ETF combos trades may help weather market storm

For investors who believe the best trades come in twos, some choice ETF pairings may be the best way to ride out the market volatility.

In a rough year for stocks, the telecom sector is the best performer in the S&P 500, rising more than 8 percent as the broader index has fallen 6 percent. Following this trend, Boris Schlossberg of BK Asset Management recommends shorting the SPDR S&P 500 ETF (SPY) and going long telecom stocks.

Specifically, Schlossberg likes the iShares U.S. telecommunications ETF, IYZ. The telecom sector is traditionally known as a safe-haven sector in times of turbulence, given its high dividend yields. Additionally, Schlossberg said increasing demand for data will help support the group of stocks.

"I think data is the new electricity. The one secular demand all of us are going to have is demand for more data," Schlossberg said Wednesday on CNBC's "Trading Nation." "That sector is going to be more protected than the rest of the economy from the turmoil we're going to be seeing."

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Chad Morganlander, portfolio manager at Stifel Nicolaus, is focusing on another sector that he sees taking off this year—health care. Morganlander recommends buying the health-care sector ETF (XLV) on projected spending and simultaneously shorting the materials sector ETF (XLB) on slow global growth.

Health spending is expected to grow at an average rate of 6 percent per year into 2024, he said. Morganlander believes health-care will make up more than one-fifth of GDP in the U.S. in the next four years.

Health care has been the S&P 500's second-worst performer this year, falling 8 percent. Morganlander said the sell-off makes the group exceptionally attractive, even going into a volatile election year.

"There will be a continuation of allocation of dollars toward that sector," Morganlander said Wednesday on "Trading Nation." "We believe there's opportunity because of this political environment that has marked down many of those larger-cap companies."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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