ProShares Trust VIX Short-Term Futures ETF (BATS: VIXY)

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The index seeks to offer exposure to market volatility through publicly traded futures markets and is designed to measure the implied volatility of the S&P 500 over 30 days in the future.

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Trump vuelve con un enfoque agresivo en comercio, desregulación y estrategia internacional. ¿Qué significa para los mercados y la economía?

El regreso de Trump: Impacto económico y político en sus primeros 100 días

ProShares Trust VIX Short-Term Futures ETF

President Donald Trump is back in the Oval Office, and his Day 1 flurry of executive orders suggests a busy and eventful <a href="https://www.benzinga.com/topic/donald-trump">first 100 days ahead.</a>
JPMorgan analysts Joyce Chang and Amy Ho warn that markets have yet to price in the full impact of Trump's aggressive trade stance, regulatory shake-ups, and expansionist ambitions. 
Investors betting on a repeat of Trump's first term should buckle up—this time, the playbook looks bolder.
<h2 class="wp-block-heading">Tariff Tensions: A Trade War Ahead?</h2>
Trump quickly signaled a renewed focus on trade policy, emphasizing his commitment to overhauling the U.S. trade system in his inauguration speech.
Immediate tariffs didn't make the Day 1 cut, but they're looming. The threat of tariffs on <a href="https://www.benzinga.com/25/01/43103527/mexican-peso-canadian-dollar-slide-as-trump-threatens-25-tariffs-expert-eyes-price-hikes-on-typical-us-breakfast">Mexico</a> and <a href="https://www.benzinga.com/etfs/emerging-market-etfs/25/01/43130930/trump-looking-at-10-tariff-on-china-starting-feb-1">Canada</a>—first floated last November—could become reality as early as Feb. 1. 
JPMorgan warns that Trump's team could be eyeing a gradual escalation strategy, hiking tariffs by 2% to 5% per month. With Stephen Miran, Trump's pick for Council of Economic Advisors chair, advocating for a 20% optimal tariff rate, markets may be underestimating the inflationary shock ahead, the analysts say.
Read Also: <a href="https://www.benzinga.com/news/25/01/43150451/jamie-dimo-supports-trumps-tariffs-if-its-a-little-inflationary-but-its-good-for-national-security-so-be-it">Jamie Dimon Supports Trump&#8217;s Tariffs: &#8216;If It&#8217;s A Little Inflationary, But It&#8217;s Good For National Security, So Be It&#8217;</a>
<h2 class="wp-block-heading">Red Tape Revisited: Deregulation Or Mere Reshuffle?</h2>
While businesses cheered Trump's push for regulatory efficiency, JPMorgan suggests it's more of a reshuffle than an outright deregulation spree. 
Basel III reforms and non-bank regulations aren't likely to advance, but the analysts expect faster approvals for M&amp;A deals. Trump's renewed exit from the Paris Agreement reflects his administration's focus on reducing climate-related capital constraints, according to the analysts.
But with a Republican-led Congress still facing hurdles on tax reform, any sweeping economic overhaul remains a tough sell.
<h2 class="wp-block-heading">America First-And Maybe A Bit Bigger?</h2>
Foreign policy under Trump 2.0 appears to focus on economic assertiveness and strategic territorial considerations.
JPMorgan highlights his focus on Mexico, <a href="https://www.benzinga.com/news/events/25/01/42860583/trump-floats-canada-as-51st-us-state-says-hes-ready-to-use-economic-force-to-achieve-it">Canada</a>, <a href="https://www.benzinga.com/startups/25/01/43074027/why-trump-sees-greenland-as-a-2-billion-security-deal">Greenland</a>, and the <a href="https://www.benzinga.com/startups/25/01/43036986/trumps-2-5-billion-power-play-what-seizing-the-panama-canal-would-cost">Panama Canal</a>—suggesting strategic interests that may influence global markets.
While Trump has downplayed the idea of military action, his firm stance on China and Russia suggests economic and strategic priorities will take center stage.
<h2 class="wp-block-heading">The Verdict: Buckle Up For Policy Uncertainty</h2>
Markets prefer certainty, but Trump's second term introduces potential challenges and uncertainties.
JPMorgan's analysts note that Trump's signature &#8220;escalate-to-de-escalate&#8221; strategy could keep investors on edge.
While the stock market benefits from easy financial conditions, Trump&#8217;s return introduces the potential for increased volatility, with tariff increases and geopolitical shifts adding to investor uncertainty.
The iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (BATS:<a class="ticker" href="https://www.benzinga.com/stock/VXX#BATS">VXX</a>) and the ProShares Trust VIX Short-Term Futures ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#BATS">VIXY</a>) are to funds that seek to profit from volatility.
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/markets/equities/25/01/43156850/wto-chief-says-everyone-will-pay-if-tit-for-tat-trade-war-breaks-out-amid-trumps-tariff-threat-leading-to-double-digit-global-gdp-losses">WTO Chief Says &#8216;Everyone Will Pay&#8217; If &#8216;Tit-For-Tat&#8217; Trade War Breaks Out Amid Trump&#8217;s Tariff Threat, Leading To Double-Digit Global GDP Losses</a></li>
</ul>
Photo: Shutterstock

Trump's Second Term Sparks Market Jitters With Trade, Regulation, Expansion Plans

Investors, brace yourselves for the rollercoaster that is September and October. But before hitting the panic button, BlackRock managing director Gargi Pal Chaudhuri offers reassurance, urging that investors not be alarmed by near-term volatility in <a href="https://www.benzinga.com/topic/volatility">U.S. equity markets</a>.
In a recent CNBC <a href="https://www.cnbctv18.com/market/brace-for-us-equity-volatility-near-term-but-dont-panic-says-global-market-expert-19471286.htm">interview</a>, Chaudhuri — Head of BlackRock&#8217;s iShares Investment Strategy-Americas — emphasized that whether it's small-cap stocks, large-caps, or the tech sector, "these months tend to be <a href="https://www.benzinga.com/24/09/40676774/september-market-seasonality-why-this-month-is-historically-the-toughest-for-investors">seasonally volatile</a>, a trend observed over the past decade.&#8221;
We looked into the past trend for validation.
<h2 class="wp-block-heading">Seasonal Market Swings: A Recurring Phenomenon</h2>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="349" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/05045124/fredgraph-1024x349.png" alt="" class="wp-image-531330" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/05045124/fredgraph-1024x349.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/05045124/fredgraph-300x102.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/05045124/fredgraph-768x262.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/05045124/fredgraph.png 1320w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Above is the graph of the CBOE Volatility Index, also known as, VIX — over the past decade. It can be observed, that the index tends to gain strength during these two months Chaudhuri mentioned (taking into account that the extremely high wave in 2020 is accountable to Covid).
Investors who track market volatility often tend to book gains through its swings via ETFs such as the iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VXX#NYSE">VXX</a>) or the ProShares VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>)
Chaudhuri also mentioned that this year, the uncertainty around the upcoming U.S. election adds to the already jittery markets, creating more potential for fluctuations.
Read Also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40345324/institutional-investors-buy-the-dip-after-august-volatility-spike-wall-street-analy">Institutional Investors Buy The Dip After August Volatility Spike: Wall Street Analyst</a>
<h2 class="wp-block-heading">Medium- To Long-Term? Still Bright</h2>
Despite the near-term uncertainty, Chaudhuri remains upbeat about the medium- to long-term outlook for U.S. equities. She believes high-quality stocks are poised to perform well over the next six to twelve months, especially as the Federal Reserve is expected to begin cutting interest rates.
Chaudhuri stated, "Historically, rate cuts have benefited both stocks and bonds," adding that she expects the Fed to start normalizing interest rates later this month with a 25-basis point cut.
<h2 class="wp-block-heading">India: The Emerging Market Opportunity</h2>
But Chaudhuri's focus isn't solely on the U.S. With India's growing influence on the global stage, she believes foreign investors should reconsider their current underweight positions. 
"I think investors need to at least get back to benchmark weights with respect to emerging markets (EMs) and with respect to India specifically. And I think that is the opportunity," she said.
While India's market valuations are on the higher end, Chaudhuri noted that "this is not just about valuations." India's economic potential and its increasing importance make it a key area for future growth.
Popular ETFs tracking Indian equity include the iShares MSCI India ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/INDA#NYSE">INDA</a>), the WisdomTree India Earnings Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EPI#NYSE">EPI</a>) and the Franklin FTSE India ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FLIN#NYSE">FLIN</a>)
Overall, Chaudhuri's message is clear: ride out the short-term volatility and stay focused on the long-term opportunities.
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/markets/bonds/24/08/40484619/from-stocks-to-bonds-cboes-vixtlt-index-adds-new-twist-to-volatility">From Stocks To Bonds: CBOE&#8217;s VIXTLT Index Adds New Twist To Volatility</a></li>
</ul>

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BlackRock Strategist On Market Jitters: Expect Volatility, But Stay Positive On US Equities And This Emerging Market

Global equity markets have been under pressure in recent sessions amid fears of a potential U.S. recession, triggered by cooling labor market conditions <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40141685/s-p-500-falls-for-third-straight-week-middle-east-in-turmoil-fed-holds-steady-but-u">and struggling manufacturing activity. </a>
Despite last month&#8217;s business surveys showing expansion in services activity, investors remain worried that the world&#8217;s largest economy may be slowing down, which could curb U.S. household discretionary spending and reduce corporate profits.
Risky assets have been at the epicenter of the current market turmoil, as stocks worldwide experienced heavy declines. 
<ul>
<li>Over the past three sessions, Japan&#8217;s Nikkei 225 index plummeted by 19.5%, marking its worst three-day drop since the index&#8217;s inception in 1950.</li>
<li>The Russell 2000 index, which tracks U.S. small-cap stocks, experienced a 10% decline during the same period.</li>
<li>The Nasdaq 100, represented by the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), has seen a 12% drop from its all-time highs in July.</li>
<li>The CBOE Volatility Index (VIX), often referred to as the market fear index, surged to briefly hit 60 points on Tuesday, its highest level since March 2020.</li>
</ul>
<h3 class="wp-block-heading">What Has Happened To Interest Rate Futures? </h3>
Recession fears, coupled with global equity market turmoil, have sparked wild speculation about Federal Reserve interest rate cuts.
A week ago, the market assigned only an 11.4% chance to a 50-basis-point rate cut in September, a probability that has now surged to 97.5%, according to the CME Group FedWatch tool.
Similarly, a week ago, the probability of year-end interest rates falling to 4-4.25% was zero, but as of Monday, it has rocketed to 72%.
<h4 class="wp-block-heading">Market-Implied Probabilities For Sept. 18&#8217;s Fed Meeting</h4>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Rate-cut event</td>
<td>Now&#x2A;</td>
<td>1 Day Ago</td>
<td>1 Week Ago July 29, 2024</td>
</tr>
<tr>
<td>50bp to 4.75-5%</td>
<td>97.5%</td>
<td>74%</td>
<td>11.4%</td>
</tr>
<tr>
<td>25bp to 5-5.25%</td>
<td>2.5%</td>
<td>26%</td>
<td>88.2%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: CME Group as of August 5, 2024 11:20 ET</figcaption></figure>
<h4 class="wp-block-heading">Market-Implied Probabilities For Dec. 18&#8217;s Fed Meeting</h4>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Year-end fed funds rate</td>
<td>Now&#x2A;</td>
<td>1 Day Ago</td>
<td>1 Week Ago, July 29, 2024</td>
</tr>
<tr>
<td>4-4.25%</td>
<td>71.8%</td>
<td>66.8%</td>
<td>0.0%</td>
</tr>
<tr>
<td>4.25-4.5%</td>
<td>28.2%</td>
<td>33.2%</td>
<td>0.0%</td>
</tr>
<tr>
<td>4.5-4.75%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>65.1%</td>
</tr>
<tr>
<td>4.75-5%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>34.9%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: CME Group as of August 5, 2024 11:25 ET</figcaption></figure>
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40160872/goldman-sachs-raises-us-recession-odds-treasury-yields-tumble-yen-rallies-as-trader">Goldman Sachs Raises US Recession Odds: Treasury Yields Tumble, Yen Rallies As Traders Bet On Heavy Fed Rate Cuts</a>
<h3 class="wp-block-heading">5 ETFs Rallying On Global Market Turmoil</h3>
While global equity markets have experienced significant declines, safe-haven assets have maintained their status and effectively shielded investor portfolios from volatility.
Moreover, leveraged and inverse investment strategies on equity indices or stocks have also seen sharp rallies amid market selloffs. 
Here are 5 exchange-traded funds (ETFs) that have rallied over the last few sessions: 
<ul>
<li>The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) has been a significant beneficiary of the global market rout, as declining interest rate expectations in the United States have reduced the dollar&#8217;s &#8220;carry trade&#8221; advantage against the yen. Over the past four sessions, the FXY ETF has surged by 6.6%, marking its strongest rally since October 2008.</li>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) has posted gains for eight consecutive sessions, surging over 3.1% last Friday as fears of a cooling U.S. labor market emerged.</li>
<li>The ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>) skyrocketed by over 20% on Monday alone, and by nearly 66% over the last three sessions. </li>
<li>The ProShares UltraPro Short QQQ (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SQQQ#NASDAQ">SQQQ</a>), which aims to achieve investment results equal to three times the inverse of the daily performance of the Nasdaq 100 index, has surged by over 23% in the past three sessions.</li>
<li>The ProShares UltraPro Short Russell 2000 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SRTY#NYSE">SRTY</a>), designed to seek an investment performance equal to three times the inverse of the daily move of the Russell 2000 index, has rallied by nearly 33% in the last three sessions.</li>
</ul>
<h3 class="wp-block-heading">Chart: Inverse And Leveraged ETF Strategies on US Small Caps Spike Amid Market Turbulence</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="440" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1024x440.png" alt="" class="wp-image-476859" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1024x440.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-300x129.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-768x330.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1536x660.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Image: <a href="https://www.benzinga.com/pro/?utm_source=BZprocontent080524&amp;t=be2bearmibe3na1">Benzinga Pro</a>
Read Next:
<ul>
<li><a href="https://www.benzinga.com/government/24/08/40164105/potential-iranian-attack-on-israel-could-rattle-markets-what-happened-to-stocks-when-russia-invaded">Potential Iranian Attack On Israel Could Rattle Markets: What Happened To Stocks When Russia Invaded Ukraine?</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

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How To Navigate Market Volatility: 5 ETFs That Strengthen Your Portfolio During Stock Turmoil

The CBOE Volatility Index, commonly known as the VIX or the &#8220;fear gauge&#8221; of the stock market, has experienced a notable upswing recently, reaching levels not seen <a href="https://www.benzinga.com/markets">in over five months.</a>
This surge in the VIX, which has breached the psychologically significant mark of 20, serves as a compelling indicator of growing apprehensions within financial markets.
The VIX, a pivotal gauge of expected volatility in the S&amp;P 500 provided by CBOE Global Markets Inc., experienced a surge of almost 13% on Tuesday, and is currently poised for its third consecutive weekly advance.
This spike has followed a month of substantial volatility, with September witnessing a 30% increase in the VIX, its most robust performance since April 2022. Notably, this came after the VIX had reached its lowest point (12.68) since January 2020.
The fear index has now exceeded both its 50-day and 200-day moving averages. The latter in particular constitutes a breach of what had been a formidable resistance hurdle since March 2023.
Chart: VIX Index Rises Above Key Moving Averages
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="695" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112427/VIX_2023-10-04_16-22-16_a9a16-1024x695.png" alt="" class="wp-image-117880" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112427/VIX_2023-10-04_16-22-16_a9a16-1024x695.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112427/VIX_2023-10-04_16-22-16_a9a16-300x204.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112427/VIX_2023-10-04_16-22-16_a9a16-768x521.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112427/VIX_2023-10-04_16-22-16_a9a16-1536x1043.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112427/VIX_2023-10-04_16-22-16_a9a16.png 1591w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">VIX&#8217;s Ascent Amid Treasury Yield Rally</h2>
A primary catalyst behind this surge in the VIX is the remarkable rise in U.S. Treasury yields over the past month. The 10-year Treasury note yield has surged past 4.75%, attaining levels not seen since August 2007. Concurrently, yields on 30-year Treasuries have skyrocketed to 4.90%-4.95%, representing their highest peaks in 16 years.
<a href="http://benzinga.com/government/23/10/35068904/10-year-treasury-yields-at-16-year-highs-shake-markets-how-far-can-they-climb">As previously discussed,</a> factors contributing to this surge in yields include a rising government deficit, the Federal Reserve&#8217;s quantitative tightening program, and a hawkish stance on interest rates.
When U.S. government bond yields increase, it signifies a decline in the value of what are often considered the world&#8217;s safest and most liquid assets, triggering reverberations throughout global asset classes. A notable example of this impact is the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), which has plummeted by more than 50% from its levels in March 2020.
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35089599/mccarthys-ouster-amplifies-congressional-tensions-goldman-sachs-anticipates-q4-shut">McCarthy&#8217;s Ouster Amplifies Congressional Tensions, Goldman Sachs Anticipates Q4 Shutdown</a>
Chart: Treasury Yields Rocketed To 16-Year Highs 
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="695" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112645/US10Y_2023-10-04_16-26-31_9ec19-1024x695.png" alt="" class="wp-image-117883" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112645/US10Y_2023-10-04_16-26-31_9ec19-1024x695.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112645/US10Y_2023-10-04_16-26-31_9ec19-300x204.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112645/US10Y_2023-10-04_16-26-31_9ec19-768x521.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112645/US10Y_2023-10-04_16-26-31_9ec19-1536x1043.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/04112645/US10Y_2023-10-04_16-26-31_9ec19.png 1591w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Equities Feel The Yields&#8217; Impact</h2>
As U.S. government bond yields climb, their influence extends beyond the bond market, creating ripple effects in the stock market.
Many companies and sectors rely heavily on low or stable market interest rates to sustain their operations and profitability. 
As highlighted in a recent note from Goldman Sachs, lower interest expenses and corporate tax rates have contributed to over 40% of real growth in corporate profits <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35062922/higher-rates-lower-leverage-growth-stocks-to-struggle-while-ai-offers-hope-goldman-">from 1989 to 2019. </a>
Consequently, the shift from a pre-pandemic environment of low interest rates to one marked by elevated rates and robust inflation presents a headwind for growth stocks, according to Goldman Sachs analysts.
The stock market is currently recalibrating itself to accommodate a prolonged era of heightened interest rates and sustained inflation, which, in turn, is propelling volatility. 
Although the VIX itself isn&#8217;t a tradable instrument, there are several exchange-traded funds (ETFs) available that provide investors with exposure to stock market volatility. These ETFs include:
<ul>
<li>Proshares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>)</li>
<li>Proshares Trust VIX Mid-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXM#NYSE">VIXM</a>)</li>
<li>2x Long VIX Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVIX#NYSE">UVIX</a>)</li>
</ul>
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35089599/mccarthys-ouster-amplifies-congressional-tensions-goldman-sachs-anticipates-q4-shut">McCarthy&#8217;s Ouster Amplifies Congressional Tensions, Goldman Sachs Anticipates Q4 Shutdown</a>
Photo: Shutterstock

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VIXM

VIX Soars To 5-Month High: What Surging Treasury Yields Mean For Stocks

The CBOE Volatility Index, also known as the VIX or &#8220;fear index,&#8221; witnessed a sudden surge of 9% Friday, marking the most significant single-day increase since mid-August. Produced by CBOE Global Markets Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CBOE#NYSE">CBOE</a>), the VIX is a well-regarded gauge of option <a href="https://www.benzinga.com/markets">volatility in the S&amp;P 500 index.</a>
This rapid surge in market volatility followed weeks of relative calm, with the VIX hitting its lowest level since January 2020, closing at 12.81 on Thursday.
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="548" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/15150047/VIX_2023-09-15_21-00-23_531a1-1024x548.png" alt="" class="wp-image-107026" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/15150047/VIX_2023-09-15_21-00-23_531a1-1024x548.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/15150047/VIX_2023-09-15_21-00-23_531a1-300x161.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/15150047/VIX_2023-09-15_21-00-23_531a1-768x411.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/15150047/VIX_2023-09-15_21-00-23_531a1-1536x822.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/15150047/VIX_2023-09-15_21-00-23_531a1.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">What Triggered VIX&#8217;s Friday Spike?</h2>
Several factors may have contributed to the remarkable daily spike in the VIX. Economic data published this week indicated a resurgence in inflation, raising some concerns among investors. 
Additionally, the surge in oil prices may have played a significant role in driving up the VIX. WTI crude oil prices touched $90 per barrel on Friday, adding to the growing concerns about rising energy costs and their potential impact on the broader economy and interest rates. 
Technical factors were also at play. Friday coincided with a triple witching day, a term used to describe the simultaneous expiration of stock options, stock index futures and stock index options contracts, all on the same trading day. 
This event, which occurs four times a year, led to a total value of option expirations amounting to an astonishing $3.4 trillion.
The previous triple witching day in June saw the VIX rise by 4.4%, and in March, it surged by 11%.
Read also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/09/34623277/bonds-in-a-multi-year-bear-market-experts-sound-alarm-on-further-rate-hikes-as-oil-">&#8216;Bonds In A Multi-Year Bear Market&#8217;, Experts Sound Alarm On Further Rate Hikes As Oil Goes Haywire</a>
<h2 class="wp-block-heading">CBOE Global Markets Reports Significant Growth in VIX Options</h2>
CBOE Global Markets released its second-quarter financial results on Aug. 4, 2023. The company reported earnings per share of $1.78, slightly exceeding estimates of $1.77. However, the revenue figure of $467 million fell short of expectations, which had been set at $469 million.
Of particular interest in CBOE&#8217;s report was the substantial growth in average daily volumes for VIX options, which increased by an impressive 53% year-over-year in the second quarter. This growth underscores the heightened interest in and demand for options linked to market volatility.
Goldman Sachs analysts recently revealed the VIX is presently trading at bargain levels compared to what the broader <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/09/34498344/volatility-bargain-alert-goldman-sachs-analyst-asserts-vix-is-priced-too-low-for-ec">economic context would imply.</a>
No exchange-traded fund exactly replicates the CBOE Global Markets&#8216; VIX. 
However, the ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), the ProShares Trust VIX Mid-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXM#NYSE">VIXM</a>), and the ProShares Trust Ultra VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVXY#NYSE">UVXY</a>) may provide a good correlation to participate in the VIX&#8217;s movements.
Now read: <a href="https://www.benzinga.com/news/earnings/earnings-beats/23/09/34611199/nasdaq-futures-edge-down-ahead-of-data-deluge-uaw-strike-analysts-warn-fed-may-not-b">Stock Retreats As Bond Yields Climb Amid Oil Concerns, UAW Strike: What&#8217;s Driving Markets Friday?</a>
Photo via Shutterstock.

Options

Markets

CBOE

UVXY

CBOE Volatility Index Spikes 9% As Triple Witching Day Shakes Market

Analysts at Goldman Sachs are highlighting an intriguing disconnect between market conditions and the <a href="https://www.benzinga.com/money/guide-to-volatility-indices-vix">famed &#8216;fear&#8217; gauge</a>.
Goldman Sachs&#8217; analyst team, featuring experts such as John Marshall and Spencer Hill, CFA, wrote a note explaining that the CBOE Volatility Index (VIX) is presently trading at price levels considerably beneath what the broader economic context would imply.
&#8220;The VIX at 13.8 is about 6 points below the 20.6 level implied by the growth and inflation environment, but only 4 points below levels implied by our year-end-2024 estimates,&#8221; the analysts wrote. 
<h2 class="wp-block-heading">Goldman Sachs Deep Dive</h2>
Goldman Sachs&#8217; analysis examines the historical underpinnings of the VIX. They examined key macroeconomic variables such as unemployment rates, ISM new orders, consumer spending growth, and inflation.
A number of factors typically appear to be correlated with an increase in equity market volatility:
<ul>
<li>Weakness in manufacturing new orders</li>
<li>Dwindling consumer expenditures</li>
<li>Rising unemployment</li>
<li>Disparities in inflation between consumers (CPI) and producers (PPI) </li>
</ul>
Despite a turbulent period that briefly propelled the VIX to a high of 31 during the regional-bank failures in March, volatility has since taken a nosedive, except for a brief uptick in August, plumbing to 2023 lows as September began.
Currently resting at a relatively modest 14, the VIX seems to have settled comfortably in the lower range of the post-pandemic era, even dipping below pre-Covid historical averages.
This year&#8217;s staggering 35% decline in the VIX is the second-largest annual drop since the 2009 financial crisis, surpassed only by the 46% plunge witnessed in 2019.
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="840" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/12115703/VIX_2023-09-12_17-56-46_ac6a9-1024x840.png" alt="" class="wp-image-104720" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/12115703/VIX_2023-09-12_17-56-46_ac6a9-1024x840.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/12115703/VIX_2023-09-12_17-56-46_ac6a9-300x246.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/12115703/VIX_2023-09-12_17-56-46_ac6a9-768x630.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/12115703/VIX_2023-09-12_17-56-46_ac6a9.png 1316w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Signs of Turbulence on the Horizon?</h2>
Is an undervalued VIX an early indicator of turbulence ahead? There are market participants who seem to believe just that, betting on the fear index to skyrocket from here. 
Recently, an unconventional move saw a trader snap up more than <a href="https://www.benzinga.com/etfs/specialty-etfs/23/09/34335973/the-biggest-short-trader-bets-30k-on-1-100-vix-spike-by-february-2024">5,000 call options on the VIX, </a>anticipating the fear index to soar to an astonishing 180 levels by February 2024. That&#8217;s an eye-popping 1,100% leap from its current level.
It&#8217;s worth noting that the VIX reached its all-time high of 89 during the September 2008 Lehman Brothers crash when the entire financial world teetered on the brink of collapse.
Exchange-traded funds such as the ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), the ProShares Trust VIX Mid-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXM#NYSE">VIXM</a>), and the ProShares Trust Ultra VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVXY#NYSE">UVXY</a>) provide opportunities to participate in the VIX&#8217;s movements.
Read now:<a href="https://www.benzinga.com/23/08/34043138/how-to-protect-your-portfolio-from-the-next-crash-with-spy-vix-gld-tlt-and-uup"> How To Protect Your Portfolio From The Next Crash With SPY, VIX, GLD, TLT, And UUP</a>

Volatility Bargain Alert: Goldman Sachs Analyst Asserts VIX Is Priced Too Low For Economic Realities

So far, 2023 has seen an equity bull market with low volatility, but whispers on Wall Street suggest an audacious move that could rival <a href="https://www.benzinga.com/topic/michael-burry">Michael Burry&#8217;s famous &#8220;Big Short.&#8221; </a>
In a jaw-dropping play, a trader recently shelled out $30,000 on a bet that hinges on the VIX index hitting 180 by February 2024. 
As of now, the VIX, often dubbed the &#8220;fear gauge,&#8221; is trading at a mere 15, implying a staggering 1,100% surge would be needed for the bet to pay off.
Yahoo Finance data reveals that the trader purchased 5,035 VIX options with a strike price of 180 and an expiration date of Feb. 14, 2024, at a cost of $0.06 per contract. 
This contrarian move raises eyebrows, especially considering that just last week, the VIX index sank to the 13 level, marking one of the lowest points of the year. Currently, it&#8217;s at its weakest level since December 2019, prior to the start of the Covid-19 pandemic.
Even more intriguing, the same trader, or others like them, have accumulated over 20,000 open interest contracts in VIX December options, all with the same strike price.
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/09/34324490/apple-tech-giants-about-to-get-dwarfed-by-generative-ai-analyst-warns">Apple, Tech Giants &#8216;About To Get Dwarfed By Generative AI,&#8217; Analyst Warns</a>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="437" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145617/Screenshot-2023-09-07-alle-20.54.24-1024x437.png" alt="" class="wp-image-102478" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145617/Screenshot-2023-09-07-alle-20.54.24-1024x437.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145617/Screenshot-2023-09-07-alle-20.54.24-300x128.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145617/Screenshot-2023-09-07-alle-20.54.24-768x327.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145617/Screenshot-2023-09-07-alle-20.54.24.png 1370w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="328" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145644/Screenshot-2023-09-07-alle-20.54.05-1024x328.png" alt="" class="wp-image-102479" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145644/Screenshot-2023-09-07-alle-20.54.05-1024x328.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145644/Screenshot-2023-09-07-alle-20.54.05-300x96.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145644/Screenshot-2023-09-07-alle-20.54.05-768x246.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07145644/Screenshot-2023-09-07-alle-20.54.05.png 1362w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Source: Yahoo Finance
<h2 class="wp-block-heading">Betting On The Biggest Short</h2>
The audacity of this trade cannot be overstated. Since the CBOE Volatility Index (VIX) was introduced in 1993, it has never surpassed the 100 level.
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="528" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07150341/VIX_2023-09-07_21-03-26_dd985-1024x528.png" alt="" class="wp-image-102480" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07150341/VIX_2023-09-07_21-03-26_dd985-1024x528.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07150341/VIX_2023-09-07_21-03-26_dd985-300x155.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07150341/VIX_2023-09-07_21-03-26_dd985-768x396.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07150341/VIX_2023-09-07_21-03-26_dd985-1536x792.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07150341/VIX_2023-09-07_21-03-26_dd985.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
To put it in perspective, the VIX index reached an all-time high of 89 during the most dire financial day since 1929 when Lehman Brothers collapsed in September 2008. This is only half of the target set by the trader.
Even during the peak of the Covid-19 pandemic, when the whole world went into lockdown, the VIX only hit 85 on March 18, 2020. 
Similarly, when the Chinese stock market experienced a meltdown in August 2015, with the Shanghai stock exchange plunging nearly 9% in a single day, the VIX reached a level of 53, for those considering the possibility of a China-triggered market crash.
Opportunities to Access the VIX Index: For investors looking to gain exposure to the VIX index, there are several ETFs available. These include the ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), the ProShares Trust VIX Mid-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXM#NYSE">VIXM</a>), and the ProShares Trust Ultra VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVXY#NYSE">UVXY</a>), which offers a leveraged play on the VIX.
Could this bet on the VIX index be the next &#8220;Big Short&#8221; to watch? Only time will tell, but if this audacious bet succeeds, the trader&#8217;s loved one might receive a memorable Valentine&#8217;s Day treat.
Read more: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/09/34326504/chinas-iphone-ban-throws-wrench-in-apple-profit-engine-30m-units-at-risk-bank-of-am">China&#8217;s iPhone Ban Throws Wrench In Apple Profit Engine: 30M Units At Risk, Bank Of America Warns</a>
Photo: Shutterstock

The Biggest Short: Trader Bets $30K On 1,100% VIX Spike By February 2024

Market volatility, simply put, is how much and how quickly prices change. The larger and quicker, the more volatile the market.
Market volatility is measured by finding the standard deviation from mean prices over a given period of time, or more commonly, the expected deviation in the future. And this, it turns out, is a great way to gauge the sentiment of investors in a market.
Most investors will be familiar with the CBOE Volatility Index (INDEXCBOE: VIX), or VIX. This tracks the expected volatility of the S&amp;P 500 and is often called the &ldquo;fear&rdquo; index because as VIX rises, markets fall, and vice versa. At least, this is the perception. There is by no means a one-to-one relationship, but they are certainly linked.
The largest spikes in VIX, by a mile, came at the height of the 2008 financial crisis and again during the spring of 2020 as the world shut down in response to the Covid-19 Pandemic.&nbsp;
Smart investors then, can use market volatility not just as a guide, but as a hedge. Certain ETFs allow investors access to monetizing volatility. Therefore if the value of the rest of a portfolio falls, that damage can be offset by the rise in volatility.
Not all ETFs are created equal, however. It is important for investors to understand what they are investing in and when presented with multiple options, to choose carefully.
Let&rsquo;s look at two options head to head:&nbsp;
ProShares VIX Short-Term Futures ETF (NYSEARCA: VIXY) vs. <a href="https://www.convexityshares.com/">ConvexityShares</a> 1x SPIKES Futures ETF (NYSEARCA: SPKX)
Underlying Index
This is perhaps the most significant distinction between these two options. VIXY is tied to an index of VIX futures while SPKX is tied to MIAX&rsquo;s SPIKES (INDEX: SPIKE) futures. SPIKES offers several advantages over VIX. The index uses live pricing data (vs an average calculation) and updates every 100 milliseconds (vs every 15 seconds). It also employs a proprietary mechanism it calls price dragging that reduces anomalous spikes in the index.
Cost
VIXY has an expense ratio of 1.05%, while SPKX has an expense ratio of 0.65%.
AUM
VIXY is much larger with $211.4 Million in AUM, while SPKX has just over $1 Million.
YTD Performance
It has been a good year for US equities in general, and thus, not a great year for volatility ETFs. VIXY is down 54.69% and SPKX is down 53.59%.

ConvexityShares Trust ConvexityShares 1x SPIKES Futures ETF

SPKX

Market Volatility Is On The Horizon -  How Can Traders Use This To Their Advantage? Compare These Two Volatility ETFs

The Bureau of Labor Statistics&#8217; long-awaited July Consumer Price Index (CPI) data is scheduled to be released on Thursday at 8:30 a.m., <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/08/33607832/what-economists-expect-when-key-inflation-data-arrives-thursday-as-market-looks-for">ahead of the opening bell.</a>
This critical economic data will have a significant impact on market expectations for future Fed rate hikes. Therefore, market fluctuations could be anticipated if inflation data surprises&nbsp;expectations.&nbsp;
Currently, there is widespread consensus around the Fed&#8217;s decision to keep rates unchanged in September, with a market-based probability standing at 85%, according to CME Group. The likelihood of rates staying unchanged also in the November meeting drops to 71%, still reflecting a substantial majority in this regard.
<h2 class="wp-block-heading">July CPI Data: What Are Economists Expecting?</h2>
Economists anticipate that the annual inflation rate will rise from 3% to 3.3% in July, snapping a streak of 12 consecutive declines. This is mainly due to the so-called base effect, which Benzinga recently explained in an article where we also gathered some <a href="https://www.benzinga.com/economics/macro-economic-events/23/08/33638208/us-inflation-preview-experts-anticipate-both-disinflation-progress-and-potential-">analysts&#8217; forecasts</a>.
Core inflation, which excludes energy and food and is closely monitored by the Fed to gauge underlying price pressures in the economy, is expected to remain steady at 4.8% year-over-year in July. Both inflation measures are projected to advance at a monthly rate of 0.2%.
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/08/33672500/goldman-sachs-was-right-about-lucid-and-celsius-why-plug-power-stock-could-be-the-n">Goldman Sachs Was Right About Lucid And Celsius: Why Plug Power Stock Could Be The Next &#8216;Earnings-Day Short Squeeze&#8217;</a>
<h2 class="wp-block-heading">These 5 ETFs Could Heavily React To Inflation Data</h2>
Let&#8217;s focus on five exchange-traded funds (ETFs) that could experience significant fluctuations if tomorrow&#8217;s data differs from economists&#8217; expectations.
<ol>
<li>ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>)</li>
</ol>
The VIXY ETF, designed to mirror the performance of the VIX Short-Term Futures Index, aims to offer investors a means to tap into volatility without engaging in direct options trading.
Higher-than-expected inflation can disrupt a market that largely believes the Fed will keep rates steady in September, thereby potentially increasing market volatility.
The VIXY ETF is down 55% year-to-date, but last week marked its second-best week of the year, surging by 12%.
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="868" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113350/VIXY_2023-08-09_17-33-35_a9c80-1024x868.png" alt="" class="wp-image-84439" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113350/VIXY_2023-08-09_17-33-35_a9c80-1024x868.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113350/VIXY_2023-08-09_17-33-35_a9c80-300x254.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113350/VIXY_2023-08-09_17-33-35_a9c80-768x651.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113350/VIXY_2023-08-09_17-33-35_a9c80.png 1274w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
 2. Vanguard Growth ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VUG#NYSE">VUG</a>)
Growth stocks have been on the rise in 2023, with the Vanguard Growth ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VUG#NYSE">VUG</a>) up 35% year-to-date, the move higher has been closely linked to the decline in consumer inflation.
The drop in inflation has eased concerns of excessive hikes by the Federal Reserve, causing the market to start pricing in rate cuts for 2024. This has provided significant relief to stocks highly sensitive to future interest rates.
However, a resurgence in price pressures could potentially slow down or reverse the trajectory that growth stocks have been following thus far. 
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="868" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113949/VUG_2023-08-09_17-36-32_02d82-1024x868.png" alt="" class="wp-image-84440" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113949/VUG_2023-08-09_17-36-32_02d82-1024x868.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113949/VUG_2023-08-09_17-36-32_02d82-300x254.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113949/VUG_2023-08-09_17-36-32_02d82-768x651.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09113949/VUG_2023-08-09_17-36-32_02d82.png 1274w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
3. ARK Innovation ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARK#NYSE">ARK</a>)
Due to its investment focus on innovative and high-growth companies, particularly in sectors like technology, healthcare, and disruptive industries, the ARK Innovation ETF is also highly sensitive to inflation data and thus rate expectations. 
Many of Cathie Wood&#8216;s ARKK investments rely on borrowing to support their research, development, and expansion. Funding those activities becomes more expensive when interest rates rise, dampening the growth forecast for these companies. 
A reemergence of inflationary pressures could potentially place some downward pressure on the ARK Innovation ETF, which has returned 36% year to date.
4. Fidelity Stocks for Inflation ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FCPI#NYSE">FCPI</a>)
This ETF, launched and managed by Fidelity Management &amp; Research Company LLC, invests in stocks that may be better positioned to perform well during inflationary periods. 
Its largest holdings include Apple Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>), Microsoft Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>) and the oil giant Exxon Mobil Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XOM#NYSE">XOM</a>)
As inflation tumbled in 2023, the Fidelity Stocks for Inflation ETF trailed the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) by 7%. If inflation returns, we can anticipate this underperformance to come to a halt, if not reverse.
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="830" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09120015/FCPI_SPY_2023-08-09_17-58-00_8d737-1024x830.png" alt="" class="wp-image-84451" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09120015/FCPI_SPY_2023-08-09_17-58-00_8d737-1024x830.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09120015/FCPI_SPY_2023-08-09_17-58-00_8d737-300x243.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09120015/FCPI_SPY_2023-08-09_17-58-00_8d737-768x622.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09120015/FCPI_SPY_2023-08-09_17-58-00_8d737.png 1333w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
5. Simplify Interest Rate Hedge ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PFIX#NYSE">PFIX</a>)
The ETF, operated by Simplify Asset Management Inc., engages in direct and derivative investments in various U.S. Treasury securities, U.S. Treasury Inflation-Protected Securities (TIPS), and investment grade bonds with different maturity dates.
The primary objective of this ETF is to provide investors with a safeguard against potential increases in interest rates. Notably, during the period between March 14, 2022, and October 25, 2022, the Simplify Interest Rate Hedge ETF experienced a remarkable 100% increase in value. This gain was propelled by the Federal Reserve&#8217;s notably aggressive monetary policy tightening during that time.
Should inflation once again experience an upswing, the demand for instruments designed to hedge against interest rate fluctuations is also likely to surge.
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="830" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09121249/PFIX_2023-08-09_18-12-37_f17ca-1024x830.png" alt="" class="wp-image-84459" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09121249/PFIX_2023-08-09_18-12-37_f17ca-1024x830.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09121249/PFIX_2023-08-09_18-12-37_f17ca-300x243.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09121249/PFIX_2023-08-09_18-12-37_f17ca-768x622.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/09121249/PFIX_2023-08-09_18-12-37_f17ca.png 1333w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/08/33672438/3-rivian-analysts-on-q2-earnings-ev-production-margins-shine-but-is-cash-burn-ahead">3 Rivian Analysts On Q2 Earnings: EV Production, Margins Shine, But Is &#8216;Cash Burn&#8217; Ahead?</a>
Photo: Shutterstock

Sector ETFs

AAPL

FCPI

MSFT

PFIX

CPI Inflation Data Hits Thursday: 5 ETFs With Potential For Wild Market Moves

In a move that sent shockwaves through global markets, Fitch Ratings downgraded the United States&#8217; sovereign credit grade from AAA to AA+. This downgrade, echoing a move by S&amp;P Global more than a decade ago, comes as a result of several concerning factors affecting <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/08/33512741/larry-summers-calls-out-fitch-downgrade-as-bizarre-and-inept-but-did-us-call-for-it">the nation&#8217;s fiscal management.</a>
S&amp;P Global rates the U.S. sovereign credit rating at AA+ with a stable outlook, while Moody&#8217;s rates it at Aaa with a stable outlook, both unchanged since 2013.
The VIX &#8220;fear index,&#8221; which is closely monitored by the Proshares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), surged by 11%, minutes after the New York market open on Wednesday, currently on track for the largest daily increase since March 9, the day when Silicon Valley Bank collapsed.
Also Read: <a href="https://www.benzinga.com/economics/macro-economic-events/23/08/33519796/us-private-sector-adds-324-000-jobs-in-july-surpassing-expectations-job-market-de">US Private Sector Adds 324,000 Jobs In July, Surpassing Expectations: Job Market Demonstrates Strong Resilience</a>
<h2 class="wp-block-heading">Why Did Fitch Downgrade The US Credit Rating?</h2>
<ul>
<li>The rating agency justified its decision, citing &#8220;the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance.&#8221; </li>
<li>Fitch also pointed to the repeated debt-limit political standoffs and last-minute resolutions, which have eroded market confidence in the U.S.&#8217;s fiscal management. </li>
<li>One of the contributing factors to the downgrade is the absence of a medium-term fiscal framework and a complex budgeting process. </li>
<li>Comparing the U.S. debt-to-GDP ratio with its peers, it is over two-and-a-half times higher than the &#8216;AAA&#8217; median and the &#8216;AA&#8217; median. </li>
<li>Fitch expects tighter credit conditions, weakening business investment, and a slowdown in consumption to push the U.S. economy into a mild recession in the fourth quarter of 2023 and the first quarter of 2024.</li>
</ul>
<h2 class="wp-block-heading">5 Economists Offer Key Insights</h2>
Economists screened by <a href="https://www.bloomberg.com/news/articles/2023-08-02/dollar-s-drop-on-fitch-downgrade-unlikely-to-persist-analysts?sref=TBDibEcD">Bloomberg</a> Wednesday morning have responded to the downgrade with varying opinions.
Alec Phillips from Goldman Sachs believes that the downgrade mainly reflects governance and medium-term fiscal challenges, but it is unlikely to have a major impact on financial markets.
Laura Fitzsimmons from JPMorgan Chase &amp; Co. notes that the 2011 experience saw a flight to quality for U.S. dollar and U.S. Treasuries, contrary to the usual response to a sovereign downgrade. 
Mark Dowding, chief investment officer at RBC BlueBay Asset Management LLP, sees the downgrade as a warning of the consistent issuance of treasuries, which could have a ripple effect on global markets and shift the yield curve. He also says that investors are starting to believe the Goldilocks narrative, but he warns that pricing for perfection could put investors at risk of a downturn.
Alvin Tan of RBC Capital Markets thinks that bond investors are unlikely to sell their U.S. Treasuries holdings, given their market&#8217;s importance and liquidity. To deal with the change in credit rating, however, some non-U.S. domiciled funds may need to reduce their exposure or rethink their mandates.
The markets&#8217; reaction to the downgrade, according to David Croy, an interest rate strategist at Australia &amp; New Zealand Banking Group, might be mixed. While it may be seen as a stain on the reputation of the United States, it may also add to safe-haven demand for U.S. Treasuries and the USD if it causes market uncertainty and a risk-off sentiment.
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/08/33511913/paul-krugman-wants-to-know-inside-story-as-fitch-downgrades-us-credit-rating-strang">Paul Krugman Wants To Know &#8216;Inside Story&#8217; As Fitch Downgrades US Credit Rating: &#8216;Strange Decision…I&#8217;ll Be Shocked If Markets React&#8217;</a>
Photo: Shutterstock

Fitch Slashes US Credit Rating: 5 Top Economists Weigh In On Economic Fallout

Financial safeguard tools are on sale these days and protecting your portfolio against sudden stock market declines, or simply speculating on them, has never been <a href="https://pro.benzinga.com/blog/beginners-guide-to-hedging/">as cheap as it is now. </a>
This insight comes from the Global Equity Derivatives Research team at Bank of America, which recently published a note analyzing the cheapness of market hedging costs.
&#8220;Since our data began in 2008, it has never cost less to protect against an S&amp;P drawdown in the next 12 months, as high rates align with low implied vol and correlation to offer a historic entry point for hedges,&#8221; analysts at Bank of America stated. 
Traditionally, there are several ways to hedge against market downturns, including investing in cash assets like short-term U.S. Treasury bonds, such as the iShares 1-3 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NYSE">SHY</a>), buying volatility (VIX), as tracked by the Proshares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), or purchasing put options on stocks and indices. Among these, the put option stands out as having the highest potential gains should the market experience a significant downturn.
Also Read: <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/07/33434767/biden-under-fire-larry-summers-warns-bidenomics-is-increasingly-dangerous-to-us-economy">Biden Under Fire: Larry Summers Warns &#8216;Bidenomics&#8217; Is &#8216;Increasingly Dangerous&#8217; To US Economy</a>
<h2 class="wp-block-heading">How Does A Put Option On The S&amp;P 500 Work?</h2>
Put options are financial derivatives that grant the holder the right, but not the duty, to sell the underlying asset (in this case, the S&amp;P 500 Index) at a predefined price (known as the strike price) on or before the expiration date. 
When an investor buys a put option on the S&amp;P 500, they are essentially taking a bearish or protective stance on the market, hoping to profit from a decline in the value of the S&amp;P 500. The buyer of the put option pays a premium to the seller (also known as the writer) for the right to have this option.
In practical terms, purchasing a put option is similar to securing insurance against a negative financial occurrence. If the unfavorable event doesn&#8217;t transpire, the investor is responsible for the option premium (expense). However, if it does happen, the investor stands to gain a significant return.
<ul>
<li>If the S&amp;P 500 falls below the option&#8217;s strike price before it expires, the put option gains value.</li>
</ul>
<ul>
<li>An investor can profitably sell the S&amp;P 500 at a higher price (the option&#8217;s strike) even if the market price is lower. </li>
<li>The difference between the option&#8217;s price and the market price, less what you paid for the option, is your potential profit. </li>
<li>If the S&amp;P 500 remains above the strike price or rises during the option&#8217;s validity period, the buyer&#8217;s maximum loss is restricted to the cost of the option.</li>
</ul>
<h2 class="wp-block-heading">Bank of America Recommends Buying Long-Term Puts On The S&amp;P 500</h2>
Bank of America emphasizes in the note that the current all-time low cost of protection is especially notable in a climate of 3-4% inflation, a real threat of recession, and high stock-market&nbsp;valuations despite still&nbsp;elevated&nbsp;interest rates.
The derivatives research team believes it is now &#8220;sensible&#8221; to purchase longer-dated S&amp;P put options.
These contracts are currently trading at prices even lower than those seen in 2017, a year marked by unprecedented stock market tranquility, including the lowest ever recorded Volatility Index (VIX).
&nbsp;&#8220;We continue to warn against rising fragility risk and favor a barbell approach to risk: participate but hedge the tails while waiting for the shock,&#8221; Bank of America wrote.
Chart: CBOE S&amp;P 500 PutWrite Index&#x2A; At All-Time Highs, VIX Nearing All-Time Lows 
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="749" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-1024x749.png" alt="" class="wp-image-77223" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-1024x749.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-300x219.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-768x562.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-1536x1123.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a.png 1690w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
&#x2A;The S&amp;P 500 PutWrite Index is a financial index that tracks the performance of an option strategy known as &#8220;put writing&#8221; on the S&amp;P 500 Index. This technique entails selling, or &#8220;writing,&#8221; S&amp;P 500 put options. When an investor sells a put option, the buyer of the put pays a premium (the option&#8217;s price).
Now Read: <a href="https://www.benzinga.com/news/large-cap/23/07/33445241/pce-report-signals-easing-inflation-economists-weigh-in-on-market-implications">PCE Report Signals Easing Inflation: Top Wall Street Economists Weigh In On Market Implications</a>
Photo: Shutterstock

iShares Trust Barclays 1-3 Year Treasury Bond Fund

Market Collapse? Never Been This Cheap To Protect Your Portfolio Using This Strategy, Experts Say

Investors are on standby for the Federal Open Market Committee (FOMC) meeting&#8217;s interest rate decision, due to be announced on Wednesday, <a href="https://www.benzinga.com/federal-reserve">July 26, at 2:00 p.m. ET.</a>
While the market has already fully priced in a 25-basis-point rate hike to a target range of 5.25%-5.5%, the Fed&#8217;s communications regarding future moves are expected to <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/07/33351071/fed-meeting-in-focus-xx-on-wednesdays-interest-rate-announcement">have a significant impact.</a>
A more hawkish attitude from Fed Chair Jerome Powell, who may reaffirm the need for more hikes during his news conference, would likely catch markets off guard.
A more dovish Fed stance, indicating that current interest rates are appropriately high and that future adjustments will be based on economic data, on the other hand, might solidify existing market expectations on the end of tightening in July. 
Here are the five major ETFs that are likely to see significant activity and shifts in reaction to the Fed interest rate decision:
1) Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>)
The largest exchange-traded fund (ETF) tracking the performance of the U.S. dollar index (DXY) is likely to witness immediate reactions following the Fed meeting.
A Federal Reserve leaning towards a more hawkish stance, maintaining a stringent approach against inflation despite recent declines and signaling a potential rate hike in September, is likely to significantly bolster the U.S. currency.
The dollar bulls, on the other hand, would suffer a serious defeat if the Federal Reserve becomes more dovish and signals the end of policy tightening. 
The dollar is on course to post 6 consecutive positive sessions leading up to the Fed meeting, a stretch not seen since May 2022. The UUP ETF, on the other hand, is flat year to date and down 0.7% from a month ago.
Also Read: <a href="https://www.benzinga.com/news/23/07/33352218/you-have-zero-chance-of-getting-hired-if-this-is-on-your-resume-says-former-google-recruiter">You Have &#8216;Zero Chance&#8217; Of Getting Hired If This Is On Your Resume, Says Former Google Recruiter</a>
Chart: Invesco DB USD Index Bullish Fund ETF Price Action In 2023
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="778" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111228/UUP_2023-07-25_17-11-16_4d08d-1024x778.png" alt="" class="wp-image-74588" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111228/UUP_2023-07-25_17-11-16_4d08d-1024x778.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111228/UUP_2023-07-25_17-11-16_4d08d-300x228.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111228/UUP_2023-07-25_17-11-16_4d08d-768x584.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111228/UUP_2023-07-25_17-11-16_4d08d-1536x1168.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111228/UUP_2023-07-25_17-11-16_4d08d.png 1626w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
2) iShares 20+ Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NYSE">TLT</a>)
The iShares 20+ Year Treasury Bond ETF (TLT) is particularly sensitive to interest rate changes and the Federal Reserve&#8217;s policy stance. Because it tracks long-dated U.S. Treasury bonds with a remaining maturity of at least 20 years, small changes in yields have a substantial influence on the ETF&#8217;s value due to its elevated duration.
A more hawkish Fed, implying a more aggressive approach to inflation and future rate hikes, poses troubles for long-term bonds. A more dovish Federal Reserve, which recognizes the risk of growth issues and minimizes inflation risks, tends to push down long-term bond yields, which boosts the value of the ETF.
As of July 25, the TLT ETF is broadly flat year to date, with a more significant drop of roughly 5% in the previous three months, as long-term Treasury yields recently surged.
Chart: iShares 20+ Year Treasury Bond ETF Price Action In 2023
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="778" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111840/TLT_2023-07-25_17-18-11_d2f5b-1024x778.png" alt="" class="wp-image-74589" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111840/TLT_2023-07-25_17-18-11_d2f5b-1024x778.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111840/TLT_2023-07-25_17-18-11_d2f5b-300x228.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111840/TLT_2023-07-25_17-18-11_d2f5b-768x584.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111840/TLT_2023-07-25_17-18-11_d2f5b-1536x1168.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25111840/TLT_2023-07-25_17-18-11_d2f5b.png 1626w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
3) SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>)
Gold investors are very concerned about the Federal Reserve&#8217;s interest rate decisions and potential future actions. Interest rates and Treasury yields have&nbsp;a substantial impact on the value of precious metals. 
A hawkish Fed, which raises interest rates and provokes the surge in&nbsp;Treasury yields, puts downward pressure on gold prices, and vice versa.
The GLD ETF has returned a positive 6.1% year to date. However, it has dropped 2% in the last three months as yields have recovered.
4) iShares Russell 1000 Growth ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWF#NYSE">IWF</a>)
Growth stocks have&nbsp;demonstrated greater sensitivity to Federal Reserve meetings. Stocks with high valuations and optimistic growth expectations could be in jeopardy if the Fed shows an aggressive posture towards inflation by enacting further interest rate hikes this year.
Companies taking on riskier, potentially more lucrative long-term projects face higher financing&nbsp;costs&nbsp;as a result of higher interest rates. Growth stocks, on the other hand, may benefit from the expectation of future rate drops.
Growth stocks have experienced a surge in 2023, climbing 32% so far this year, primarily due to the rally driven by advancements in AI and progress in sectors such as technology, communication services, and consumer discretionary.
Chart: iShares Russell 1000 Growth ETF Price Action in 2023
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="778" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25112435/IWF_2023-07-25_17-24-16_23535-1024x778.png" alt="" class="wp-image-74590" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25112435/IWF_2023-07-25_17-24-16_23535-1024x778.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25112435/IWF_2023-07-25_17-24-16_23535-300x228.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25112435/IWF_2023-07-25_17-24-16_23535-768x584.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25112435/IWF_2023-07-25_17-24-16_23535-1536x1168.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25112435/IWF_2023-07-25_17-24-16_23535.png 1626w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
5) ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>)
Volatility in the stock market, as measured by the VIX index, has experienced a significant decline since the last quarter of the previous year. The fear index has not only returned to pre-pandemic lows but has also endured nine negative months out of the last 10, currently maintaining a 5-month losing streak.
The volatility index has seen a decrease of 59.2% since the start of the year. It&#8217;s natural to question whether the Federal Reserve has the ability to alter this trajectory. The answer largely depends on the actual impact of the upcoming event.
The VIX may experience an uptick if the Fed signals intentions to hike interest rates more aggressively and speed up quantitative tightening, both of which could trigger market instability. As the Fed&#8217;s decision unfolds, investors are closely monitoring the VIXY ETF.
Chart: ProShares Trust VIX Short-Term Futures ETF Price Action in 2023
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="778" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25113428/VIXY_2023-07-25_17-34-10_d3bd7-1024x778.png" alt="" class="wp-image-74596" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25113428/VIXY_2023-07-25_17-34-10_d3bd7-1024x778.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25113428/VIXY_2023-07-25_17-34-10_d3bd7-300x228.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25113428/VIXY_2023-07-25_17-34-10_d3bd7-768x584.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25113428/VIXY_2023-07-25_17-34-10_d3bd7-1536x1168.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/25113428/VIXY_2023-07-25_17-34-10_d3bd7.png 1626w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Now read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/07/33369519/top-wall-street-strategist-warns-of-possible-market-bubble-points-to-tech-concentra">Top Wall Street Strategist Warns Of Possible Market Bubble, Points To Tech Concentration In S&amp;P 500 And AI Hype</a>
Photo: <a href="https://www.flickr.com/photos/imfphoto/" target="_blank" rel="noreferrer noopener">International Monetary Fund</a> on Flickr and Shutterstock

PowerShares DB US Dollar Index Bullish Fund

Will Jerome Powell Be Hawkish Or Dovish? How These 5 ETFs Could React To The Fed's Rate Decision Wednesday

The CBOE Volatility (VIX) Index, commonly known as the &#8220;fear index,&#8221; surged over 20% on Thursday, reflecting the prevailing market volatility across <a href="https://www.benzinga.com/quote/spy" target="_blank" rel="noreferrer noopener">major U.S. stock indices.</a>
With a daily change of 20%, the VIX is on track for its best session of 2023, topping the spike seen on March 8, when it soared 18.3% following the banking failures of Silicon Valley Bank and Signature Capital.
<h2 class="wp-block-heading">Chart: CBOE Volatility Index On Track For The Best 2023 Session (1-day % change in VIX)</h2>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="750" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/06113233/VIX_2023-07-06_17-24-35_56eb0-1024x750.png" alt="" class="wp-image-63428" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/06113233/VIX_2023-07-06_17-24-35_56eb0-1024x750.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/06113233/VIX_2023-07-06_17-24-35_56eb0-300x220.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/06113233/VIX_2023-07-06_17-24-35_56eb0-768x562.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/06113233/VIX_2023-07-06_17-24-35_56eb0-1536x1125.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/06113233/VIX_2023-07-06_17-24-35_56eb0.png 1618w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Why is Stock Market Volatility Spiking on Thursday?</h2>
The spike in the VIX was fueled by mounting concerns that the Federal Reserve may raise interest rates again in 2023, potentially with two more hikes by year-end, as indicated by the June dot plot.
Wednesday&#8217;s <a href="https://www.benzinga.com/economics/macro-economic-events/23/07/33120898/fed-minutes-show-dissent-on-the-board-foreshadow-more-interest-rate-hikes-in-2023" target="_blank" rel="noreferrer noopener">minutes from the latest June FOMC Meeting</a> revealed an unusual dissent within the board, with a minority of members preferring a rate hike in June rather than keeping rates unchanged.
The minutes also indicated a strong consensus to implement further rate increases, as reflected in the macroeconomic projections, with two hikes being the median preference among Fed members.
<h2 class="wp-block-heading">Strong Economic Data Backed by Hawkish Fed Remarks</h2>
On Thursday, better-than-expected economic data further fueled market expectations of rate hikes by the Federal Reserve.
The <a href="https://www.benzinga.com/economics/macro-economic-events/23/07/33131965/adp-job-growth-soars-by-500k-jobless-claims-ticks-higher-traders-raise-fed-hike-b">ADP National Employment Report</a> revealed an impressive 497,000 new payrolls in June, a remarkable jump from May&#8217;s 278,000 and well above the forecast of 220,000.
Shortly after, the Institute for Supply Management (ISM) reported a <a href="https://www.benzinga.com/economics/macro-economic-events/23/07/33134063/us-services-sector-signals-strong-growth-beats-expectations-amplifying-rate-hike-" target="_blank" rel="noreferrer noopener">surge in the Services PMI</a> to 53.9 in June, up from 50.3 in May and beating expectations of 51. This marks the sixth consecutive expansion reading for the private services sector.
Adding fuel to the fire, Lorie K. Logan, president and CEO of the Federal Reserve Bank of Dallas and a Federal Committee Member this year, stated that &#8220;more restrictive policy and rate hikes are needed for the FOMC to reach goals.&#8221; She also expressed concern about the speed at which inflation will cool down and revealed her preference for a June rate hike.
<h2 class="wp-block-heading">Traders Now Fear the Fed Will Hike Twice</h2>
All these events have led traders to anticipate an increased likelihood of Fed rate hikes.
The probability of a 25 basis points hike in July has now risen to 95%, up from 90% yesterday.
More worrisome is the probability of a consecutive hike in September, which has increased from yesterday&#8217;s 18% to 28.5%, and the likelihood of a second rate hike in November now stands at over 40%, according to CME Group Fed Watch tool. 
<h2 class="wp-block-heading">CME Group Fedwatch: FOMC Meeting Probabilities as of July 6</h2>
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>MEETING DATE</th>
<th>450-475</th>
<th>475-500</th>
<th>500-525</th>
<th>525-550</th>
<th>550-575</th>
<th>575-600</th>
</tr>
</thead>
<tbody>
<tr>
<td>26/07/2023</td>
<td></td>
<td></td>
<td>5,1%</td>
<td>94,9%</td>
<td></td>
<td></td>
</tr>
<tr>
<td>20/09/2023</td>
<td></td>
<td></td>
<td>3,6%</td>
<td>67,9%</td>
<td>28,5%</td>
<td></td>
</tr>
<tr>
<td>01/11/2023</td>
<td></td>
<td></td>
<td>2,5%</td>
<td>49,0%</td>
<td>40,1%</td>
<td>8,4%</td>
</tr>
<tr>
<td>13/12/2023</td>
<td></td>
<td>0,2%</td>
<td>6,7%</td>
<td>48,2%</td>
<td>37,3%</td>
<td>7,6%</td>
</tr>
<tr>
<td>31/01/2024</td>
<td></td>
<td>1,3%</td>
<td>13,6%</td>
<td>46,4%</td>
<td>32,4%</td>
<td>6,4%</td>
</tr>
<tr>
<td>20/03/2024</td>
<td>0,4%</td>
<td>4,7%</td>
<td>22,7%</td>
<td>42,4%</td>
<td>25,1%</td>
<td>4,6%</td>
</tr>
</tbody>
</table>
</figure>
<h2 class="wp-block-heading">ETFs Tracking The VIX Index </h2>
There are several ETFs available that track the VIX index. Here are a few examples:
<ol>
<li>ProShares VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>)</li>
<li>iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VXX#NYSE">VXX</a>)</li>
<li>VelocityShares Daily 2x VIX Short-Term ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TVIX#NYSE">TVIX</a>)</li>
<li>ProShares Ultra VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVXY#NYSE">UVXY</a>)</li>
ProShares VIX Mid-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXM#NYSE">VIXM</a>) Photo: Shutterstock
</ol>

Intraday Update

TVIX

Investor Anxiety Grows As VIX Index Records Dramatic Increase Amid Fed Rate Hike Concerns: Why Is Volatility Spiking Thursday?

Market attention is turning to the upcoming release of the Federal Reserve minutes from the June 14 meeting, scheduled for release at 2 p.m. EDT Wednesday. This highly anticipated event is expected to spark reactions across markets as investors seek further clarity on the <a href="https://www.benzinga.com/economics/macro-economic-events/23/07/33099550/attention-shifts-to-fed-minutes-volatility-may-resume-this-week-as-markets-do-not" target="_blank" rel="noreferrer noopener">Federal Reserve&#8217;s interest rate trajectory. </a>
Let&#8217;s explore what the minutes might reveal and how they could shape market expectations.
<h2 class="wp-block-heading">Fed Pauses In June, But Hints At 2 More Hikes</h2>
During the June meeting, the Fed decided to maintain the funds rate target at 5%-5.25%, pausing a series of uninterrupted rate hikes that started in March 2022. Yet the updated economic projections in June suggest that fed funds may reach 5.6% by the end of the year, indicating the possibility of two more rate hikes.
Fed Chair Jerome Powell&#8216;s recent comments suggest that two further rate hikes are a &#8220;pretty good guess&#8221; following the June pause, with the possibility of consecutive hikes still on the table.
It&#8217;s highly likely the minutes of the June meeting will confirm the board&#8217;s strong majority for two additional rate hikes in 2023 and the intention to maintain higher interest rates for an extended period.
Read also: <a href="https://www.benzinga.com/news/23/07/33110810/after-powells-muddled-message-economist-thinks-fed-minutes-may-clarify-awkward-june-meet-outcome" target="_blank" rel="noreferrer noopener">After Powell&#8217;s &#8216;Muddled&#8217; Message, Economist Thinks Fed Minutes May Clarify &#8216;Awkward&#8217; June Meet Outcome</a>
<h2 class="wp-block-heading">Market Expectations Are Dovish: Only 1 Rate Hike Has Been Priced In</h2>
Skepticism remains among market participants that the Fed can enact two more rate hikes in 2023.
CME Group&#8217;s Fedwatch tool predicts a nearly 90% chance of a rate hike in July, but only a 17% or 30% chance of another hike in either September or November.
The market has already priced in a rate cut in the first quarter of 2024, but the Fed minutes could push this optimistic expectation forward to the second quarter of next year. The Fed&#8217;s latest economic projections suggest a gradual decline in the fed funds rate to 4.6% in 2024. 
<h2 class="wp-block-heading">CME Group Fedwatch: Target Rate Probabilities As Of July 5, 2023</h2>
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>MEETING DATE</th>
<th>400-425</th>
<th>425-450</th>
<th>450-475</th>
<th>475-500</th>
<th>500-525</th>
<th>525-550</th>
<th>550-575</th>
<th>575-600</th>
</tr>
</thead>
<tbody>
<tr>
<td>26/07/2023</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>11.3%</td>
<td>88.7%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td>20/09/2023</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>9.1%</td>
<td>73.2%</td>
<td>17.7%</td>
<td>0.0%</td>
</tr>
<tr>
<td>01/11/2023</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>6.6%</td>
<td>55.8%</td>
<td>32.8%</td>
<td>4.8%</td>
</tr>
<tr>
<td>13/12/2023</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>15.5%</td>
<td>51.7%</td>
<td>27.7%</td>
<td>3.9%</td>
</tr>
<tr>
<td>31/01/2024</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>5.6%</td>
<td>26.7%</td>
<td>44.2%</td>
<td>20.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td>20/03/2024</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>14.9%</td>
<td>34.4%</td>
<td>33.7%</td>
<td>12.6%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
</figure>
<h2 class="wp-block-heading">Investors Brace For Return Of Volatility</h2>
There is room for surprises and thus a return of volatility if the Fed sticks to a fairly hawkish stance by leaning toward two hikes. 
Ahead of Wednesday&#8217;s release of the Federal Reserve&#8217;s minutes, the CBOE Volatility Index (VIX), or &#8216;fear index,&#8217; rose by 3%.
At the end of June 2023, the volatility gauge hit the lowest level since February 2020 after a 44% year-to-date plunge. 
The following popular ETFs that track the VIX index:
<ol>
<li>iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VXX#NYSE">VXX</a>)</li>
<li>ProShares VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>)</li>
<li>VelocityShares Daily 2x VIX Short-Term ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TVIX#NYSE">TVIX</a>)</li>
<li>ProShares Ultra VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVXY#NYSE">UVXY</a>)</li>
<li>iPath Series B S&amp;P 500 VIX Mid-Term Futures ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VXZ#NYSE">VXZ</a>)</li>
<li>VelocityShares Daily Inverse VIX Short-Term ETN (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XIV#NYSE">XIV</a>)</li>
<li>ProShares Short VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SVXY#NYSE">SVXY</a>)</li>
</ol>
Photo via Shutterstock.

Previews

SVXY

Barclays Bank iPath S&P 500 VIX Mid-Term Futures ETN

Fed Minutes Arrive At Critical Juncture: Will The Call For 2 Hikes Shake Markets?

The Chicago Board Options Exchange&rsquo;s CBOE Volatility Index (VIX), commonly known as the &ldquo;fear index,&rdquo; has recently plummeted to levels <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/06/32778285/stock-market-volatility-continues-to-decrease-as-data-points-to-economic-slowdown">unseen since June 2021</a>.
The current low level of the VIX also aligns with the levels observed in February 2021, before the onset of the Covid-19 pandemic.
The substantial drop in volatility has ignited a notable upturn in the stock market during the past month, propelling the S&amp;P 500 index towards its highest point since August 2022 and driving the Nasdaq 100 index to over 12-month highs.
Analysts are cautioning investors to enjoy the low volatility momentum while it endures. Historical patterns indicate the likelihood of a resurgence in volatility in the upcoming months.
Also Read: <a href="https://www.benzinga.com/markets/equities/23/06/32773110/ai-powered-etf-dumps-nvidia-in-june-for-a-faang-stock">AI-Powered ETF Dumps Nvidia In June For A FAANG Stock</a>
VIX Index: 2023 in Review
The VIX index has steadily declined by 38% year to date, with a dramatic drop of over 50% since a mid-March spike caused by regional banking turmoil and the subsequent collapse of Silicon Valley Bank and Signature Bank.
To better understand the prolonged downturn phase, the VIX index currently stands 37% below its 200-day moving average and 20% below its 50-day moving average.
VIX Chart
<img alt="" class="wp-image-49251" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/08095445/VIX_2023-06-08_15-54-31_7840b-1024x557.png" style="height:435px; width:800px" />
The Warning Signs: Head of research at Topdown Charts, Callum Thomas, recently shared insights on LinkedIn, highlighting the VIX&rsquo;s consistent adherence to its seasonal pattern so far this year. According to historical data, volatility tends to begin rising from July through mid-October. Thomas sarcastically advised investors to &ldquo;enjoy low VIX while it lasts,&rdquo; hinting at a potential reversal in the near future.
Opportunities to Access the VIX Index: For investors looking to gain exposure to the VIX index, there are several ETFs available. These include the ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), the ProShares Trust VIX Mid-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXM#NYSE">VIXM</a>), and the ProShares Trust Ultra VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UVXY#NYSE">UVXY</a>), which offers a leveraged play on the VIX.
Read now: <a href="https://www.benzinga.com/news/23/06/32778040/wall-streets-most-accurate-analysts-say-hold-these-3-health-care-stocks-with-over-3-dividend-yields" rel="noreferrer noopener" target="_blank">Wall Street&rsquo;s Most Accurate Analysts Say Hold These 3 Health Care Stocks With Over 3% Dividend Yields</a>
Photo: Shutterstock

Signals

Stock Market Volatility Plummets To Pre-Covid Levels: Analyst Says 'Enjoy Low VIX While It Lasts'

The CBOE Volatility Index (VIX), an index measuring expected volatility in the market, has climbed to its highest level since early March, when a tech meltdown triggered an across-the-board selling in stocks.
VIX Spikes: After topping out at 31.90 on March 4, the VIX began moving down and hit a low of 15.38 on April 14. Subsequently, the index saw a consolidation move, only to climb sharply since the start of the week.
It broke back above 20 on Tuesday and settled the session 11% higher at 21.84. The upward momentum&nbsp;strengthened Wednesday amid a pullback by the equity market.
The <a href="https://www.benzinga.com/news/earnings/21/05/21084626/mid-morning-market-update-markets-open-lower-us-consumer-prices-rise-in-april">major averages </a>moving&nbsp;Wednesday are all&nbsp;sharply lower amid macroeconomic worries.
A <a href="http://www.benzinga.com/analyst-ratings/analyst-color/21/05/21088375/im-playing-a-bit-of-defense-experts-react-to-4-2-cpi-inflation">consumer price inflation report</a>&nbsp;released by the U.S. Bureau of Labor showed the consumer price index rose 0.8% month-over-month in March and increased 4.2% year-over-year, the biggest jump since a 4.9% rate in September&nbsp;2009.
The report showcases the pricing pressure that has come into play amid a rebound in spending following the COVID-19&nbsp;pandemic&nbsp;and supply chain bottlenecks. A persistent inflationary environment would necessitate monetary policy tightening to rein in prices. Fears of tighter monetary policy are hurting the fledgling recovery and are&nbsp;apparently on traders&#39; minds.
Tech stocks are once again leading the market decline, with the tech-heavy Nasdaq Composite Index currently down more than 300 points. The broader S&amp;P 500 Index was last seen dipping 1.75%.
The inflation report led to a sell-off in bonds, with the yield on the benchmark 10-year Treasury note rising to 1.6770%, the highest since early April. The dollar has also firmed up.
Related Link: <a href="https://www.benzinga.com/markets/commodities/21/05/21086801/commodities-futures-and-inflation-what-investors-need-to-know">Commodities Futures And Inflation: What Investors Need To Know </a>
The VIX And its Significance: The VIX is calculated from the prices of S&amp;P 500 Index options with near-term expiration dates. It would give a one-month forward projection of volatility, which reflects the fear and greed sentiment found among market participants.
Volatility doesn&#39;t focus on directional change but the magnitude of change and how frequently the move occurs.
The VIX historically has a strong inverse relationship with the S&amp;P 500 Index and is therefore used for portfolio hedging.
One can trade the VIX by using derivative products that track the index&#39;s price moves. Some of VIX derivatives include ProShares VIX Short-Term Futures ETF (BATS: <a class="ticker" href="https://www.benzinga.com/stock/vixy#BATS">VIXY</a>), VelocityShares Daily 2x VIX Short-Term ETN (OTC: <a class="ticker" href="https://www.benzinga.com/stock/tvixf#OTC">TVIXF</a>) and Barclays&nbsp;iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (BATS: <a class="ticker" href="https://www.benzinga.com/stock/vxx#BATS">VXX</a>).
At last check Wednesday afternoon, the VIX was rallying 26.433% to 27.59.
Related Link: <a href="https://www.benzinga.com/opinion/21/02/19425893/i-remember-the-epic-vix-short-squeeze">I Remember The Epic VIX Short Squeeze </a>
(Photo: John Schnobrich via<a href="https://unsplash.com/"> Unsplash</a>)

News

TVIXF

VIX Climbs To Its Highest Since Early March Amid Market Sell-off: What You Need To Know

On <a href="https://www.cnbc.com/video/2021/03/01/options-action-vix-warning-signs.html">CNBC&#39;s &quot;Options Action,&quot;</a> Mike Khouw said that calls significantly outpaced puts in ProShares VIX Short-Term Futures ETF (BATS: <a class="ticker" href="https://www.benzinga.com/stock/vixy#BATS">VIXY</a>) on Monday.
The most active options were the March $17 calls and they were trading for 35 cents. The trade breaks even at $17.35 or more than 40% above the ETF&#39;s closing price on Monday. Khouw also noticed call purchases in VIX and ProShares UltraShort 20+ Year Treasury (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tbt#NYSE">TBT</a>). This combined activity could mean that people are using the current rally as an opportunity to put some hedges on, said Khouw.

Media

ProShares UltraShort Lehman 20+ Year Treasury

Mike Khouw Sees Unusual Options Activity In VIXY

The ramp in trade tensions between the U.S. and China this month wiped $1.1 trillion in value from the S&amp;P 500 in less than two weeks. Stock investors aren&rsquo;t the only ones rattled by the trade war, as the bond market is also feeling the impact.
<h3>Treasury Auction Disappoints</h3>
On May 8, the bond market raised a red flag to investors that demand for U.S. Treasuries could drop low enough to create a spike in yields. Bids for the monthly U.S. Treasury auction of 10-year notes exceeded the offering by only 2.17 times, the lowest demand at a monthly auction since 2009, according <a href="https://www.businessinsider.com/stock-market-treasuries-volatility-about-to-spike-dimon-gundlach-2019-5">to Bloomberg</a>.
Ten-year Treasury yields are currently at just 2.4 percent, near their lowest levels of the past year. If demand for Treasury bonds falls, rates could spike quickly.
<h3>Experts Raise Concerns</h3>
JPMorgan Chase &amp; Co (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/jpm#NYSE">JPM</a>) CEO Jamie Dimon is among the market experts watching Treasury demand closely.
&ldquo;People tend to forecast a little bit of a change, and sometimes it&#39;s a huge inflection point which people almost never capture,&rdquo; Dimon <a href="https://www.bloomberg.com/news/articles/2019-05-08/low-yield-bad-seasonals-and-trade-trip-up-u-s-10-year-auction">recently said</a>.
Rupert Watson, head of asset allocation at Mercer Investments, said the biggest concern for investors may not be the direct impact of the tariffs.
&ldquo;The direct effect of the tariffs is pretty small, but the indirect effects may be significant in terms largely of business confidence,&rdquo; Watson told the <a href="https://www.ft.com/content/507c025c-ce12-11e8-8d0b-a6539b949662">Financial Times</a>.
<h3>China&rsquo;s &lsquo;Nuclear Option&rsquo;</h3>
While bond investors mull the possibility of softening demand for U.S. Treasuries, some investors are growing increasingly fearful an escalating trade war could ultimately trigger a worst-case-scenario in the bond market.
China is the single largest holder of U.S. Treasury bonds. If China decides to begin aggressively selling its more than $1.2 trillion in U.S. debt, it could easily tank the U.S. bond market and drive interest rates much higher.
The threat isn&rsquo;t just hypothetical. This week, Hu Xijin, editor in chief of the state-run Global Times, <a href="https://twitter.com/HuXijin_GT/status/1127909254134767616?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed&amp;ref_url=https%3A%2F%2Fwww.cnbc.com%2F2019%2F05%2F13%2Fchinas-self-destructive-nuclear-option-in-trade-war-selling-us-treasury-bonds.html">tweeted that</a> &ldquo;Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.&rdquo;
Fortunately, China will likely only resort to dumping U.S. debt as a last resort. China has already reduced its exposure to U.S. Treasuries by 4 percent in the past year, but flooding the market could potentially do more harm to China&rsquo;s balance sheet than it does to the U.S.
&ldquo;It hurts their portfolio. Whether they are willing to endure the pain &mdash; I think they might, but not to a great extent,&rdquo; Kim Rupert, managing director of global fixed income analysis at Action Economics, said <a href="https://www.cnbc.com/2019/05/13/chinas-self-destructive-nuclear-option-in-trade-war-selling-us-treasury-bonds.html">this week</a>.
<h3>Price Action</h3>
Here&rsquo;s a look at how trade war jitters have impacted the stock market and bond market so far in the month of May:
<ul>
<li>SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>) is down 1.5 percent.</li>
<li>iShares FTSE/Xinhua China 25 Index (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/fxi#NYSE">FXI</a>) is down 7 percent.</li>
<li>iShares Barclays 20+ Yr Treas.Bond (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>) is up 1.6 percent.</li>
<li>iShares iBoxx $ High Yid Corp Bond (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hyg#NYSE">HYG</a>) is down 0.3 percent.</li>
<li>ProShares VIX Short-Term Futures ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vixy#NYSE">VIXY</a>) is up 5.3 percent.</li>
</ul>
Related Links:
<a href="https://www.benzinga.com/markets/cryptocurrency/19/05/13764524/another-treasury-department-exit-creates-uncertainty-for-investors">Another Treasury Department Exit Creates Uncertainty For Investors</a> 
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/19/05/13683037/colas-why-trumps-tariff-timing-is-no-coincidence-and-investors-shouldnt-worry">Colas: Why Trump&#39;s Tariff Timing Is No Coincidence &mdash; And Investors Shouldn&#39;t Worry</a>

General

What The Trade War Means For The Bond Market

U.S. stocks are off to another volatile day of trading Wednesday, with the Dow giving up 400 points on the day. While the trading action has most investors taking huge losses, the VIX volatility index and its derivatives have produced major gains in the past week.
<h3>What Happened</h3>
In the past week, the VIX is up nearly 60 percent, and the BRCL BK IPTH S&amp;P 500 VIX SH FTRS ETN (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vxx#NYSE">VXX</a>) is up 18.6 percent. The VIX is a measure of the amount of volatility options traders are pricing in over the month ahead.
<h3>Why It&rsquo;s Important</h3>
The market volatility may be tied to the ongoing U.S. trade war with China and/or fears surrounding the upcoming Q3 earnings season and the U.S. midterm elections. After hovering above 50 for most of the past month, the <a href="https://money.cnn.com/data/fear-and-greed/">CNN Money</a> Fear and Greed Index plummeted in the past week from 51 to 13. That&#39;s well into the &ldquo;Extreme Fear&rdquo; of the index, which ranged from 0 to 100.
Interest rates have also become a major concern for some investors. Weaker-than-expected inflation in the momnth of September coupled with the&nbsp;10-year Treasury yield topping 3.15 percent has some investors worried that rising borrowing costs could slow down U.S. economic growth. The Federal Reserve has also given no&nbsp;indication it will slow down or stop its pattern of rate hikes in the near future.
The VIX at one point traded above 19.17 Wednesday, its highest level since June. Market volatility has spiked multiple times in 2018, <a href="https://www.benzinga.com/news/18/02/11143390/busiest-trading-day-ever-brokerages-retail-clients-react-to-volatility">most notably back in February </a>when the S&amp;P 500 plummeted following a hot start to the year.
<h3>What&rsquo;s Next</h3>
Traders that expect the spike in volatility to continue can take a close look at how some of the following popular volatility ETFs have traded in the past week:
<ul>
<li>ProShares VIX Short-Term Futures (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vixy#NYSE">VIXY</a>) is up 19.3 percent.</li>
<li>Cr SUISSE AG NA/VELOCITY SHS SHORT (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/viix#NASDAQ">VIIX</a>) is up 18.6 percent.</li>
<li>BRCL BK IPTH SP 500 VIX MD FTRS ETN (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vxz#NYSE">VXZ</a>) is up 6.8 percent.</li>
<li>VelocityShares Daily 2x VIX ST ETN (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tvix#NYSE">TVIX</a>) is up 40.1 percent.</li>
</ul>
Related Links:
<a href="https://www.benzinga.com/general/education/17/08/9911978/what-is-the-vix-and-what-does-it-do">What Is The VIX, And What Does It Do?</a> 
<a href="https://www.benzinga.com/markets/18/10/12473371/3-strategies-to-trade-volatility-effectively-with-the-vix">3 Strategies To Trade Volatility Effectively With The VIX</a>

Futures

VIIX

The VIX Is Up 60% In A Week, Highest Level Since June

The international trade war among the U.S., China and Europe may have investors uneasy, but you wouldn&rsquo;t know it by&nbsp;looking at market volatility. After spiking back in February, the CBOE S&amp;P 500 Volatility Index is down about 30 percent in the past three months, suggesting the market may be pricing in a quick resolution to the trade war.
<a href="https://www.benzinga.com/general/education/17/08/9911978/what-is-the-vix-and-what-does-it-do">The VIX </a>surged more than 200 percent in February to its high of the year during a steep market sell-off. Since that time, it has steadily drifted lower despite a breakdown in international relations. Last week, the VIX dipped to around 73 percent below its February high.
<h3>Investors Shrug Off Trade War</h3>
President Donald Trump has been steadily ramping&nbsp;the trade war since he first imposed&nbsp;tariffs on imported solar panels in January. Yet many analysts and investors seem to think the trade war will be short-lived.
&ldquo;While Trump has significant leverage in the short term by virtue of being able to target more imports than the Chinese, this advantage is fleeting,&rdquo; Height Capital Markets analyst Clayton Allen said last month.
Trump is likely motivated to end the trade war quickly to avoid media backlash and the potential overshadowing of&nbsp;Republican talking points of tax reform and a booming economy ahead of&nbsp;midterm elections in November,&nbsp;Allen said.
<h3>No Reason To Panic</h3>
U.S. business is booming, with many companies reporting record earnings and above-consensus growth numbers. While investors may be watching the trade war closely, it&rsquo;s difficult to project a major disruption when fundamentals are sound.&nbsp;
CBOE&nbsp;said earlier this year that it is working on improving the <a href="https://www.wsj.com/articles/in-a-year-marked-by-controversy-cboe-seeks-to-improve-the-vix-1529492400">VIX settlement</a> process amid&nbsp;accusations that traders have been manipulating the index.
At least one deep-pocketed trader is betting on&nbsp;another uptick in volatility in the near future. Last month, the enigmatic &ldquo;50 Cent&rdquo; trader &mdash; who made a killing during the VIX spike in February &mdash; returned to the market by placing a new series of bets on a rising VIX. Macro Risk Advisors estimates the anonymous trader earned about $183 million from their first round of volatility bets.
<h3>Price Action</h3>
While traders continue to search&nbsp;for the next volatility catalysts, here&rsquo;s a look at how some popular volatility ETFs have performed in the past three months:
<ul>
<li>BRCL BK IPTH S&amp;P 500 VIX SH FTRS ETN (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vxx#NYSE">VXX</a>) is down 31.2 percent.</li>
<li>PROSHARES Tr II/VIX SHORT TERM F ET (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vixy#NYSE">VIXY</a>) is down 31.4 percent.</li>
<li>PROSHARES Tr II/ULTRA VIX SHORT TER (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/uvxy#NYSE">UVXY</a>) is down 45.1 percent.</li>
</ul>
Related Links:
<a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/18/07/11967335/a-trade-war-primer-the-tariffs-imposed-threatened-and-expe">A Trade War Primer: The Tariffs Imposed, Threatened, And Expected By The US, Canada, Mexico, China And The EU</a>
<a href="https://www.benzinga.com/general/education/18/06/11881026/the-enigmatic-50-cent-vix-trader-is-back">The Enigmatic &#39;50 Cent&#39; VIX Trader Is Back</a>

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