We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should Investors Worry About a Market Correction? ETFs to Consider
Read MoreHide Full Article
Key Takeaways
According to a recent survey, approximately 75% of Americans expect a market correction.
Investor sentiment could become a catalyst for a market correction amid rising uncertainty.
ETFs like VXX, VIXY, SPLV and SPHD can offer protection against downside during market swings.
Market sentiment is increasingly getting polarized as investors weigh the potential for a pullback against hopes of a continued rally. While markets have shown resilience through a volatile 2026, persistent macro headwinds demand caution, making the threat of a pullback difficult to ignore.
The CBOE Volatility Index (VIX), which reflects market expectations of near-term volatility, rose about 5.23% over the past trading session, taking the index up around 13.85% over the past month. The rise in the volatility index highlights persistent market uncertainty and a growing risk-off sentiment among investors.
According to Panmure Liberum, as quoted on a Reuters article, the current equity bull run could be at its end, predicting a steep correction of over 35% for the S&P 500 by end-2027. Adding to market anxiety, as per a recent survey by Allianz Life quoted on USA TODAY and cited by Yahoo Finance, around 75% of Americans believe the recent stock market rally is unsustainable and fear a looming correction.
Adding weight to these fears are historic valuation extremes. As quoted on the Yahoo Finance article, the S&P 500's CAPE ratio has climbed to 41.07, an extreme level previously reached only during the 1929 market crash and the 1999–2000 dot-com peak.
The key question may no longer be whether concerns about a market correction are justified, but whether growing expectations of one could trigger it. With the majority of Americans now anticipating a market pullback as per the survey, heightened uncertainty could prompt investors to panic-sell, potentially amplifying market volatility and putting further pressure on stocks. In other words, investor sentiment itself could become a catalyst for a correction.
What Should Investors Do?
When it comes to risk management, anticipating potential threats is far more effective than reacting after losses materialize. In the current environment, adopting a more cautious posture is prudent, with investors looking to reduce volatility and provide greater stability to their portfolios.
Treasury yields at multi-year highs, softening consumer sentiment, growing fiscal concerns, high energy costs, persistent concerns of an AI bubble and persistent inflation make a compelling case for investors to adopt a more defensive and tactical approach, making volatility and low-volatility ETFs particularly attractive.
Volatility ETFs for Navigating Risks
Increasing exposure to volatility ETFs in the short term can be a winning move for investors. These funds have delivered short-term gains during periods of market chaos and may climb further if volatility continues.
Increased exposure to volatility ETFs is emerging as a compelling strategy, not only as a hedge against potential short-term downside risks but also as a way to benefit from lingering market uncertainty.
Investors can consider iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) , ProShares VIXShort-Term Futures ETF (VIXY - Free Report) and ProShares VIX Mid-Term Futures ETF (VIXM - Free Report) .
With a one-month average trading volume of 8.34 million shares, VXX is the most liquid option, offering investors easier entry and exit, making it well-suited for tactical positioning and short-term hedging strategies in the current volatile economic backdrop.
VXX has gathered an asset base of $523.6 million, the largest asset base among the abovementioned funds. Regarding annual fees, VIXY and VIXM are the cheapest options, charging 0.85%.
Low-Volatility ETFs to Help Steady Your Portfolio
Low-volatility ETFs seek to provide a smoother investment experience by focusing on stocks that historically exhibit lower levels of market volatility. These funds commonly favor defensive sectors, including healthcare, utilities and consumer staples, where earnings and demand tend to remain more stable during uncertain periods. This makes them attractive for investors looking to balance market exposure with downside protection.
Investors can consider Invesco S&P 500 Low VolatilityETF (SPLV - Free Report) , Invesco S&P 500 High DividendLow Volatility ETF (SPHD - Free Report) and State Street SPDR US Large Cap Low Volatility Index ETF (LGLV - Free Report) .
Regarding annual fees, LGLV is the cheapest option, charging 0.12%. SPLV has its top three allocations to utilities (26.65%), financials (23.91%) and real estate (16.98%).
SPHD has its top three allocations to real estate (19.79%), consumer staples (18.58%) and utilities (13.95%), while LGLV’s top three allocations are industrials (21.76%), real estate (16.72%) and financials (11.25%).
SPHD has the highest dividend yield among the three funds mentioned, with 5.12%. However, with a one-month average trading volume of 1.91 million shares and an asset base of $6.89 billion, SPLV is both the most liquid and the largest fund mentioned.
View the Zacks #1 Rank List
Image: Bigstock
Should Investors Worry About a Market Correction? ETFs to Consider
Key Takeaways
Market sentiment is increasingly getting polarized as investors weigh the potential for a pullback against hopes of a continued rally. While markets have shown resilience through a volatile 2026, persistent macro headwinds demand caution, making the threat of a pullback difficult to ignore.
The CBOE Volatility Index (VIX), which reflects market expectations of near-term volatility, rose about 5.23% over the past trading session, taking the index up around 13.85% over the past month. The rise in the volatility index highlights persistent market uncertainty and a growing risk-off sentiment among investors.
According to Panmure Liberum, as quoted on a Reuters article, the current equity bull run could be at its end, predicting a steep correction of over 35% for the S&P 500 by end-2027. Adding to market anxiety, as per a recent survey by Allianz Life quoted on USA TODAY and cited by Yahoo Finance, around 75% of Americans believe the recent stock market rally is unsustainable and fear a looming correction.
Adding weight to these fears are historic valuation extremes. As quoted on the Yahoo Finance article, the S&P 500's CAPE ratio has climbed to 41.07, an extreme level previously reached only during the 1929 market crash and the 1999–2000 dot-com peak.
The key question may no longer be whether concerns about a market correction are justified, but whether growing expectations of one could trigger it. With the majority of Americans now anticipating a market pullback as per the survey, heightened uncertainty could prompt investors to panic-sell, potentially amplifying market volatility and putting further pressure on stocks. In other words, investor sentiment itself could become a catalyst for a correction.
What Should Investors Do?
When it comes to risk management, anticipating potential threats is far more effective than reacting after losses materialize. In the current environment, adopting a more cautious posture is prudent, with investors looking to reduce volatility and provide greater stability to their portfolios.
Treasury yields at multi-year highs, softening consumer sentiment, growing fiscal concerns, high energy costs, persistent concerns of an AI bubble and persistent inflation make a compelling case for investors to adopt a more defensive and tactical approach, making volatility and low-volatility ETFs particularly attractive.
Volatility ETFs for Navigating Risks
Increasing exposure to volatility ETFs in the short term can be a winning move for investors. These funds have delivered short-term gains during periods of market chaos and may climb further if volatility continues.
Increased exposure to volatility ETFs is emerging as a compelling strategy, not only as a hedge against potential short-term downside risks but also as a way to benefit from lingering market uncertainty.
Investors can consider iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) , ProShares VIX Short-Term Futures ETF (VIXY - Free Report) and ProShares VIX Mid-Term Futures ETF (VIXM - Free Report) .
With a one-month average trading volume of 8.34 million shares, VXX is the most liquid option, offering investors easier entry and exit, making it well-suited for tactical positioning and short-term hedging strategies in the current volatile economic backdrop.
VXX has gathered an asset base of $523.6 million, the largest asset base among the abovementioned funds. Regarding annual fees, VIXY and VIXM are the cheapest options, charging 0.85%.
Low-Volatility ETFs to Help Steady Your Portfolio
Low-volatility ETFs seek to provide a smoother investment experience by focusing on stocks that historically exhibit lower levels of market volatility. These funds commonly favor defensive sectors, including healthcare, utilities and consumer staples, where earnings and demand tend to remain more stable during uncertain periods. This makes them attractive for investors looking to balance market exposure with downside protection.
Investors can consider Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) , Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) and State Street SPDR US Large Cap Low Volatility Index ETF (LGLV - Free Report) .
Regarding annual fees, LGLV is the cheapest option, charging 0.12%. SPLV has its top three allocations to utilities (26.65%), financials (23.91%) and real estate (16.98%).
SPHD has its top three allocations to real estate (19.79%), consumer staples (18.58%) and utilities (13.95%), while LGLV’s top three allocations are industrials (21.76%), real estate (16.72%) and financials (11.25%).
SPHD has the highest dividend yield among the three funds mentioned, with 5.12%. However, with a one-month average trading volume of 1.91 million shares and an asset base of $6.89 billion, SPLV is both the most liquid and the largest fund mentioned.