The fear in the market is palpable.
The trade war is only intensifying with no real signs of cooling prior to 2020. Herd instincts are kicking into overdrive over the trade war, and fears of a global recession.
And from the look of futures this morning, investors are running scared.
Top Analysts are Raising the Fear of Recession
For one, there are still great concerns the trade war could tip the global community into a recession. Remember, an escalation of the U.S.-China trade war could spark a global recession in just nine months, just warned Morgan Stanley. Even Goldman Sachs just lowered its GDP forecast to 1.8%, citing a larger than expected impact of trade war events.
In addition, Goldman Sachs said it does expect the new round of tariffs to go through in September, and noted it no longer sees a trade deal before the 2020 election.
China Unrest Contributing to Downside
However, it’s not just the trade war that’s weighing on markets.
Hong Kong protests have gained momentum with hundreds arrested since the unrest began. “The people who are protesting are not backing down, the Chinese government doesn’t seem to be backing down, so if cooler heads don’t prevail it’s possible things in Hong Kong could get very ugly,” said Steve Eisman of “Big Short” fame, as quoted by CNBC.
As a result of all of the chaos, investors have been pushing into the safety of gold, and taking positions in volatility, as we’ve noted over the last few days:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher from a current low of $30 a share. The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
The TVIX is another great way to trade elevated volatility. This ETF tracks an index of futures contracts on the S&P 500VIX Short-TermFutures Index. As volatility ticks higher, the TVIX ticks higher.
iPath S&P 500 VIX Short-Term Futures (VXX)
As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return. In simple terms, as volatility shoots higher, so does the VXX.