The Dow ended an eight-day losing streak last Friday, but those gains were erased quickly today as it fell by almost 350 points amid more trade concerns. While this doesn’t help the bulls, traders capitalizing on the volatility are rejoicing as the markets fluctuate, which makes for a suitable environment when investing in volatility ETFs.
The CBOE Volatility Index is a key indicator in short-term expectations in the volatility of the S&P 500. ETFs tracking the movement of this indicator have been making gains as the tariff-for-tariff battle wages on between the United States and China.
ProShares VIX Short-Term Futures (NYSEArca: VIXY) is up a whopping 14.3% today and up about 15% the past five days:
Likewise, the volatility has benefitted ProShares VIX Mid-Term Futures (NYSEArca: VIXM), which is up 4.45% today and up about 5% the past five days:
Consumer Sentiment Tilting Towards Fear
While it’s been a boon to volatility, the trade concerns have done no favors for consumer sentiment as evidenced by CNNMoney’s Fear and Greed Index. On Monday, the index was technically still deemed neutral, but a tilt towards fear is evident as the needle could get pushed towards the left with more negative market news.
According to the Investor and Advisor Pulse Study, 57% of investors expect a market disruption will occur at some time this year.
“After a long period of growth, financial advisors and investors need to get used to an ongoing environment of uncertainty,” said Kristina Hooper, Invesco’s Global Chief Market Strategist. “This research demonstrates that investors are confused and overwhelmed, causing them to react emotionally. Now more than ever, advisors need to educate and support their clients to help them reach their individual investment goals.”
For more market trends in volatility, click here.