Most stock market observers would agree that there’s been increased stock market volatility in 2022. And so it stands to reason that exchange-traded products linked to benchmarks like the VIX index, which measures the price swings of the S&P 500, have been great year-to-date performers.
For example, the ProShares VIX Short-Term Futures ETF (VIXY) has climbed 17.04% this year while the iShares Core S&P 500 ETF (IVV) has fallen 13.88%. With around $275 million in assets, VIXY is among the largest volatility-focused ETFs in its peer group.
But are we really facing record bouts of volatility? The answer may surprise you when you look back.
Historical Comparisons
In the past month, the VIX index has bounced between 20 and 35 and now trades in the vicinity of 26. That might seem high, but not when you consider past market turmoil. The index surged to a monthly closing high of 53.54 during the Covid-19 selloff in March 2020. It also hit worse highs during the financial crisis, closing at 59.89 for the month of October in 2008.
Amid the wreckage of the dot-com crash, the VIX hit a monthly closing high of 39.69 in September 2002.
So when you look at history, today’s VIX readings certainly don’t seem so bad.
Cutting Stock Market Volatility
While the ProShares VIXY fund uses futures contracts to take advantage of the volatility and match the VIX performance, there are a number of ETFs at the opposite end of the spectrum designed to dampen that volatility.
One of the funds in this group, the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), has climbed 6.99% since the beginning of this year.
The portfolio comprises 50 securities in the S&P 500 that in the past have provided high dividend yields and low volatility. Both the fund and underlying index are rebalanced and reconstituted semiannually, in January and July.
The fund has $3.9 billion in assets, carries a 30-SEC yield of 3.65% and charges annual expenses of 0.30%.