Market Volatility Still Matters – Consider This ETF

While major equity indices have stabilized over the past month, the volatility is far from over. With inflation fears giving way to recession fears, market activity could pick up again.

Markets are currently in the midst of a summer rally, but eyes continue to be on the Federal Reserve and how it will approach interest rate policy. For now, it looks like further tightening could be on the way, but the big question is whether the tightening will come at the expense of economic growth. As such, the narrative of the recession has increased lately.

“Stocks are looking for firm direction following a declining summer rally, the Federal Reserve is unlikely to suspend rate hikes until it sees a major improvement in a trend indicator. ‘key inflation, according to UBS,’ noted a Markets Insider report.

Optimists are hoping the Fed can steer the economy toward a “soft landing” as opposed to a recession. Until then, market volatility is to be expected, giving investors reason to hedge against further pressures in equity markets.

“We expect equity markets to remain volatile as investor sentiment swings between hope that the Fed will succeed in steering the US economy into a ‘soft landing’ and fear that it will not. “said Mark Haefele, chief investment officer at UBS Global Wealth Management. .

A high volatility solution

One option to consider is an exchange-traded fund (ETF) which achieves the goal of reducing volatility when it hits. Take into account American Century Low Volatility ETF (LVOL)which offers investors exposure to active management, which means portfolio managers can take the pulse of the markets and enter or exit positions as the market moves.

This dynamic exposure comes with a low cost expense ratio of 0.29%. The fund filters out asymmetric or downward volatility and invests in companies with strong and steady growth.

Key features of the fund as presented on the product website:

  • Emphasizes strong fundamentals to limit the potential risk of speculative companies with questionable earnings.
  • Extends risk metrics beyond volatility to capture other downside and balance sheet risks.
  • Focuses on volatility at the portfolio level as well as at the individual stock level.
  • Uses a rebalancing strategy that actively responds to changing market conditions.

For more news, insights and strategy visit the Core Strategies Channel.

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