Sunday, May 23, 2010

Chart of the Week: The Flight-to-Safety Trade

This week’s chart of the week looks at some of the various flight-to-safety trades that investors have been taking advantage of since the recent closing high of 1217 in the S&P 500 index from April 23rd.

In the chart below, note that first gold (GLD) and then the dollar (UUP) peaked as hedges against stock declines. More recently, U.S. Treasuries have been the favored flight-to-safety vehicle, with the long bond ETF (TLT) outperforming the other two alternatives and shorter-term Treasury ETFs such as IEF, not shown, attracting quite a few buyers.

Also not shown in the chart below is VXX (iPath S&P 500 VIX Short-Term Futures ETN), which is more of a hedge than a flight-to-safety alternative. During the last month VXX is up 81.3%, with a volatility level of 113.6.


Disclosure(s): short VXX at time of writing

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