Without a definitive monetary tightening plan from the Federal Reserve, we could be in for increased financial market volatility. Nevertheless, investors can still gain exposure to the upward moves in equities and limit the swings through low-volatility exchange traded fund strategies.
Larry Fink, chief executive of BlackRock (NYSE: BLK), warned that global volatility will remain elevated until the Fed clarifies its monetary policy, reports Stephen Foley for the Financial Times.
“There is so much uncertainty in the world and that is leading to more volatility,” Fink told the FT. “Some of the official authorities are guilty of, instead of being a calming influence, through their mixed messages, inflaming the markets.”
The Fed previously stated that the markets should expect an interest rate hike sometime this year. However, the central bank has been kicking the can down the road as global uncertainty lingers and U.S. jobs market showed some weakness. Now, more market observers anticipate the Fed to push off a rate hike to December or even into next year.
Consequently, investors seeking global exposure may want to consider low-volatility ETF strategies that specifically target company stocks with smaller swings. For instance, investors can target European market exposure through the iShares MSCI Europe Minimum Volatility ETF (NYSEArca: EUMV). Additionally, the relatively new PowerShares Europe Currency Hedged Low Volatility Portfolio (NYSEArca: FXEU) hedges against currency risks as well as targeting 80 of the least volatile stocks taken from the S&P Eurozone BMI Index. [Low-Vol Europe ETFs to Ride Out Volatile Conditions]