Long/Short ETFs To Brave This Wild Market

What similarity between summer 2015 and winter 2016! The China-driven sell-off that crushed the global investing world last August-September suddenly starts chiming to start the New Year (read: China Crash Spoils New Year Mood: ETFs in Focus).

Basically, a wavering Chinese economy and the consequent burst of the Chinese stock market on the one hand and the Fed policy tightening as well as massive crashes in oil prices on the other sent the global markets in a state of plight. The contagion effect of the double whammy was strong enough to make global equities see the most horrible start to a year in 16 years.

Grave economic releases out of China and heightened volatility in its stock market caught the global markets off guard lately. There was a trading halt on the key Chinese bourses, with the indexes diving 7%, to start the New Year. The decline was the worst single-day performance since the 8.5% decline on August 24, 2015, which was the root of the global market rout last summer.

Hints of further shrinkage in the Chinese manufacturing sector in December were held responsible for the bloodbath in the market. The Caixin/Markit purchasing managers' index for China declined to 48.2 in December, representing the 10th successive month of factory output contraction. The data was worse than a prior 48.6 and well below the market’s expectation for 48.9.

Additionally, China’s central bank guided the yuan to a five-year low in off-shore trading on Wednesday, which raised expectations of further weakness in Chinese economy as well as sparked off fears of a currency war among export-centric Asian nations. If this was not enough, news of Saudi Arabia cutting off diplomatic ties with Iran joined China-led worries to start the year (read: ETFs to Move on Yuan Devaluation).

While investors somehow started to digest fears of a hard landing in China, things seemed unsteady even in the U.S. Despite the Fed liftoff in December, subdued inflation is still a concern.From this global trend, we can easily say that the macroeconomic environment is anything but steady. Asian shares are approaching their largest weekly decline in over four years (read: 5 ETF Losers of 2015 Hoping for a Rebound in 2016).

Added to this, oil prices are stubbornly low, having slipped to below $34/barrel level lately on supply glut and global growth worries. The continued downward pressure on oil prices crushed several oil-rich nations during this course.Brent crude tested an 11-year low while WT has seen a 7-year low in the first week of 2016 (read: Oil and Energy ETFs That Hit All-Time Lows).

For the top U.S. ETFs, investors saw SPDR S&P 500 ETF (SPY) lose over 5.8%, SPDR Dow Jones Industrial Average ETF (DIA) shed over 6% and PowerShares QQQ (QQQ) move down by 7.5% in the last five trading sessions (as of January 7, 2016).

So, it would be wise for investors to settle on safe ETFs while playing the U.S. Safety and value should be the investment mantra in this stormy market. If caution is the keyword, investors can take a look at these three long/short ETFs which beat the aforementioned broader U.S. ETFs in the first week of 2016.

U.S Market Neutral Anti-Beta Fund (BTAL)

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