Here's Why It's Wise To Invest In Low Volatility ETFs Now

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Wall Street has been witnessing increasing volatility since the beginning of the month. In fact, after seeing losses for three straight days, the market finally saw some upside as the Dow Jones Industrial Average was up 1.3% on May 13. The S&P 500 and the Nasdaq Composite were also up 1.2% and 0.7%, respectively, on the same day.

The initial weakness in the market was largely due to investors exiting major tech players and growth picks amid intensifying fears of increasing inflation and rising interest rates, per a CNBC article.

Spooking investors more, the latest data highlighted inflation levels rising at the fastest speed since 2008 in April. Notably, the Consumer Price Index rose 4.2% year over year in comparison with the Dow Jones estimate of a 3.6% rise, per a CNBC article. The five-year breakeven inflation rate — which measures expectations of inflation five years out — reached its highest since April 2011 on May 10 while the 10-year breakeven inflation rate — a measure of expectations of inflation in 10 years’ time — rose to its highest since March 2013.

Investors are worried that rising inflation may hurt corporate margins and profits. They are also fearing that the consistent rise in inflation may put pressure on the Federal Reserve to tighten monetary policy, according to a CNBC article.

However, investors showed optimism despite a disappointing April jobs report. According to the Labor Department, nonfarm payrolls rose only 266,000 last month. The metric lags the Dow Jones estimate of 1 million, per a CNBC article. It also missed the downwardly revised figure of a rise to 770,000 in March from the previously stated 916,000. Moving on, the U.S. unemployment rate came in at 6.1% during April, in comparison with the Dow Jones estimate of 5.8%, per the same CNBC article.

The U.S. economy is appearing to be on the path of recovery from the pandemic-led slowdown. Markedly, accelerated vaccine distribution, strong fiscal stimulus support and the reopening of non-essential businesses are expected to expedite the economic recovery pace. Notably, the central bank has raised its economic growth outlook considering the vaccine and stimulus optimism and even expects higher inflation this year.

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