ETF strategies to capture the changing momentum ahead


IInvestors have returned to financial markets over the past week after weeks of losses that sent many losses, but exchange-traded fund investors shouldn’t get too complacent.

According to data from Bank of America, investors reinvested $18.9 billion in stocks and $6.3 billion in bonds over the past week after weeks of exits, Reuters reports.

BofA strategists also cautioned against reading too much of the recent rally. US stocks have gained almost 9% from their mid-March levels, reducing year-to-date losses to less than 5% as of March 31 and bringing benchmarks back to a striking distance from their previous highs. from early January.

Looking ahead, BofA strategists argued that recession risks would “jump” in the coming months due to the end of the bullish era of central bank excesses, high inflation from Wall Street, from the erosion of globalization, from an era of governmental intervention, social and political polarization and the geopolitical isolationism of Main Street.

Consequently, BofA strategists advised investors that portfolios should be positioned for stagflation and dollar depreciation, with a specific long-term buying outlook on the energy sector and a selling outlook at long term in the technology segment.

Investors can also use ETFs to capture these changing dynamics. For example, the Energy Select Sector SPDR (NYSE Arca: XLE)the Vanguard Energy ETF (NYSE Arca: VDE)the iShares US Energy ETF (NYSEArca: IYE)and the Fidelity MSCI Energy Index ETF (NYSEArca: FENY) offer broad exposure to the energy sector.

Investors can hedge potential downside risks in the technology sector through inverse or bearish ETF plays. For example, the ProShares UltraShort Technology (NYSEArca: REW) takes the -2x or -200% daily performance of the Dow Jones US Technology index, the Direxion Daily Technology Bear 3X Shares (NYSEArca: TECS) reflects the daily performance of -3x or -300% of the S&P Technology Select Sector Index, and the Direxion Daily Semiconductor Bear 3X Stock (SOXS) aims to take the -300% daily performance of the PHLX Semiconductor Sector Index.

Additionally, investors can also hedge against a tech-heavy Nasdaq with bearish ETFs as well. For example, the ProShares Short QQQ ETF (NYSEArca:PSQ) takes the inverse or -100% of the daily performance of the Nasdaq-100 index. For the aggressive trader, the ProShares UltraShort QQQ ETF (NYSEArca: QID) follows the double inverse or -200% performance of the Nasdaq-100, and the ProShares UltraPro Short QQQ ETF (NasdaqGM: SQQQ) reflects the triple inverse or -300% of the Nasdaq-100.

For more news, insights and strategy, visit ETF Trends.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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