Markets continue their cycle of bear rallies and drawdowns in the latter half of the year as volatility remains one of the few certainties in a challenging market environment. Strategies that attempt to decrease or mitigate portfolio volatility have been popular this year, particularly for retirees or those near retirement age. The Nationwide suite of ETFs that seek to reduce volatility while generating monthly income is worthy of consideration.
One of the most popular ways that advisors gauge volatility is through the Cboe Volatility Index (VIX), a forward-looking, real-time measurement of market expectations for volatility. The VIX calculates the implied volatility of options on the S&P 500 for the upcoming 30 days and is one of the few forward-looking indicators that advisors rely on to measure perceived market stress, fear, or risk.
The VIX has had quite a year as the S&P 500 and equity indexes vacillated between bear rallies and fresh lows: the S&P reached new lows in October at levels not experienced since December 2020.
Fears of continued strong Federal Reserve monetary policy action and aggressive rate hikes have been a catalyst for many of the market gyrations this year and it’s a trend that has continued this week. Indexes that rallied briefly at the end of last week have dropped once more on news of higher than anticipated job openings in September and concerns of continued, strong guidance from the Fed to stay the course on rate hikes at tomorrow’s FOMC meeting conclusion.
Volatility is by no means a new factor to contend with in portfolios but this year has been fairly remarkable. Looking back further than just this year, the VIX has had a greater number of strong peaks and troughs in 2022 than in any year over the last decade as the S&P 500 has risen and plummeted repeatedly. Volatility has reigned supreme this year as market uncertainty persists, inflation remains entrenched, and interest rates rise aggressively.
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Strategies that can provide a measure of volatility mitigation have been popular this year. For advisors seeking a risk-managed approach to investing in the major equity indexes, the Nationwide suite of ETFs is worth consideration. The funds are actively managed and seek high monthly income and include the Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI), the Nationwide S&P 500 Risk-Managed Income ETF (NSPI), the Nationwide Dow Jones Risk-Managed Income ETF (NDJI), and the Nationwide Russell 2000 Risk-Managed Income ETF (NTKI).
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