlighted five volatility-hedged ETFs that could prove beneficial amid market turbulence. Investors should note that these funds have the potential to stand out and outperform the simple vanilla funds in case of rising volatility.

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