Invesco’s head of innovation and commercialization John Feyerer spoke with NYSE’s Judy Shaw at Exchange 2023 about managing volatility.
Feyerer said that 2022 was fraught with market drawdowns, Fed tightening, and a “resurgence in volatility.” But as of early 2023, “markets have kind of regained their footing.” However, there could be a “potential resurgence in volatility.”
“I think it’s important that investors continue to have an eye on volatility because there are some potential storm clouds out there,” he said. These potential storm clouds include a lagged impact from the Fed’s tightening cycle, a possible disconnect over the Fed’s terminal rate. Plus, “thus far this year, all the gains largely have come from the multiple expansion.”
“So, we start to see the potential backdrop for volatility returning to levels that we may have seen last year,” he said.
And while February was moderate (when the interview was conducted), Feyerer thinks “investors should have a mind towards” managing “volatility going forward.”
The Importance of Being Invested for Managing Volatility
Invesco has a suite of ETFs designed to help its clients manage risk. Feyerer said these funds “enable investors to participate in the market with the potential for downside protection.”
Feyerer stressed “the importance of investors being invested in the market." He cited a study that looked at data from roughly 5,040 of trading days within a 20-year time horizon. Per the study, if investors missed the five best trading days within that horizon, “their return was cut in half.”
The (SPLV ) offers what Invesco calls “the two Ps: participation with potential protection.” SPLV has “nearly a 12-year track record and a very positive relationship” between upside and downside capture.
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