Strategist Thinks S&P 500 Volatility Could Rise


Jun. 25 2020, Updated 11:26 a.m. ET

In an interview with CNBC, Art Hogan hinted about higher S&P 500 volatility. He’s the chief market strategist at National Securities. Any burst in market volatility could impact investors. Early this year, the CBOE volatility index was near its highest level since the “sub-prime” crisis. The volatility rose due to the plunge in the equity market. However, in the last two months, we have witnessed a “V” shape recovery in the stock market.

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Why is market volatility expected to peak?

In regards to market volatility, Hogan said, “The fear of the unknown catches more volatility than anything. Volatility is going to tick up a bit into summertime.” Rising coronavirus cases across the world created a large number of risks for the market movement. He thinks that the market is at an overbought level. Since both of the incidents coincide with each other, the market volatility could increase to the peak level. The broader market S&P 500 Index (NYSEARCA:SPY) and the technology-heavy NASDAQ Composite (NASDAQ:QQQ) have recovered nearly 40% and 50%, respectively, from their lows in March 2020.

Strategies to follow?

The strong recovery in the last two months raised concerns among investors about whether or not the rally is sustainable. Hogan said that long-term investors shouldn’t be worried about their position or any panic sell. They should hold their strategies strongly. He said, “Have a plan, stick to it, and have balance in the equity portion of your portfolio. Sticking to your plan is one of the best things you can do right now.” His best strategy is to reshuffle the portfolio every quarter. He said that 40% should be in fixed income securities and 60% should be in equity.

Recently, Goldman Sachs forecasted another uptick in gold prices. Read Goldman Sachs Ups Gold Price Forecasts: Rally to Resume? to learn more. In the past, the S&P 500 and gold prices have moved inversely. During the COVID-19 pandemic, gold rose, while the market witnessed a huge fall. Any rise in market volatility could push gold prices higher. The SPDR Gold Shares (NYSEARCA:GLD) invests directly into gold futures. Meanwhile, the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) invests in gold mining companies. GDX has outperformed GLD on a year-to-date basis.


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