This article was originally published on ETFTrends.com.
Markets have been on a roller coaster ride for weeks amidst uncertainty stemmed in from the COVID-19 Omicron variant and the impending announcement from the Federal Reserve Board about raising rates. Stock trading continued to be erratic after Fed Chair Jerome Powell announced that the central bank has “quite a bit of room to raise interest rates without threatening the labor market,” with indexes wiping out gains made earlier in the day.
The Dow Jones Industrial Average closed on Wednesday down 129.64 points, or 0.38%, after it was up more than 500 points earlier in the day. The S&P 500 fell 0.14% after rallying more than 2% earlier that day.
In a separate statement issued Wednesday, the Fed signaled that a quarter-percentage-point increase to its benchmark short-term borrowing rate could be coming as soon as March. “With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement says.
Following these statements and subsequent market moves, OANDA senior market analyst Ed Moya said in a note: “After hearing Fed Chair Powell talk, it became clear the risk of more rate hikes was elevated and the earlier Wall Street rally fizzled.”
Meanwhile, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said: “The stock market is especially vulnerable to higher rates and the removal of the tailwind that the Fed’s asset purchases have provided for the past two years,” before adding: “We believe the economy will stay out of recession and the bull market in stocks will continue this year, but we are concerned that the volatility we have already witnessed this month will increase in the months ahead.”
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Benchmarked against the S&P 500, LVOL is an actively managed fund that seeks to offer lower volatility than the overall market by screening for asymmetric, or downside, volatility as well as investing in companies with strong, steady growth. It looks to reduce volatility both at the portfolio level and also in its individual securities. The portfolio managers seek to balance returns with risk management by evaluating the individual securities and their place and performance within their sector and overall.