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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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