Protection Strategies for a Volatile Market Environment

Jeff Chang, Managing Director at CBOE Vest , gives his thoughts on the current market environment and discusses strategies advisors can use moving towards a changing investing world.

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Related: Remodeling Portfolios to Shift Growth to Income

What are your thoughts about the current market environment?

  • Interesting times; uncharted territory
  • Central bank actions last 10 years – unprecedented
  • No more cushion by central bank actions moving forward
  • Long-held assumptions can break down
  • Asset allocation tricky
  • Equity-bond not the same
  • What are some strategies you see advisors gravitating towards in this environment?

  • Volatility is back; Investors questioning whether the 10-year bull market is slowing and are concerned about impact of potential Fed rate hikes on portfolios
  • Advisors recognize need for new sleeve
  • New sleeve: Low vol equity, low risk equity, hedge equity. Control downside risk without allocating to fixed income
  • S&P 500 Buffer Protect strategy; we have products
  • Why protect the first 10%?

  • Typically, you want to buy protection you are actually going to use
  • By protecting the first 10% within a year, you are protecting the most likely losses
  • Buying protection past 10% is similar to a high deductible insurance policy. You don’t use the benefits often.
  • How do you see these strategies used in portfolios?

  • Advisors’ client base closer to retirement, natural migration from equities to fixed income
  • rate hikes potentially adding more risk
  • Buffer protect strategy reduce the risk through cushion on the downside
  • Goal to deliver equity upside participation, beat inflation, reduced volatility
  • [Help investors STAY invested