At the 11th hour, the U.S. government once again averted disaster. Enough republicans and democrats agreed to both raise the debt ceiling and reopen the government, ending the first government shutdown since the mid 90s, and ending worries over a debt default for now.
However, a long term deal was not reached, as legislators pushed out worries about another shutdown to just mid-January 2014, while the next debt ceiling looks to be hit in February of next year. This means that we could be back at these concerns once more in just a couple of months, suggesting that we aren’t out of the woods yet on the issue, though there is definitely some short term relief (see Beat Hedge Funds with these ETFs).
Given this, it seems reasonable to assume that another bout of volatility is just around the corner. Fortunately, there are some solid ETFs that can protect portfolios in sluggish market environments, and could be worth a closer look the next time things get rocky. While there are plenty of options in this segment, we have highlighted three of our favorites below:
PowerShares S&P 500 BuyWrite Portfolio (NYSEARCA:PBP)
This ETF could be an interesting choice for investors seeking to utilize a covered call strategy in an exchange-traded vehicle. The product writes call options on the S&P 500, selling slightly out-of-the-money, or at-the-money calls, on the index.
This approach looks to generate income, though if the S&P 500 surges, upside potential will be capped. However, the income level looks to be boosted—thanks to the proceeds from selling the options—giving this product a decent yield of 3.6% in 12 month yield terms.
The fund is a bit pricey when compared to other choices in the market, but you make up for this in terms of yield. Just remember that in roaring bull markets, PBP will probably underperform, as the covered call strategy definitely takes away from the gains potential and especially so with a short time horizon.
PowerShares S&P Downside Hedged Portfolio (NYSEARCA:PHDG)
Another option to reduce risk is by taking a look at PHDG from PowerShares. This ETF follows the S&P 500 Dynamic VEQTOR Index which looks to dynamically allocate between three different asset classes; equities, volatility, and cash.