Market Overview

3 Protective ETFs To Consider If Stocks Swoon Again

3 Protective ETFs To Consider If Stocks Swoon Again

Three days of impressive market action notwithstanding, stocks still aren't out of the woods just yet. Sure, the Dow Jones Industrial Average is out of a bear market technically speaking, but history shows that technical erasures of bear markets can be fleeting.

Scores of industries currently face zero revenue scenarios and recession fears are running high, indicating that when March economic start rolling in next month, the data could be ugly and if that's not already efficiently baked into equities, stocks could be in for more downside.

Among exchange-traded funds, there are avenues for investors seeking protection without establishing overtly bearish positions. Here are some ideas to consider.

Direxion Flight to Safety Strategy ETF (FLYT)

Many new ETFs are victimized by bad timing. The opposite is true of the Direxion Flight to Safety Strategy ETF (NYSE: FLYT). FLYT debuted on Feb. 5, right before investors started mulling flight to safety plays. As such, the Direxion offering is one of the most successful ETFs to come to market thus far in 2020.

FLYT tracks the Solactive Flight to Safety Index. That benchmark “measures the performance of a volatility-weighted basket of gold, U.S. listed large-capitalization utility stocks, and U.S. treasury bonds with remaining maturities of greater than 20 years,” according to Direxion.

Currently, FLYT allocates 42.7% of its weight to Treasuries, 34.7% to utilities equities and the remainder to gold. That's not a portfolio for adrenaline junkies, but it's one that has been less bad/almost pretty good this year as highlighted by FLYT's modest 2.10% month-to-date loss.

Direxion S&P 500 High minus Low Quality ETF (QMJ)

Sure, some recently downtrodden names are rallying this month, but if the March meltdown is reminding investors of anything it's that financially stressed companies with a proclivity for feasting on debt and cutting dividends when times are tough aren't investors' cup of tea in the aforementioned tough times.

The Direxion S&P 500 High minus Low Quality ETF (NYSE: QMJ) helps investors capitalize on the quality at the expense of trash theme and is a long/short fund.

“The Long Component is comprised of stocks selected from the S&P 500® based on their quality score as defined by the Index Provider. The Short Component is comprised of stocks selected from the S&P 500® with the lowest quality scores,” according to Direxion.

The concept is working as QMJ has been about 330 less bad than the S&P 500 this month.

Direxion MSCI USA ESG – Leaders vs. Laggards ETF (ESNG)

This is an ideal to see if sustainable investing strategies can weather bear markets. Some data points suggest that is happening and the Direxion MSCI USA ESG – Leaders vs. Laggards ETF (NYSE: ESNG) is one way for investors to take advantage of that theme.

Moreover, ESNG is a long/short product that emphasizes stocks with strong environmental, social and governance scores while shorting ESG offenders. Not surprisingly, names in the latter camp are often low quality fare, underscoring the notion that ESNG could prove durable going forward.


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Posted-In: direxionLong Ideas News Broad U.S. Equity ETFs Specialty ETFs Markets Trading Ideas ETFs Best of Benzinga

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