Volatility ETFs climb as traders hedge risk ahead of Fed’s Jackson Hole conference
The CBOE Volatility Index, or VIX, and volatility-linked exchange-traded funds surged on Monday as another round of aggressive speculation about rising interest rates fueled fears of a possible economic recession. coming.
Among the best performing unleveraged ETFs on Monday, the ProShares VIX Short Term ETF (VIXY) increased by 5.0%. Meanwhile, the CBOE Volatility Index jumped 16.3% to 24.0.
Over the past few weeks, equities have rallied with a return to a risk stance on rising expectations for more moderate monetary policy from the Federal Reserve in the face of waning inflationary pressures. Risk sentiment helped push the VIX down slightly below the 20 level for the first time since April.
However, market watchers are refocusing on Fed Chairman Jerome Powell’s speech at the central bank’s annual conference in Jackson Hole for potential clues as to how policymakers will act going forward.
“Powell speaks on Friday and there is a risk that he will get a bit more hawkish when talking about interest rates,” Paul Nolte, portfolio manager at Kingsview Investment Management, told Reuters. “At this point, a small market correction is not cause for concern at this time.”
Economists are mainly betting on a 50 basis point rate hike at the next Fed meeting in September.
“Jackson Hole is something the market is starting to worry about,” Hani Redha, portfolio manager at PineBridge Investments, told The Wall Street Journal, adding that some expect the Fed to be less aggressive on the upsides. rates as economic data deteriorates but “there is chatter that Powell may try to reverse that perception.
The Fed maintained its targets for mitigating inflationary pressures and consumer price increases remained high.
“He can try to send a clear message that even if they have a slower pace of rate hikes, it won’t signal a lower peak rate or that they will be quick to cut rates,” Ed Moya , senior market analyst at Oanda, said in a note, according to Bloomberg. “After this week, Wall Street shouldn’t be surprised if fed funds futures start to forecast rate hikes for next year. This could be the week many return from vacation and double down on their rally calls. of the bear market.
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