“If what we’re looking at here is more akin to a late cycle period of rate hikes, as was the case in 1999,” then the market may be in for heightened volatility amid a series of rate hikes, Strugger added.
While equity investors can hedge volatility with a VIX option, there are a number of ETF that specifically target the least volatile areas of the market. For instance, the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) lean toward more conservative stocks. [Chilling Out With Low Volatility ETFs]
SPLV takes 100 stocks from the S&P 500 that have exhibited the lowest volatility over the past year and weights holdings by the inverse of their volatility, so the largest components show the least amount of volatility. USMV also tracks low volatility stocks, but the ETF targets variances and correlations for all stocks, along with other risk factors.
iPath S&P 500 VIX Short Term Futures ETN
For more information on market volatility, visit our volatility category.
Max Chen contributed to this article.