Volatility ETF Guide: VXX Vs. VXUP

Touted as the ‘Investor Fear Gauge’, the CBOE Volatility index or ‘VIX’ is now one of the most followed market indicators around the world.  This tends to outperform when markets are falling or fear levels over the future are high. The CBOE VIX determines the volatility that the equity market (i.e. S&P 500) is heading toward.

There is no doubt that the U.S. economy is well on its course of recovery, but this does not ensure that there is no volatility in the market. The economy is presently caught between mixed data points and is baffled by the rate hike speculations.

Though a June timeline (for Fed rate hike) looks almost unfeasible as indicated by the Fed’s still-cautious tone, the latest sturdy job, housing and inflation data rekindled the faster-than-expected rate hike possibility in the U.S. On the other hand, industrial production, consumer sentiment and retail sales numbers were daunting and have left the Fed in two minds about normalizing the interest rate policy.

To add to this, issues over global growth especially in the big three regions ─ Euro zone, Japan and China – will be lingering concerns as these are far from standing on their own feet. Moreover, volatility in crude prices can also single-handedly derail the course of action taken by these economies and their central banks in the coming days.

So, one can be sure that volatility will remain heightened going forward and might lead many investors to monitor volatility-related products. After all, thanks to the fast-growing ETF industry, it has become easier to invest in complicated spaces like volatility.

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