After an extended bull market rally, any uncertainties could shake the markets. Investors should consider alternative exchange traded fund strategies to help smooth out any volatility ahead.
On the upcoming webcast, Outlook 2017: Investing in a Politically Volatile Landscape, Maxwell Gold, Director of Investment Strategy at ETF Securities, Matt Collins, Director and Head U.S. Product Operations of Capital Markets at ETF Securities, and Drew B. Wieder, Chief Operations Officer and Chief Compliance Officer at Provident Capital Management, will take a look at potential risks in the global markets in the year ahead and outline ETF strategies that could help hedge against a change in trends.
Among the major risks ahead, further interest rate hikes have weighed on investors’ minds. The Federal Reserve recently hiked rates for the second time in almost a decade and expects three more hikes this year. While a stronger dollar and rising yields may weigh on hard assets, precious metals may still have room to rebound.
“Historically expectations of a rate hike drive support for the U.S. dollar which is generally negative for precious metals,” Gold said. “Once a rate hike has occurred, however, this trend typically reverses. A similar path may play out.”
Precious metals could find support from continued negative real interest rates, episodic market volatility and continued political uncertainty around the world. Even though rates are rising in the U.S., other uncertainties could push investors back into safe-haven assets like gold and other precious metals.
While the markets attention has been focused on equities with U.S. stocks pushing toward new heights and an aging three-decade long bull run in bonds, investors should consider alternative assets to better diversify and limit downside risk.
“With markets near all-time highs, it is difficult to apply modern portfolio theory and be truly diversified,” Wieder said. “Investors should instead implement multi-directional strategies that are needed in the current market environment to be truly diversified.”
For example, as part of a diversified portfolio that employs some form of risk management, investors may consider precious metals ETFs that offer low correlation to equities and fixed-income assets. These precious metals exposure would zig while stocks and bonds zag.
Investors can gain exposure to precious metals through a number of physically backed ETF options, including ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), ETFS Physical Silver Shares (NYSEArca: SIVR), ETFS Physical Platinum Shares (NYSEArca: PPLT) and ETFS Physical Palladium Shares (NYSEArca: PALL). ETF investors can also use the ETFS Physical Precious Metals Basket Shares (NYSEArca: GLTR) as a catch-all of all four precious metals.
Financial advisors who are interested in learning more about hedging strategies for potential volatility ahead can register for the Thursday, January 12 webcast here.