September is one of the worst months of the year for stocks. October is infamous in its own right. That’s a month when some of the biggest market tumbles of all-time were born. Those sentiments aren’t necessarily death knells for equity-heavy portfolios. That’s because seasonal trends aren’t always guaranteed to repeat. But as is often said in investing and in healthcare, an ounce of prevention is worth a pound of cure. Prevention can be accessed with high-flying gold and ETFs such as the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN ).
The actively managed GDMN is a high flier in its own right. It’s higher by 96.20% year-to-date. And the ETF confirms the benefits of its best-of-both-worlds approach as it combines exposure to shares of gold miners with bullion futures. GDMN has surged a jaw-dropping 23.18% over the past month. But investors shouldn’t be put off by those statistics. That’s because consensus wisdom in the investment community indicates gold has more upside ahead.
GDMN Could Be Awesome in Autumn
The VIX Index is currently residing at its lowest levels since February. So volatility and protection against it may not be top-of-mind for many investors. But with gold and ETFs like GDMN soaring, market participants could be rewarded for adding some insurance to their portfolios. Plus, it might not take much in the way of increased equity market turbulence to spark bullion higher.
“The key point in the relationship between gold, stocks and volatility: Even a modest uptick in equity market volatility can favor gold. Looking back at the past fifteen years, there has been a very consistent relationship between how gold performs relative to stocks and weekly or monthly changes in implied volatility,” according to BlackRock.
Add to that, the more equity volatility increases, the more gold is likely to follow suit. That would potentially bolster the near-term case for the yellow metal and ETFs such as GDMN. Gold’s penchant for providing protection against stock market bumps is all the more relevant now. That’s because September and October have, in the past, subjected investors to elevated volatility. Bottom line: GDMN merits consideration today.
Short-Term Gold Trade May Aid in Preserving Gains
“In addition to the turn of the season, investors might want to tuck in a bit of insurance given the unusually calm pall that has descended over markets,” concluded BlackRock. “Regardless of the asset class – stocks, Treasuries, currencies – volatility is bouncing around the lows for the year, suggesting investors are not particularly focused on hedging their accumulated gains. A short-term trade in gold may help preserve those gains in what is turning out to be a decent year.”
This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.
WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.
For more news, information, and analysis, visit the Modern Alpha Content Hub.
