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QAI and MNA Are Two ETFs for the 'Muddle Through' Economy


One is low-correlation and the other pure equity.

Although markets have come back a bit this summer, the economy remains undeniably shaky. Growth in the American economy is coming in below 2%, although the level is still in the positives, giving hope to some investors as we approach the end of the year.
Yet, there are many risks to the American economy as unemployment levels remain stubbornly high, Europe is still in shambles, and emerging market growth rates are coming down for the major economies. Still, on the positive side, the housing market is starting to trend back higher while the Federal Reserve could be poised to embark on another round of easing.

However, even as the Federal Reserve adds to the QE program, the market and the economy at large will likely be stuck in a narrow range, much as it has been for most of 2012. The first two rounds of QE have had little impact on driving the economy back to solid levels of growth so it is somewhat questionable if another round will have any different results.

These conflicting data points and the lack of government measures to truly stimulate the market, suggest that we are likely to see a "muddle through" economy for the foreseeable future. In other words, markets are likely to oscillate around their current level, but will be unable to breakthrough either to the downside or the upside. Meanwhile, growth will probably stay in the 1.5%-2.5% range as well; not enough to truly bring back the economy, but certainly not a recession either.

In this type of economic environment, stocks-in aggregate-are likely to offer little in returns, forcing investors to only choose the best securities for purchase. Additionally, the uncertain outlook could increase volatility and make correct selection of securities all that much more important, especially for low risk investors.

For those who find themselves in this group, a look at some low risk ETFs could be an excellent way to round out a portfolio and its exposure. While correct stock selection is probably necessary in order to generate positive returns in this kind of climate, a look at some lower volatility ETF products could provide some stability as well as being able to offer up at least some equity exposure.

In light of this, we have highlighted a few ETFs below that are decidedly low risk and have generally low levels of correlation to the broad markets. That way, investors can still play stocks but can ensure that when the uncertain market is going one way, at least some of their portfolio is going the other, thus improving diversification levels and making for a potentially better portfolio in this shaky environment.
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No positions in stocks mentioned.
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