3 High Octane Value Trades for a Bear Market

Note: This article is part of the ETF Trends Strategist Channel

By Rick Vollaro

In investment markets, there are always opportunities. What constitutes a timely tactical opportunity is in the eye of the beholder and can vary widely depending on an investor’s view. Our eye continues to view conditions through the lens of a global cyclical bear market.

Having this view allows us to not only focus on areas that might provide value during this market downtrend, but just as important, it also allows us to steer clear of markets we believe may be dangerous value traps while this bear persists.

Given that we are not big fans of selling markets short, we have highlighted a few high octane value trades below that might make sense if you have a similarly bearish view.

Opportunity 1: The Japanese Yen Likes Stressful Times (FXY)

Despite a massive monetary spending spree that includes a venture into negative rate territory, the Japanese Yen has bucked conventional wisdom and reverted to its pattern of strengthening as risk aversion breaks out across the globe.

In 2016, the yen is up close to 7% while the S&P 500 is down about 5%, and many world markets are down double digits on the year. That’s not too shabby for a currency backed by a poor economy and some very iffy demographics.

As a warning, this trade is at constant risk of the Bank of Japan (BOJ) making further attempts to weaken the currency, and investors in this trade may have to be willing to abandon it fast if the BOJ takes out the monetary bazooka again. But barring a new shock and awe program, it’s probably a decent bet that the yen will continue to rise if risk assets continue to trend down. In that environment the position could clearly add some value.

Opportunity 2: Zero Coupon Bonds Love Deflationary Bears (ZROZ)