Investors sold off stocks on Thursday as they anticipated a possible recession and braced for the Federal Reserve to raise rates. Citing Dow Jones Market Data, the Wall Street Journal reports that the major indexes fell between 7.02 and 9.38 percentage points from Wednesday’s highs to Thursday’s lows, their largest swings since the first half of 2020.
The Nasdaq Composite Index fell 5%, the largest one-day percentage decline since June 2020. The S&P dropped 3.6%, and the Dow slid 3.1%, erasing Wednesday’s gains.
The S&P 500 lost more than 13% of its value between January and April, the worst start to a year since 1939, according to CNN. Tech stocks in particular have taken a beating, with the Nasdaq Composite down 21% this year, closing Thursday at its lowest level since November 2020.
According to Bank of America Global Research strategists led by Michael Hartnett, the global market sell-off has more room to run.
“Base case remains equity lows, yield highs yet to be reached,” the BofA team wrote in a research note published on Friday, adding that the market is struggling with how to price in inflation and sluggish growth. “Paralysis rather than panic best describes investor positioning.”
Amidst market volatility and interest rates rising at a faster and higher rate than expected, investors may want to consider allocating to managed futures as a hedge. One option is the iMGP DBi Hedge Strategy ETF (DBEH), an actively managed fund that seeks long-term capital appreciation by employing long and short positions in derivatives, primarily futures contracts, and forward contracts, across the broad asset classes of equities, fixed income, and currencies.
DBEH seeks to potentially match or exceed the performance of a portfolio of 40 leading equity long/short hedge funds using a factor replication strategy, according to the fund’s fact sheet. The strategy employs a statistical model to identify the key drivers of recent pre-fee performance of such hedge funds across major equity and other markets.
The fund then invests directly in an optimized, dynamically adjusted portfolio of liquid futures contracts to efficiently obtain similar exposures.
DBEH has an expense ratio of 0.85%.
For more news, information, and strategy, visit the Managed Futures Channel.
