Shares traded solidly higher for most of Tuesday, but lost steam in the afternoon as Wall Street reacted to a big shake-up in the cryptocurrency space.
Earlier today, crypto exchange Binance announced plans to buy the non-US assets of rival FTX amid the latter company’s liquidity issues. The news sent the price of Bitcoin fell 12.6% to $18,184 (Bitcoin is trading 24 hours a day; prices shown here are as of 4 p.m.).
“Today is a bad day in crypto. Binance had to step in to save crypto exchange FTX from Sam Bankman-Fried,” says Edward Moya, senior market strategist at currency data provider OANDA. “This is a major setback for many crypto investors who have seen [Bankman-Fried] as a white knight and one of the leaders in the space that was meant to thrive once we got past this crypto winter.” The news also hit stocks with exposure to digital assets such as the exchange of cryptocurrency Coinbase Global (PIECE OF MONEY (opens in a new tab)-10.8%) and online trading platform Robinhood Markets (HOOD (opens in a new tab)-19.0%).
The headlines created a whirlwind afternoon for the markets, with the Nasdaq Compound going from a gain of almost 2% at the start of the session to a loss of 0.9% in the middle of the afternoon. Price action stabilized in the final hour of the session, with the tech-heavy index ending up 0.5% at 10,616. S&P 500 Index rose 0.6% to 3,828, while blue chips Dow Jones Industrial Average outperformed (+1.0% to 33,160) while Amgen (AMGN (opens in a new tab)) added 5.6% on a well-received update for its obesity drug.
Low-volunteer ETFs to consider after mid-terms
Today’s first gains came as midterm elections were held across the country. And history suggests that the stock market may continue to rise over the next few weeks. “After the election, we expect the stock market to rise slightly over the next month (+1%) – assuming Thursday’s consumer price index isn’t ‘hot,'” Chris said. Harvey, analyst at Wells Fargo.
Although it will likely take weeks to learn the full results of the midterm elections, most expect Republicans to take control of the House of Representatives. Harvey says if we see a “red wave” — where the GOP takes control of both the House and the Senate — defensive stocks should continue to do well. This includes companies from basic consumption and Health care sectors. Harvey also says a red wave could be beneficial for low volatility strategies, which have tended to show strong relative performance after previous elections where Republicans took control of Congress.
For investors looking to add defensive positions to their portfolio, here are 10 low volatility exchange traded funds which offer an inexpensive way to provide stability amid market ups and downs. Check them.