Are we headed for a crash or is this week's slide just another market dip?
It's too early to tell, but that doesn't mean investors in exchange-traded funds can't start getting a little more defensive with their portfolios.
The first step to protecting your portfolio is to assess your allocation to cyclical growth stocks. Since Oct. 3, the technology sector, which has driven most of the market gains this year, has taken a nosedive. According to ETFdb.com, the worst-performing ETF over the last week, excluding inverse and leveraged funds, is the actively managed AdvisorShares New Tech and Media ETF. The fund, which holds Amazon, Salesforce and Roku, is down about 13.5 percent.
Other technology funds also took big hits, including the O'Shares Global Internet Giants ETF, down about 11 percent, while emerging market ETFs with a technology bent also did poorly. The Global X NASDAQ China Technology ETF, for instance, was the third worst-performing fund of the week, down 12.2 percent.
If the market continues to falter, technology ETFs will keep getting hammered, say some experts. The sector has performed so well over the last year — the S&P 500 information technology subsector was up about 30 percent between Oct. 3, 2017 and and the same date this year — that it's only logical these companies would take the biggest hit at the first whiff of trouble. Indeed, the subsector dropped by 8.42 percent over the last week, compared with 4.8 percent for the S&P 500, according to S&P Capital IQ.