U.S. markets are looking good early in 2024, with the S&P 500 up 23% for the year ended January 5. While large-cap stocks are looking strong these days, industry observers don’t think we’re out of the woods just yet when it comes to a potential downturn.
Allio Finance CIO A.J. Giannone is quoted in U.S. News as calling the stock market “on shaky ground heading into the new year.” Giannone added that “we could be in trouble if the labor market suddenly shows signs of a meaningful slowdown.” (It should be noted, however, that Giannone’s remarks were made before December’s jobs report showed a more resilient than expected labor market.)
And while Yardeni Research President Ed Yardeni is bullish on the stock market, he’s quoted in Insider as saying there are still “clear and present dangers,” from a hawkish Fed to Congressional gridlock to prolonged geopolitical turmoil.
So, while large caps still seem to be a good bet, it may not be a bad idea to hedge this bet. That’s where the Parametric Hedged Equity ETF (PHEQ) comes into play.
See more: “Morgan Stanley Lists 5 Active ETFs”
Seek Capital Appreciation While Enjoying Downside Protection
PHEQ seeks capital appreciation while offering downside protection. The actively managed ETF combines a U.S. large-cap equity portfolio with option overlay hedges. The fund’s option overlay component looks to reduce portfolio volatility.
Prior to the launch of PHEQ, this option overlay was something that Parametric employed primarily for institutional clients. Now, this feature is accessible to a broader range of investors through the ETF wrapper.
PHEQ is one of five active ETFs that Morgan Stanley Investment Management listed on the NYSE Arca in October. When they launched, VettaFi’s Head of Research Todd Rosenbluth called MSIM “a heavyweight with a strong heritage of active management.”
“It’s great to see their lineup expansion, which includes low-cost fixed income and risk-mitigating equity ETFs,” Rosenbluth added.
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