The latest market oscillations are certainly causing a risk-off shift into not only the bond markets, but to areas in U.S. equities where volatility doesn’t have a complete stranglehold on the sector, such as consumer discretionary or consumer staples–a case for leveraged exchange-traded fund (ETF) plays like the Direxion Daily Consumer Staples Bull 3X ETF (NYSEArca: NEED) and the Direxion Daily Consumer Discretionary Bull 3X ETF (NYSEArca: WANT).
Market declines and gains have been anything, but two ships sailing in the night as volatility has been propelling the CBOE VIX index, a measuring stick of market movements, to stratospheric levels. According to market mavens like Paul Tudor Jones, who had the prescience to predict the ominous Black Monday in 1987, investors need to brace themselves for more volatility to come.
“I think we’re going to see a lot more of what we just saw, which is a lot more volatility,” Jones told CNBC’s Andrew Ross Sorkin. “It’s really easy to say ‘I’m really bullish’ or ‘I’m really bearish.’ I kind of see a two-sided market.”
Source: tradingeconomics.com
As such, traders have been looking to corner specific areas of the market where investors are seeking shelter from the volatility. On the stock market front, traders have been looking to names like Costco Wholesale and Campbell Soup, but in the aggregate, they’re looking at the consumer discretionary or consumer staples sectors or both.
For leveraged returns, traders have been looking at ETF plays in NEED and WANT. NEED eked out a small gain of 0.70% on Wednesday, but has been up 4 percent within the last five days, while WANT surged 6.53 percent on strength from the major indexes due to U.S.-China trade talks progressing.
NEED seeks daily investment results equal to 300% of the daily performance of the Consumer Staples Select Sector Index that includes domestic companies from the consumer staples sector which includes the following industries: food and staples retailing; household products; food products; beverages; tobacco; and personal products. WANT seeks daily investment results of 300% of the daily performance of the Consumer Discretionary Select Sector Index, which is provided by S&P Dow Jones Indices and includes domestic companies from the consumer discretionary sector. It is non-diversified.
These sectors will be of particular importance, especially if U.S.-China trade deal negotiations go asunder in the forthcoming weeks. Thus far, the markets have been quick to digest the positive news emanating from financial news outlets, but defensive plays against volatility like NEED and WANT could continue to see interest from cautionary traders.
For more market trends, visit ETF Trends.