Preparing for the Storm: 3 ETFs to Consider

Source: Getty Images

Source: Getty Images

While the market recovered most of its early losses on Thursday the fact remains that investors are jittery after reports that the Portuguese bank Banco Espirito is considering filing for bankruptcy and after weak economic news coming out of Asia. Furthermore, the Federal Reserve has announced that it will stop its quantitative easing program in October, and for years now the driving force behind the bullish upswing in the S&P 500 has been the Fed’s loose monetary policy.

The American stock market rally is long in the tooth and there are a lot of investors out there sitting on a mountain of profits, some of which was earned using margin. Thus it shouldn’t surprise anybody that we are seeing the market show signs of weakness such as the underperformance of economically sensitive stocks and small caps as well as heightened volatility. Given these points investors should consider hedging their bets using tactical ETFs that benefit from stock market weakness and related phenomena.

I should point out that before you buy these funds realize that they are trading vehicles only, and that they do not function properly over long periods of time. Use limit orders and stop orders.

I have listed three that I like in this market, although the list is by no means complete.