Markets are a mess – again.
All after the latest report on inflation.
“Inflation in April accelerated at its fastest pace in more than 12 years as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported,” as noted by CNBC. CPI jumped 4.2% year over year. Month over month, the gain was 0.8%, as compared to expectations for 0.2%.
While the numbers jump, the Federal Reserve isn’t as concerned as the market.
They see current numbers as transitory, with the expectation that inflation will settle around 2%. They also won’t raise interest rates or pull back on bond purchases until inflation averages 2% for an extended period.
With markets pulling back, it’s easy to panic.
However, that’s the worst thing you can do. Instead, remember that markets are resilient, and could bounce back, as we’ve historically seen.
In addition, ignore the herd.
A trader will often do what a larger group of traders do, so they don’t feel left out of a trend. The rationale is simple. It’s unlikely that such a large group of people can be so wrong. But you know as well as I do, that’s not the case.
Also, be in a strong position to capitalize.
As Warren Buffett has often said — keeping some cash on hand allows you to take advantage of corrections without having to sell other investments.
Or, if you believe market volatility could get worse, you can always invest in VIX ETFs, such as:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. The UVXY now trades at just $5.40.
iPath S&P 500 VIX Short-Term Futures (VXX)
The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index. The VXX last traded at $44.76 and could easily run well above $50, near-term with the chaos.
ProShares VIX Short-Term Futures ETF (VIXY)
ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. The VIXY last traded at $9.16 and could run above $15, near-term.
The post Markets are Getting Pummeled – Here’s What to Do Next appeared first on Morningology.
