The stock market had a smooth run last year, with volatility at usually low levels. When the Fed was providing massive support to the market, investors did not care much for fundamentals.
Now as the support is being gradually withdrawn, investors will focus every bit of information—macroeconomic or earnings related. And, the market may see much higher levels of volatility compared to last year’s.
We already saw a spike in volatility this year. The volatility Index, often called the Fear Index touched a 13-month high of 21.4 earlier this month, as soft economic data coupled with worries about emerging markets unsettled investors. The index has since fallen to around 13.5 as of today.
Do you think that the market will stay choppy this year? And how are you planning to play the volatility?
1) I am adding low-volatility stocks and ETFs to my portfolio as a hedge
2) I will play these trends using Volatility (VIX) ETFs
3) I do not care about short-term moves in the market
4) Other—please explain