Stock losses are accelerating.
At the moment, the Dow Jones is now down 330 points. The NASDAQ shed 88, as the S&P 500 falls 35 points. All as U.S. manufacturing woes scare the Street.
Just this morning, the ISM September survey on manufacturing registered at 47.8%, down from 49.1% from July. It’s also the 50.2% expected, and is now the worst reading we’ve seen since June 2009. Remember, any number under 50% does indicate contraction.
“The disappointing data is only fanning long-standing fears of slowing global growth,” Alec Young, managing director of global markets research at FTSE Russell said, as quoted by MarketWatch. “And with U.S.-China trade expected to produce little in the way of near-term breakthroughs, investors continue to favor counter-cyclical, defensive stocks with high dividend yields as weak data pushes interest rates ever lower.”
It’s the latest sign that the trade war is taking a big bite out of the economy.
It now also raises the possibility of another rate cut by the end of October.
In fact, investors are betting that the weak ISM report will force the Federal Reserve to cut interest rates for the third straight policy meeting in October. At the moment, expectations for a rate cut soared to 60% from 40% a day ago.
At the same time, President Trump is blaming the Federal Reserve, tweeting, “As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!”
The best way to trade the slowdown is to trade volatility.
As we’ve noted, some of the best ways include the use of:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher from a current low of $30 a share. . The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
The TVIX is another great way to trade elevated volatility. This ETF tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index. As volatility ticks higher, the TVIX ticks higher.
iPath S&P 500 VIX Short-Term Futures (VXX)
As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return. In simple terms, as volatility shoots higher, so does the VXX.