After what seemed like endless months of frustratingnegotiations, Congress finally signed off on a last minute deal cobbled together by Republican leader Mitch McConnell and Vice President Joe Biden. For the first time in nearly two decades, income-tax rates for those earning over $450,000 were raised. The tax hikes are expected to reduce the deficit by some $620 billion over 10 years, far less than Obama's $4 trillion in deficit reduction goal . Though the American public might have sighed in relief, there is one crucial element that was not addressed in the New Year's deal: spending. Many who are outraged by the deal believe that the fiscal cliff deal did not really solve anything, and that the main issues of lackluster economic growth and mounting pile of debt still pose some glaring red flags for the future of the nation. Without the necessary spending cuts, it will be nearly impossible to combat the country's swelling budget deficit.

And though markets got off to a rather strong start in 2013, many investors remain cautious ahead of next month's round of negotiations concerning the debt ceiling and several spending cut deadlines. For those looking to take a defensive stance in their portfolios against the now apparent fiscal cliff fakeout, we outline three ETFs that may be worth keeping a close eye on :


1. Remaining Neutral: BTAL

QuantShares' innovative U.S. Market Neutral Anti-Beta Fund, BTAL, is a relatively small yet powerful tool for investors wishing to hedge against economic turmoil and uncertainty. The fund tracks an index that is designed to identifythe lowest beta stocks as long positions and the highest beta stocks as short positions.

The strategy generally works out favorably in a bear market, but performs rather poorly during a bull run. Should Congress fail to come to a viable solution concerning spending cuts and the nation's statutory borrowing limit, BTAL may profit from a seemingly inevitable dip in equities.


2. On The Defensive: DEF

Another ETF offering exposure to a unique investment strategy, the Defensive Equity ETF (DEF) seeks out securities that perform well during bearish market periods. To be included in the index, stocks are selected based on low relative valuations, conservative accounting, dividend payments and a history of out-performance during market downswings .

DEF currently maintains a relatively well-balanced portfolio of roughly 100 individual securities and only 11% of total assets lying in the top ten holdings. The fund is dominated by utilities equities, consumer defensive and energy stocks thetypicalgo-to sectors of the market during times of economic turmoil.


3. Going Long: BLV

Vanguard's Long-Term Bond ETF BLV is a popular option for those looking to add fixed income exposure from the long end of the maturity curve. The fund tracks an index that invests in U.S. Treasury, agency, investment-grade corporate and investment-grade international dollar-denominated bonds with maturities greater than 10 years.

Long-term bond funds have demonstrated their ability to take on safe haven appeal when markets take a sour turn. If bearish pressure emerges in the coming months as Washington grapples over spending and budget deficit talks, BLV may be able to provide some stability and the potential to smooth out volatility.

Disclosure: No positions at time of writing.

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