The annual Morningstar ETF Invest Conference is in full swing in Chicago and is shaping up to be one of the best meetings of the minds in the exchange traded fund industry.
The morning session started off with BlackRock’s iShares global chief investment strategist, Russ Koesterich, and his take on the looming fiscal cliff and potential recessionary fears.
Still, Koesterich believes we may see last minute compromises; however, there is a chance that Congress may drag its feet, again. Additionally, he predicts that Obama will win a tight race, with the GOP controlling the House. [ETFs and the Presidential Election]
In a recent iShares blog, Koesterich suggested investors should take exposure to low-volatility ETFs to “help provide some downside cushion, while also offering the prospect of better risk-adjusted returns over the long term.” For fixed-income investors, he pointed to municipals and investment grade options as an alternative to Treasuries. Additionally, Koesterich warned against industrial metals, “which will not respond well if growth continues to slow.” [Why Investors Have Funneled $3 Billion to Low-Volatility ETFs]
At the conference, Koesterich predicted a 65% chance for a “great idle” in developed economies, a 30% chance of a global recession or a 5% chance of accelerated growth. Consequently, he advises investors to “get defensive,” with dividend stocks, smaller developed economies and strategic commodity allocations, like gold.
Next up, Joanne Hill, head of investment strategy at ProShares, stated that investors should include alternative assets to improve the return-risk profile or diversification, to manage equity risk, to manage interest rate or inflation risks and to manage exposure to the various asset classes.
She also highlighted VIX related ETFs as an alternative tool to mitigate risks and boost returns within portfolios. However, the CBOE Volatility Index, or VIX, is currently hovering around 15, or near its historical average, which suggests greater complacency within the markets. [Leveraged VIX ETFs Tumble Over 95% This Year]
In mid-day during a panel on alternative assets beyond long/short strategies, Sean Clark, the CIO at Clark Capital Management Group, forecast gold will hit new highs due to devaluing currencies on the unprecedented global central bank printing spree. Gold futures currently sit just under $1,800 an ounce. [Gold ETFs Eye 2011 High on Central Bank Stimulus]
For more information on past conferences, visit our ETF conferences category.