Best Safe Haven ETF?
February 7, 2020 - Bonds, Commodity Futures, Currency Trading, Gold, Real Estate
A subscriber asked which exchange-traded fund (ETF) asset class proxies make the best safe havens for the U.S. stock market as proxied by the S&P 500 Index. To investigate, we test 14 ETFs as potential safe havens:
Utilities Select Sector SPDR (XLU)
iShares 20+ Year Treasury Bond (TLT)
iShares 7-10 Year Treasury Bond (IEF)
iShares 1-3 Year Treasury Bond (SHY)
iShares iBoxx $ Investment Grade Corporate Bond (LQD)
iShares Core US Aggregate Bond (AGG)
iShares TIPS Bond (TIP)
Vanguard REIT ETF (VNQ)
SPDR Gold Shares (GLD)
PowerShares DB Commodity Tracking (DBC)
United States Oil (USO)
iShares Silver Trust (SLV)
PowerShares DB G10 Currency Harvest (DBV)
SPDR Bloomberg Barclays 1-3 Month T-Bill (BIL)
We consider three ways of testing these ETFs as safe havens for the U.S. stock market based on daily or monthly returns:
- Contemporaneous return correlation with the S&P 500 Index during all market conditions at daily and monthly frequencies.
- Performance during S&P 500 Index bear markets as defined by the index being below its 10-month simple moving average (SMA10) at the end of the prior month.
- Performance during S&P 500 Index bear markets as defined by the index being -20%, -15% or -10% below its most recent peak at the end of the prior month.
Using daily and monthly dividend-adjusted closing prices for the 14 ETFs since respective inceptions, and contemporaneous daily and monthly levels of the S&P 500 Index since 10 months before the earliest ETF inception, all through December 2019, we find that: Keep Reading