The long-awaited pullback following soaring equity markets may have taken its first step this week and low volatility ETFs have been impacted. Investors are concerned about inflation and rising interest rates, which have pushed up bond yields while stocks sink.
Investors are exiting defensive trades like utilities, min vol and consumer staples as VIX drops to record low. Yet these asset classes are still producing healthy returns.
Investors have been pouring money into Brazilian ETFs, after a 10% drop in the country’s main index following allegations of the President’s involvement in a corruption scandal and calls for his impeachment.
The VIX index, which measures equity market volatility, has been at ‘exceptionally’ low levels since the start of the year, but ETF Securities warns this is not factoring in market risks that could cause a sell-off in the near future. The firm suggests volatility should be at much higher levels than the index is indicating.