Another month has come and gone, and what a tumultuous one it was for the markets and exchange traded funds (ETFs). The Greece debt woes touched upon almost all facets of the markets, and investors ran for safety and comfort of the U.S. dollar. In the end, these five ETFs came out ahead.
The VIX. The CBOE Volatility Index (VIX) surged as stocks fell sharply amidst lingering concerns over the European Union and growth in emerging markets. The nearly $1 trillion bailout package of the European Union has not assuaged investors’ worries. On top of credit concerns, investors are now fearful that drastic budget cuts throughout the eurozone may put the brakes on the global economic recovery. [VIX ETNs Reflecting the Market’s Fear.]
It should be noted that the VIX ETNs perform differently as compared to the VIX because the investment vehicle are ETNs, which as its name implies, don’t follow the spot price of the VIX, but rather its futures price. Specifically, the fund targets a constant weighted average futures maturity of one month. [Turmoil Gives VIX ETNs Their Moment.]
- iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX)
- iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca: VXZ)
Treasury Bonds. The eurozone crisis has pushed Treasury prices higher as investors bet that inflation will remain low for some time. Yet again, investors are seeking low-risk U.S. government debt as the euro dropped and stocks slid on ongoing concerns that struggling eurozone nations will be unable to lock in the spending cuts and tax increases that are needed to reduce their deficits. [Europe’s Crisis Makes Treasury Bond ETFs Winners.]
- Vanguard Extended Duration ETF (NYSEArca: EDV)
Natural Gas. More storms than “normal” – about 16 – are anticipated to hit the Atlantic coast of the United States this season. Of these, eight are expected to become hurricanes and about four of them are going to be intense, according to the Tropical Storm Risk. As the number of hurricanes rises, so does the chance of one striking the oil-rich Gulf of Mexico or Florida’s crop areas. [Hurricane Season.]
Natural gas prices have moved past their 50-day moving average, with prices now wobbling around $4. However, energy analysts point out that supply and demand fundamentals are weak. [Following the Gyrations of Oil and Natural Gas ETFs.]
- United States Natural Gas (NYSEArca: UNG)
U.S. dollar. The dollar is surging as investors look for a safe haven from financial turmoil and the uncertainty stemming from a possible North Korea war that could destabilize the entire world. The U.S. dollar is gaining across the currency board with the exception of the Japanese yen.
Furthermore, Spain’s central bank had to bail out a regional bank, and four other regional banks are looking to combine in an effort to fend off insolvency. Many European countries are also announcing austerity measures in an effort to convince creditors that they can pay off their debt. Investors, worried over possible bankruptcies and a halt to global economic recovery as a result of the austerity measures, have been stocking up on safe-haven dollars. [U.S. Dollar ETF Revels in Being a Safe Haven.]
- PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.