4 ETFs To Play Increased Economic Uncertainty

Last week numerous indicators enhanced economic uncertainty in the US, sending the Dow Jones Industrial Average to its longest streak in nearly seven years and all 10 of the S&P 500 Index groups down.

Enhanced economic uncertainty was primarily driven by three major forces.  The first was a decline in the Conference Board’s measure of consumer confidence.  For the month of May, the index dropped by nearly 7.9% from the month before reaching a six month low.  Furthermore, the Conference Board indicated that consumers remain overly pessimistic about the labor markets during the next six months. 

4 ETFs Hit By Falling Home Values

According to the S&P/Case-Shiller index of property values in 20 major cities, the housing sector continues to face headwinds and remains in a slump.

The index fell 3.6 percent from March 2010 to March 2011, marking the largest year-over-year decline since November 2009 and reached its weakest point since March 2003.  Furthermore, pending sales of previously owned homes dropped a whopping 12 percent in April from the prior month, forcing many home builders to be wary of when a recovery could be in sight. 

Five ETFs To Play Spread Trades

Recently, New York-based asset management firm, FactorAdvisors announced the launch of the first ever family of spread exchange traded funds (ETFs) which will enable investors to simultaneously hold a long and short position in one leveraged ETF. 

These new ETFs are designed to simplify spread trading and lower the transaction costs behind implementing such a strategy.  Furthermore, these new ETFs are designed to rebalance daily to achieve the desired effect of maintaining dollar neutrality.   The FactorShares ETFs are designed to target a daily leverage ratio of 4:1, where each dollar invested provides approximately two dollars of long futures exposure and two dollars of short futures exposure, immediately after daily rebalancing.  Although these new products offer exposure to a niche market and strategy, it is important to keep in mind that these ETFs seek investment results for a single day’s performance and rebalances on a daily basis. 

An ETF Strategy For An Uncertain Market

August 18, 2010

As investors look for ways to add diversification and alpha, implementing the 130-30 strategy could be a way to go.

The 130-30 strategy uses financial leverage by shorting poor performing stocks and purchasing shares that are expected to have high returns.  A 130-30 ratio implies shorting stocks up to 30% of the portfolio value and then using the cash from the short position to take a long position in the stocks that are expected to outperform the market.