iQ ETF Recession Hedge Model

See the current selections for all iQUANT models with a 30-Day Free Trial

REDUCE YOUR DOWNSIDE RISK IN A RECESSION

The iQ ETF Recession Hedge Model applies quantitative monthly technical indicators to ten sector and asset class Exchange-Traded Funds (ETFs) representing indices that have historically outperformed in down markets caused by a economic contraction.

HOW DOES THE MODEL WORK?

Each asset ETF represents a 0% - 10% allocation of the total model and is represented by two monthly technical strategies that may dictate a long or cash position in any given month. Each of the two technical strategies per asset ETF represents 1/2 of each asset’s allocation.

As an example, if one strategy for a particular asset class is long while the second strategy for the same asset class is in cash then the asset class would have a 5% allocation of the Total. If both strategies for an asset class dictate a cash position, then there will be no allocation to the asset class. On the flip side, if both strategies are long then the asset class will represent 10% of the selections.

The table below summarizes the asset ETF tickers and the potential allocation to each:

The Model reconstitutes monthly as the technical indicators it utilizes are monthly.

Why invest in recession hedges?

Investing in recession hedges such as precious metals, defensive stocks, the US dollar, and bonds can help protect an investor's portfolio from the negative effects of a recession. Here are some reasons why investors might choose to invest in these assets during a recession:

1. Safe Haven: Precious metals, such as gold and silver, are often considered safe haven assets because they tend to retain their value during times of economic uncertainty. Investors may choose to invest in precious metals during a recession as a way to protect their portfolio from potential losses in other asset classes.

2. Defensive Stocks: Defensive stocks are stocks of companies that tend to be less affected by economic cycles and can provide stability to a portfolio during a recession. These companies often operate in industries such as healthcare, utilities, and consumer staples, which provide products and services that consumers need regardless of the state of the economy.

3. US Dollar: During a recession, the US dollar tends to appreciate in value as investors seek out safe haven assets. This can provide a hedge against inflation and currency volatility, as well as potential benefits for investors who hold assets denominated in US dollars.

4. Bonds: Bonds are often considered a safe haven asset class during a recession because they tend to provide stable returns and can help to diversify a portfolio.

*HISTORICAL MODEL PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE RETURNS PRESENTED REPRESENT SIMULATED MODEL RETURNS WHICH ARE HYPOTHETICAL, MEANING THEY DO NOT REPRESENT ACTUAL TRADING, AND, THUS, MAY NOT REFLECT MATERIAL ECONOMIC AND MARKET FACTORS, SUCH AS LIQUIDITY CONSTRAINTS, THAT MAY HAVE HAD AN IMPACT ON ACTUAL DECISION MAKING. THE HYPOTHETICAL PERFORMANCE REFLECTS THE RETROACTIVE APPLICATION OF THE MODEL WITH THE FULL BENEFIT OF HINDSIGHT. Actual performance may result in lower or higher returns than the hypothetical Model performance presented. If actual portfolios had been managed, there can be no guarantee such portfolios would have achieved results similar to those portrayed. Model returns reflect a 0.50% annual trading expense on total portfolio value – which may be higher or lower than actual trading costs. Actual performance will vary from that of investing in the Model because it may not be fully invested at all times. Hypothetical model returns in certain years were significantly higher than the returns of the S&P 500 Index. It is important to note that models may underperform in certain years and may produce negative results. The value of the securities selected by the Model may be subject to steep declines or increased volatility or perception of the issuers.