After a wild ride, investors are hoping for the markets to return to normal, but a number of risks still remain and may potentially cause another round of risk-off selling. However, there are a number of exchange traded fund strategies that may help investors mute the swings.
“We’re heading into a summer that is going to remain volatile,” Andrew Sheets, Morgan Stanley’s head of cross-asset strategy, told Bloomberg. “We have upcoming headlines on steel tariffs, we have upcoming headlines on China trade negotiations, we have Nafta, we have an uncertain political backdrop in Italy, we have a new government potentially in Spain. There’s a lot for the market to digest.”
In anticipation of the potential volatility ahead, Sheets advised “taking positioning down” and paring risk exposure to a “more neutral” stance.
JPMorgan Chase & Co. also warned that Italy and trade rifts are only a sign of ongoing risks that have not dissipated.
Acute Global Uncertainty
“A fresh round of acute global political and policy uncertainty that marked the first week of summer foreshadows a likely coming several months of global event risks and potential global shocks,” JPMOrgan strategists led by Paul Meggyesi said in a note. June looks “particularly treacherous.”
Consequently, investors who are concerned about the potential risks ahead may consider CBOE Volatility Index or VIX-related exchange traded products that track VIX futures, which allow traders to profit during rising volatility or hedge against short-term turns.