Election Faceoff: Harris and Trump’s Policy Differences and How to Weather Volatility

Strategies for Stability: Protecting Your Portfolio in Uncertain Times

Given the potential for volatility caused by election-related news and policy changes, investors can use various strategies and instruments to manage risk and protect their portfolios:

Diversified ETFs:

One can minimize risk by investing in U.S. and global stocks with lower volatility and defensive sectors to weather election-related volatility. ETFs focused on low-volatility assets, defensive sectors like utilities or consumer staples, and bonds can offer protection while still positioning for potential growth, depending on the election outcome.

1. iShares MSCI USA Min Vol Factor ETF (USMV). This ETF seeks to minimize risk by investing in U.S. stocks with lower volatility compared to the broader market. It's designed to provide exposure to less volatile companies, offering a more defensive position during uncertain times like elections.
2. iShares MSCI Global Min Vol Factor ETF (ACWV). This ETF focuses on minimizing volatility by investing in global stocks with lower risk, making it a solid option for managing market swings during election uncertainty.
3. iShares U.S. Utilities ETF (IDU). Utilities are a defensive sector that tends to be less sensitive to market fluctuations. This ETF provides exposure to utility companies, which are often considered safe investments during periods of volatility.
4. Vanguard Consumer Staples ETF (VDC). Consumer staples, such as food and household products, tend to perform well during periods of economic and political uncertainty. This ETF offers exposure to companies that produce essential goods, helping shield your portfolio from election-driven market swings.

Bonds:

Hedging with Options:

Options strategies can provide downside protection by allowing investors to hedge their positions against potential declines in stock prices due to election-related market fluctuations. To learn how, check out Koen Hoorelbeke's insightful guide here.

Gold and Precious Metals:

Precious metals like gold are widely regarded as a safe haven during times of inflation and market volatility. Gold typically performs well in periods of uncertainty, making it a go-to investment during elections and major geopolitical events. For a deeper dive into the current trends in gold, check out Ole Hansen’s expert analysis.

Currency Hedging:

Election-related news often affects the strength of the U.S. dollar. By using currency hedging strategies or investing in foreign currency funds, investors can protect against unfavorable shifts in currency valuations that could arise from major policy changes. Here are a few examples of popular foreign currency funds that investors might consider:

1. Invesco CurrencyShares Euro Trust (FXE):
   • Currency Exposure: Euro (EUR)
   • Description: This fund offers direct exposure to the value of the Euro relative to the U.S. dollar. It is suitable for investors who want to hedge against the weakening of the U.S. dollar or those who expect the Euro to appreciate.
2. Invesco CurrencyShares Japanese Yen Trust (FXY):
   • Currency Exposure: Japanese Yen (JPY)
   • Description: This fund provides investors with exposure to the Japanese yen relative to the U.S. dollar. Investors might use this ETF to hedge against fluctuations in the yen or to benefit from a weakening dollar.
3. Invesco CurrencyShares Swiss Franc Trust (FXF):
   • Currency Exposure: Swiss Franc (CHF)
   • Description: This ETF provides exposure to the Swiss franc, which is often considered a "safe-haven" currency during periods of global financial uncertainty.

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