5 Niche ETFs That Beat A Volatile Market Last Week

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Wall Street saw wild swings last week, with the major indices moving in opposite directions. After a powerful rally at the start of the week, the stocks lost momentum on hot inflation data, which would push the Federal Reserve toward another aggressive rate hike. The Dow Jones Industrial Average gained 1.15% in the week, while the S&P 500 and the Nasdaq Composite Index dropped 1.55% and 3.11%, respectively.

While most segments of the market suffered huge losses, a few performed really well. ProShares Inflation Expectations ETF (RINF - Free Report), Credit Suisse S&P MLP ETN (MLPO - Free Report), Simplify Interest Rate Hedge ETF (PFIX - Free Report), AGFiQ US Market Neutral Anti-Beta Fund (BTAL - Free Report) and First Trust NASDAQ ABA Community Bank Index Fund (QABA - Free Report) from different zones led the way higher last week.

Wild Swings

The core consumer price index, which strips out volatile components, such as food and energy prices, climbed 6.6% year over year, marking the biggest annual increase in 40 years. The consumer price index rose 0.4% in September after rising 0.1% in August, twice the 0.2% projected by analysts, even as the annual rate slowed slightly to 8.2% from 8.3%.

The hot data came amid soaring prices for shelter, food and medical care and pushed up chances of the Federal Reserve’s fourth 75 bps interest rate hike next month. Following the data, the S&P 500 climbed more than 5% on Oct 13 and the Dow Jones Industrial Average surged 1,500 points from its intraday lows to the highest level, falling more than 500 points and then rose at least 800 points.

Investors are worried that the Fed could see that the economy has yet to slow enough to get inflation under control. That could clear the way for the Fed to continue hiking interest rates aggressively, which could cause a recession.

ProShares Inflation Expectations ETF (RINF) – Up 6.3%

As inflation is not showing any sign of a slowdown, RINF is gaining strength on further rate hike expectations. ProShares Inflation Expectations ETF seeks to mitigate the risk of rising rates through a built-in interest rate hedge using U.S. Treasury futures. It offers a portfolio of 30-year Treasury Inflation-Protected Securities (TIPS) bonds by tracking the performance of the FTSE 30-Year TIPS (Treasury Rate-Hedged) Index.

ProShares Inflation Expectations ETF has amassed $70.3 million and trades in an average daily volume of 30,000 shares. It charges 97 bps in annual fees.  

Credit Suisse S&P MLP ETN (MLPO) – Up 6%

Amid volatility in the stock market, this overlooked corner of the market is making great strides. MLPs have relatively consistent and predictable cash flows, making them safer and less risky than the other plays in the broader energy space. These represent an attractive investment option for income-focused investors as MLPs pay out substantially all of their income to investors on a regular basis. In addition to high yields and the potential for capital appreciation, MLPs also have lower volatility and provide diversification benefits to the portfolio.

Credit Suisse S&P MLP ETN is linked to the S&P MLP Index, which includes both master limited partnerships and publicly traded limited liability companies having a similar legal structure to MLPs and sharing the same tax benefits. It is unpopular and illiquid in the MLP space, with AUM of $27.9 million and an average daily volume of nearly 1,100 shares. The note charges 95 bps in annual fees.

Simplify Interest Rate Hedge ETF (PFIX) – Up 5.3%

Simplify Interest Rate Hedge ETF seeks to provide a hedge against a sharp increase in long-term interest rates and benefit from market stress when fixed-income volatility increases, while providing the potential for income. It buys put options on longer-term Treasury bonds to offer “the most liquid and the most cost-efficient way of getting interest rate protection.” Simplify Interest Rate Hedge ETF is the first ETF providing a simple, direct and transparent interest rate hedge.

PFIX has accumulated $368.1 million in its asset base and trades in an average daily volume of 201,000 shares. It charges 50 bps in annual fees.

AGFiQ US Market Neutral Anti-Beta Fund (BTAL) – Up 4.8%

AGFiQ US Market Neutral Anti-Beta 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 primarily in long positions in low-beta U.S. equities and short positions in high-beta U.S. equities on a dollar-neutral basis, within sectors.

AGFiQ US Market Neutral Anti-Beta Fund has AUM of $305.5 million and an expense ratio of 2.53%. It trades in an average daily volume of 408,000 shares.

First Trust NASDAQ ABA Community Bank Index Fund (QABA) – Up 4.1%

Banks are in the most advantageous position on rising rates. As banks seek to borrow money at short-term rates and lend at long-term rates, the rise in interest rates will earn more on lending and pay less on deposits, leading to a wider spread. This will expand net margins and increase banks’ profits. First Trust NASDAQ ABA Community Bank Index Fund offers exposure to the largest banks and thrifts or their holding companies that are designated as banks by the Industry Classification Benchmark. It tracks the NASDAQ OMX ABA Community Bank Index, holding 172 stocks in its basket.

First Trust NASDAQ ABA Community Bank Index Fund has accumulated $82.9 million in its asset base and trades in a volume of around 11,000 shares a day on average. It charges 60 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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