Displaying items by tag: volatility

Friday, 20 May 2022 16:32

ETFs The Thrive in Volatility

You’d have to be completely blind to miss the market gyrations as of late, but the question remains which funds can you lean on in times like this? VIX only funds miss the boat because they have bad long-run historical performance and rely on timing the market, whereas volatility minimizing ETFs do a better job at hitting long-term targets. Dividend funds like SPHD from Invesco try and minimize volatility while still giving income exposure. A similar fund without the dividend is the IShares MSCI USA Min Vol ETF (USMV) which tracks lower volatility stocks. The advantage of these funds is that once volatility is gone they still provide potential upside so you aren’t guessing about volatility swings.


Finsum: While the VIX is a great market gauge it’s far from a stable long-term investment on its own, other volatility strategies can be more effective. 

Published in Economy
Tuesday, 17 May 2022 17:27

How to Respond to Volatility

The market is seeing some of the highest volatility since the pandemic and before that, you have to go back to the taper tantrum, but how should investors respond? While the most obvious answer is to ‘buy the dip’, the question remains where. Investors should look to industries whose fundamentals haven’t shifted in the most recent months or are less susceptible to the ongoing volatility shifts. This value tilt means leaning towards financials and commodities. Moreover, investors should steer clear of those exactly susceptible to current volatility spikes. Technology and emerging markets are easy stay-aways because inflationary pressures are going to hurt growth stocks and supply constraints will bottle up developing economies for the foreseeable future.


Finsum: More advanced hedging strategies should be considered in equity markets given the volatility, but still tilt toward value.

Published in Eq: Total Market
Thursday, 12 May 2022 21:05

Volatility ETFs Return from the Dead

Volatility ETFs reached infamy in the 2018 Volmageddon episode, but these formerly destructive ETFs making a Lazzarath-like comeback. Both the SVIX and UVIX delivered record style gains amid inflows due to market gyrations UVIX closed 37% higher but was up 42% in mid-day trading. The wild up and downs came in response to the Fed meeting and a tanking S&P the following day. Advisors are steering investors toward both UVIX and SVIX because this is exactly where these products thrive. However, there is still a substantial risk as investors have suffered greatly in the past from these products and the ‘juice’ they are receiving could be detrimental on the downside.


Finsum: This is unprecedented volatility in the post-GFC, and it could continue until inflation is under control.

Published in Eq: Total Market

Goldman Sachs put out its views on the market’s volatility and how to handle it. The bank is not bullish on markets but thinks there are some very good stocks to help weather the storm. Unsurprisingly, Goldman says investors should buy stable stocks to help get through the turbulence, as such hum-drum stocks look like they have room to run. "Stable stocks also trade with undemanding valuations, supporting the likelihood that they will outperform if the macro environment grows increasingly challenging. Stocks with stable share prices and stable earnings growth generally trade with a valuation premium relative to more volatile peers and to the typical S&P 500 stock. However, relative valuations today are much lower than they have generally been during the last few years."


FINSUM: This is essentially a low-vol, value play, and that makes perfect sense right now. Very stable companies are likely to get through the economic upheaval better than their peers, so on a relative basis they should outperform.

Published in Eq: Total Market
Monday, 02 May 2022 20:08

How to Manage Clients in Volatile Markets

There are several threats that are targeting portfolios right now in terms of volatility. The first is inflation, and investors need to make considerations like planning ahead for the near term for big financial costs. Advisors can also help investors with rising interest rates. Rising interest rates mean variable debt will become more costly so more payments are better in the short run, and locking in fixed rates could be smart before yields climb too high. Finally, concerning general volatility due to slowing growth, it really depends on demographics. For young investors, advisors should steer them through market difficulty by bringing their experience with it previously. For more seasoned investors nearer to retirement, investors should consider pivoting to safer assets in order to avoid sharp losses in market swings.


Finsum: There are intricate strategies or specific funds to help in terms of volatility that advisors should consider.

Published in Wealth Management
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