We are clearly seeing that American consumers are tapped out. One retail stock after another has disappointed over the past quarter, and I don’t see any reason why we will see a massive increase in consumer spending over the next couple of quarters.
When you combine all of these macro-economic factors with the fact that the Federal Reserve is continuing to reduce its monetary stimulus, these are large hurdles for the S&P 500 to overcome. In terms of a market correction, as more investors begin to take profits, especially as the Federal Reserve continues pulling back on the money printing throttle, I think it’s important to incorporate some investment strategies to hedge your portfolio.
Chart courtesy of www.StockCharts.com
One of these investment strategies is to use an inverse exchange-traded fund (ETF), such as ProShares UltraShort S&P 500 (NYSEARCA:SDS). While the S&P 500 has begun this market correction with a five-percent drop over the past month, the UltraShort S&P 500 ETF is up more than 10% during this time.
Even as the S&P 500 continues and this pullback and possibly an even deeper market correction occur, it’s important to incorporate various investment strategies in your portfolio. This certainly does not mean you should put all your eggs in one basket, such as one inverse ETF—far from it.
When a sector or specific stock that is a solid, long-term investment encounters a market correction, this is a time to begin adding to your portfolio. But it’s also important to add some hedges as part of your investment strategies.
This article is brought to you courtesy of Sasha Cekerevac from Daily Gains.