4. Hedge Your Portfolio With an Inverse ETF
By Luiz Augusto Pacheco
Low-interest rates are one of the main factors that are keeping stock prices high. Fed president, Janet Yellen, showed several times throughout the year she wants to raise interest rates sooner rather than later. But mixed economic data in the U.S., a global economy with low growth, Brexit and the U.S. elections made her postpone the move so far.
However, inflation and wage growth are starting to pick up, and the U.S. economy is growing above the world average. Elections in Austria can start the rise of extreme right parties and a referendum in Italy may be the beginning of a crisis in the Eurozone.
We see a very good chance of an interest rate hike in December and also some turmoil in Europe. On top of the U.S. elections, these issues will certainly bring a lot more volatility in the stock markets in fourth quarter, and we will probably see a market correction.
With that in mind, clients should hedge their stock portfolios with ProShares Short S&P 500 (SH). It provides inverse exposure to the SPDR S&P 500 Index (SPY). The recommended exposure to SH depends on the client. But something between 10% and 20% of their stock portfolio is enough to hedge the losses without compromising any gains in case we have surprises regarding interest rates and elections in the upcoming months.
Os artigos deste blog não refletem necessariamente a opinião da Inva Capital Consultoria Ltda e da Inva Capital Wealth Management LLC.
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