The equities markets are slipping and the CBOE Market Volatility Index, along with VIX-related exchange traded products, is spiking as traders try to hedge a number of risk events ahead.
On Monday, the REX VolMAXX Long VIX Weekly Futures Strategy ETF (BATS: VMAX) surged 9.6%, iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) jumped 9.2% and ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) increased 9.2%. Over the past week, VMAX gained 14.1%, VXX was up 10.5% and VIXY rose 10.6%.
Related: ETFs to Hedge Against a Turn in a Complacent Market
Meanwhile, the VIX spiked 17.1% Monday to 19.94, a three-month high. The index also broke above its 200-day simple moving average.
The VIX, or so-called fear index, is a widely observed indicator for investor sentiment in the stock market and measures the expected or implied volatility of large-cap stock options traded on the S&P 500 index. Exchange traded products that track VIX futures allow investors to profit during rising volatility or hedge against short-term turns.
The volatility index is advancing as investors looked to the scheduled Federal Reserve meeting and the upcoming United Kingdom’s so-called Brexit vote to leave the European Union, which is gaining traction. The latest poll released by The Guardian showed a gain in the “leave” camp over the “remain.”
Related: ETFs to Watch as Brexit Uncertainty Mounts
Many market observers are also growing anxious over the market outlook. For instance, Goldman Sachs’ equity strategist Christian Mueller-Glissmann recently outlined the firm’s fears that there may be significant risk to the downside, Business Insider reports.
[related_stories]“There are generally more negative than positive 3-standard deviation moves for equities, indicating a negative ‘skew’ for equity returns,” Mueller-Glissmann said. “And recently the balance has shifted further towards negative moves.”
Looking further out, we are still in the midst of an election season, and the uncertainty has been a negative factor on the equities market.
“There are concerns and worries, and it’s coming from both sides of the aisle,” Karen Altfest, principal advisor and executive vice president of client relations at Altfest Personal Wealth Management, told CNBC. “Yes, it’s a complicated world, but the people who have fears aren’t focusing on things like stock valuations and economic indicators and trends that an investor should look at to make decisions. They’re focusing on their feelings about [unrelated]things.”
For more information on the CBOE Volatility Index, visit our VIX category.
REX VolMAXX Long VIX Weekly Futures Strategy ETF