Preparing for Market Volatility With Smart Beta ETFs | ETF Trends

The Dow Jones Industrial Average was rebounding early Thursday from its loss earlier this week, but investors should brace themselves for more volatility ahead. One way to help blunt the impact of market downturns is via smart beta exchange-traded funds (ETFs).

With a protracted trade war between the U.S. and China seeming more likely as the days and months seem to drag on without making any headway in negotiations, more tariffs could upset the markets further.

Furthermore, from a technical analysis perspective, a correction is par for course given the uptrend in the market the past decade.

“This is a corrective phase in an upward trend that’s not yet over,” said John Roque, technical analyst at Wolfe Research.

Additionally, how the markets react to the latest round of sell-offs will be key moving forward.

“Since the May low, the comeback has produced a number of bullish formations,” said Frank Cappelleri, executive director at Instinet. “This current sell-off has been so sharp, what’s going to have to happen is to watch the ensuing bounce and see how strong or not it is. … It’s interesting because some of these moves are some of the largest we’ve seen all year.”

In the meantime, the question remains—how low can the markets go?

“Around 20%–30% of stocks reached a 20-day low on Friday,” said Michael Arone, chief investment strategist at State Street Global Advisors. “That needs to get to 60%–70% before we find a bottom,” he said. “So it seems like perhaps like the onset of a typical market correction. It wouldn’t surprise me as investors recalibrate their Fed and trade expectations that the market suffers a correction.”

A Smart Beta Option with International Exposure

With the potential for volatility ahead, what ETPs are available in the marketplace that can address the concern for volatility risk while at the same time, realize any upward gains realized when markets rise? And what product can provide investors with the international exposure necessary for diversification?

One such product is the Natixis Seeyond International Minimum Volatility ETF (MVIN). MVIN focuses on developed markets and seeks to generate long-term capital appreciation with less volatility than typically experienced by international equity markets—the minimum volatility approach helps diminish portfolio risk.

MVIN gives investors:

• Less volatile approach to diversify internationally
• Long-term capital appreciation seeking less volatile international stocks
• Actively managed ETF with the ability to adapt over time

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