Three ETFs For Rate Hikes, Economic Slowdown, and War

High Volatility, The Fed, Volatility
by Ian Cooper

There’s a substantial amount of fear in the market.

At one point on Monday, the Dow Jones was down more than 1,000. This may have been for a number of reasons.

One, the Federal Reserve may have to get aggressive with interest rates in order to slow inflation. “Over the past month, the Federal Reserve (Fed) has made it increasingly clear that it is serious about fighting that inflation,” the Wells Fargo Investment Institute said, as quoted by CNBC.

Federal Reserve Headquarters in Washing, D.C.

Two, the U.S. economy is slowing. In fact, according to MarketWatch.com, “The U.S. economy dropped down to a slower gear in January amid a record outbreak of coronavirus cases that intensified labor and supply shortages, according to pair of IHS Markit surveys of senior business executives.”

Three, there’s a very real chance of instability in Europe, with trainloads of Russian troops being deployed around Ukraine. President Biden could deploy thousands of troops in eastern Europe, in addition to warships and aircraft. The Pentagon has also issued orders for hundreds of U.S. troops to be on standby.

To say it’s a tense, troubling situation is an understatement.

With all three catalysts, we’re also not surprised the Volatility Index, or what’s commonly referred to as the Fear Gauge is up about 17 points since the start of 2022.

Should the Fear Gauge push even higher, investors may want to look at VIX-fueled ETFs and ETNs, such as the following:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. The UVXY last traded at $20.08, and could, at the worst case, see $30.

iPath S&P 500 VIX Short-Term Futures (VXX)

The VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index. The VXX last traded at $25.76 and could see $30.

ProShares VIX Short-Term Futures ETF (VIXY)

ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It last traded at $20.88 and could test $25.

All of that said, however, don’t panic. Stay calm and remember: this too shall pass.

Author: Ian CooperOver the last 20 years, he’s taught thousands of investors how to trade news flow and herd mentality using a unique blend of technical and fundamental analysis. He was among the few analysts to spot the financial crisis of 2008, the top of subprime and Alt-A, the death of Lehman Brothers, Bear Stearns, and New Century Financial, and even the Dow’s collapse to 6,500, as well as its recovery. He even called for gold to rally well above $1.500 when it traded under $600. He's a firm believer that hard work and thorough research will lead to investment success.