4 ETF Zones To Invest In As Volatility Spikes

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Wall Street saw wild swings last week with the return of volatility triggered by sooner-than-expected rate hike signals and higher inflation expectation. The Federal Reserve turned hawkish in its latest FOMC meeting, indicating two interest rate hikes by the end of 2023, sooner than previously expected.

Investors worried that if the Fed tightens monetary policy sooner than expected to help cool inflationary pressures this could weigh on future economic growth. This concern will continue to linger this year and thus led to a decline in stocks.

Additionally, it caused the flattening of the yield curve, which means that the yields of shorter-duration treasuries like the 2-year note increased while longer-duration yields like the benchmark 10-year declined. The retreat in long-dated bond yields reflects less optimism toward economic growth and the jump in short-end yields shows expectations of the Fed raising rates.

As such, the Dow Jones plunged 3.5%, its consecutive second weekly fall and marks the worst week since October, while the S&P 500 shed 1.9% for the week, ending a three-week winning streak. The Nasdaq Composite Index saw a weekly loss of 0.3%, snapping its four-week rally. Meanwhile, the CBOE Volatility Index (VIX) jumped more than 32% last week. It implies that market worries have started to set in. This fear gauge tends to outperform when markets are declining or fear levels pertaining to the future are high.

Earlier-than-expected tightening has prompted investors to re-access their portfolio, leading to higher demand for lower-risk securities. As a result, we have highlighted four such zones and their popular ETFs where investors could stash their money amid this volatility:

Low Volatility - iShares Edge MSCI Min Vol USA ETF (USMV - Free Report)

Low-volatility ETFs have the potential to outpace the broader market in an uncertain market environment, providing significant protection to the portfolio. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. Further, these allocate more to the defensive sectors that usually have a higher distribution yield than the broader markets.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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