Large money managers are bracing for a market correction. Exchange traded fund investors can also hedge against a turn in equities through inverse or bearish ETF options.
The so-called Warren Buffett Indicator, or the Total Market Cap to GDP Ratio, is triggering sell-alert warnings, and Warren Buffett is already trimming his U.S. stock exposure, MoneyNews reports. [A Short ETF Idea for Developed Markets]
Investors who believe the markets are set to about face have a number of broad short or inverse ETF options available. For instance, the Direxion Daily Total Market Bear 1x Shares (NYSEArca: TOTS) tries to reflect the inverse or -100% of the MSCI US Broad Market Index. Over the past week, TOTS has increased 3.9%. [Inverse S&P 500 ETF Ideas to Hedge a Correction]
Alternatively, investors can also capitalize off the fall in the widely viewed Dow Jones Industrial Average through the ProShares Short Dow30 ETF (NYSEArca: DOG), which tries to reflect the -100% daily performance of the Dow Jones Industrial Average. Additionally, for the more aggressive traders, the ProShares UltraShort Dow 30 ETF (NYSEArca: DXD) takes the -200% of the Dow Jones and the ProShares UltraPro Short Dow30 (NYSEArca: SDOW) reflects the -300% of the Dow. [Do You Know How Your Leveraged ETFs Work?]
Warren Buffett has pointed to “disappointing performance” in prominent American companies like Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG) and Kraft Foods (NasdaqGS: KRFT). Additionally, Berkshire Hathaway (NYSE: BRK.A) has been reducing exposure to consumer stocks.