Some pundits are saying that we are in a recession; others call it a mere economic slowdown. In my opinion, what difference does this technical distinction make to you? The one thing everyone agrees on, bull or bear, is that we're living in uncertain times. As a result, it is of the utmost importance for us to take a cautious approach. That's why in this week's ETF Talk I'm going to show you the ETF tools you can use to profit in a difficult market.

Before going any further, I want to stress the importance of managing risk, having the discipline to sell, and tapping new opportunities. After reading this ETF Talk, if you have any additional ETF-related questions, please contact me by clicking here.

I want to start with a warning. I think there's a market storm headed our way, and that means we all have to get ready to batten down our financial hatches. A key reason for my concern is that financials once again are on the decline. We now have entered a traditionally weak period for stocks that typically spans between August and November. We also have the looming uncertainty of the upcoming presidential election. Sure, my prognostication for more pain ahead could be wrong. And if we see an uptrend take hold I will revise my opinion. Nevertheless, my advice to stay cautious remains firm.

Two ETFs that I have been speaking about recently on the radio and on television are the iShares Lehman 20+ Year Treasury Bond fund (TLT) and the ProShares Short S&P 500 (SH). Both of these funds typically move inverse to the stock market. They can be used as a hedge against long positions or to profit from a decline in stock prices.

The iShares Lehman 20+ Year Treasury Bond fund (TLT) seeks results that correspond to the price and yield performance of the long-term sector of the United States Treasury market as defined by the Lehman Brothers 20+ Year U.S. Treasury index. TLT invests at least 90% of its assets in the bonds of the underlying index and at least 95% of its assets in the U.S. government.

At the close of the quarter on June 30, 2008, the fund had a one-year average annualized return of 13.37%. Also on that date, TLT had compiled an average annualized return of 6.75% since its inception during July 2002.

The ProShares Short S&P 500 (SH) seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the S&P 500 index. SH invests 80% of its assets in financial instruments that have economic characteristics inverse to those of the index.

As of the quarter ending June 30, 2008, SH had a one-year market price return of 18.15%. Since its inception in June of 2006, the fund had a market price return of 2.11%, also as of June 30, 2008.

Of course, there are no guarantees in life, just as there are none when investing in bonds and short funds. However, such investments can be used strategically to profit from markets on the slide. If you want to avoid simply riding the stock market down by hanging onto long positions, both of these funds are ones that you may want to consider.