U.S. stocks have recently seen a noticeable pullback, and many investors are wondering how to respond amidst a market sell-off and the temporary failure of the "buy the dip" strategy. How should U.S. stock investors respond?

Sahm has compiled a list of common hedging ETFs for investors' reference:

Shorting Major Indices: Inverse Index Funds

Some investors may choose to short the three major indices, with options for 1x, 2x, and 3x leverage. These inverse-leveraged ETFs can hedge portfolio risk and capitalize on Wall Street's negative sentiment, reflecting bearish investor sentiment. However, it's important to note that these ETFs are not suitable for long-term investments, and the expense ratios of professional funds are generally high, which might affect total returns. If the market rebounds, ETF holders could face significant losses.

1. Shorting the Dow Jones Index

• Proshares Short Dow30(DOG.US): Up over 3% in the past 10 trading days;
• Proshares Trust Ultrashort Dow30(DXD.US): Up over 7% in the past 10 trading days;
• Ultrapro Short DOW 30 Proshares(SDOW.US): Up over 11% in the past 10 trading days.

2. Shorting the Nasdaq Index

• Proshares Trust Short Qqq Proshares (Post Rev Split)(PSQ.US): Up over 7% in the past 10 trading days;
• Proshares Trust Pshs Ultshrt Qqq(QID.US): Up over 15% in the past 10 trading days;
• Ultrapro Short QQQ Proshares(SQQQ.US): Up over 23% in the past 10 trading days.

3. Shorting the S&P 500 Index

• Short S&P 500 Proshares(SH.US): Up over 5% in the past 10 trading days;
• Ultrashort S&P 500 Proshares(SDS.US): Up over 10% in the past 10 trading days;
• Proshares Trust Ultrapro Short S&P500(SPXU.US): Up over 16% in the past 10 trading days.

The VIX: The More Volatile the Market, the Higher It Rises

The "fear index" is a common term for the Chicago Board Options Exchange Market Volatility Index, used to measure the volatility of S&P 500 index options. More commonly known as the VIX index (S&P 500 Volatility Index).

The VIX is often considered an important tool for gauging market sentiment. Generally, a spike in the VIX indicates pessimistic market sentiment with expectations of higher future volatility, while a decline suggests optimistic sentiment with expectations of lower future volatility.

In the last ten trading days, the VIX has surged. Market strategists note that a spike in the "fear index" usually indicates that traders are preparing for short-term sell-offs, but they also caution that excessive increases could mean the worst of the market downturn might be over.

The VIX itself cannot be directly traded, but investors can consider related ETFs:

• IPATH S&P 500 VIX MID-TRM (POST SPLIT)(VXZ.US): Up nearly 6% in the past 10 trading days;
• Proshares Trust Ii Vix Short Term Futures(Post Rev Splt)(VIXY.US): Up over 17% in the past 10 trading days;
• iPath Series B S&P 500 VIX Short-Term Futures ETN(VXX.US): Up over 17% in the past 10 trading days;
• Proshares Trust Ii Ultra Vix Sht Trm Futr Etf 2017(Post Spt(UVXY.US): Up nearly 26% in the past 10 trading days.

Low Volatility ETFs: A Stable Choice During Market Turbulence

Low-volatility funds differ from traditional investment strategies by excluding the fastest-moving stocks. This means they may underperform during bullish markets but tend to fare "less badly" during market turmoil.

iShares MSCI Min Vol Global ETF(ACWV.US): Up over 1% in the past 10 trading days;

S&P 500 Low Volatility Powershares(SPLV.US): Up nearly 2% in the past 10 trading days;

iShares MSCI Min Vol EAFE ETF(EFAV.US): Up over 4% in the past 10 trading days.

What’s Next for U.S. Stocks?

Andrew Tyler, Head of Global Market Intelligence at JPMorgan, stated that escalating trade tensions could significantly lower U.S. GDP expectations and earnings revisions, prompting Wall Street to reassess year-end forecasts for the S&P 500.

So far, his caution has been justified: according to Bloomberg Industry Research data, first-quarter earnings growth expectations have been downgraded from 11% at the start of the latest reporting cycle to 7.1%. Meanwhile, the Atlanta Federal Reserve's latest GDPNow forecast, though not perfect, also indicates a shrinking U.S. economy.

Jay Woods, Chief Global Strategist at Freedom Capital Markets, commented, "Buckle up because more volatility is coming. Even though there was a technical rebound today, traders are selling first and asking questions later. The market has long been due for a correction. The real question is, has 'buy the dip' turned into 'sell the rally'? That remains to be seen; we’re not out of the woods yet."