How To Hedge Your Portfolio With ETFs Amid Rising Volatility

Volatility has taken precedence this month, triggered by fresh escalation in U.S.-Sino trade war. This is because President Donald Trump unexpectedly threatened to impose a new tariff of 10% on the remaining $300 billion of Chinese goods effective Sep 1. Meanwhile, China retaliated by allowing the yuan to slip to the lowest level against the dollar in more than a decade, sparking currency war concerns. Per Bloomberg News, China has halted imports of U.S. agricultural products.

Additionally, less-than-expected Fed’s dovish view added to the woes. Though the central bank lowered interest rates for the first time in more than a decade, it dampened hopes of a string of rate cuts to shore up the economy. Further, a slew of downbeat economic data also resulted in decline in the market. The U.S. ISM manufacturing index dropped for the fourth straight month in July to record the lowest reading since August 2016. U.S. Non-manufacturing (services) index also dropped last month.

However, the trade fear eased after People’s Bank of China (PBOC) jumped in to stabilize its currency on Aug 8. It set the official midpoint reference for the yuan at 7.0039 per dollar. Though it is the weakest point for the currency against the dollar since Apr 21, 2008, it is ahead of analyst expectation of 7.0222 per dollar per Reuters. The central bank fixed the midpoint of the currency rate below 7 yuan per dollar for the second time today at 7.0136 per dollar - the weakest level since Apr 3, 2008.

Yet again, volatility rose following fresh round of news, including the possibility of snap elections in Italy. Per Bloomberg, the White House is holding off on licensing decisions for American companies to restart business with Huawei Technologies. Additionally, bouts of latest data across the globe also added to the chaos. United Kingdom’s economy shrank for the first time in more than six years in the second quarter and producer-price index in Asian country contracted for the first time in nearly three years.

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