“In the coming year, we expect to see S&P 500 multiple expansion as investors become more convinced of sustainable economic growth and [earnings]increases, and more comfortable with the gradual unwinding of Fed stimulus,” Stovall wrote in a recent note.
Traders who are anticipating a ramp up in market volatility may hedge equity positions with CBOE Volatility Index based fund products, such as the iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) and ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY). [VIX ETFs Rise Despite Higher Dow]
Additionally, low-volatility equity ETFs, like the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) and PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV), also provide investors with broad stock market exposure but include a conservative focus that helps even out potential swings. [Low-Volatility ETFs Remain Popular with Risk-Averse Investors]
For more information on volatility, visit our volatility category.
Max Chen contributed to this article.