Flight-to-Safety ETP Performance During Invasion of Ukraine
Russia invaded Ukraine a little over a month ago, creating turmoil and panic in stocks and across a wide variety of asset classes and instruments.
In the graphic below, I capture the performance of ETPs covering a variety of
traditional flight-to-safety instruments that are used to de-risk or hedge an equity-centric
portfolio. These include:
SHY: 1-3 Year
Treasuries (solid red line)
GLD: Gold (dark
purple line)
UUP: U.S. Dollar
(light green line)
FXY: Japanese
Yen (violet line)
FXF: Swiss Franc
(light blue line)
VIXY: Short-Term
VIX Futures (black line)
Note that normally I would use VXX, but the price distortions due to the suspension of new creation units makes VIXY a more accurate measure.
The graphic shows that none of the ETPs above turned in particularly strong performance. Long volatility has been the best performer
for the first two weeks, but is now down more than the S&P 500 Index, with
a loss of over 12%. The top performer
for the entire period is gold, which has had a fairly steady if unremarkable
return during this period. The second-best
performer is the dollar, which has seen a steady upside, but has consistently
trailed gold. Three ETPs have also
generated losses, following a slight uptick the first few days. The worst performer has been the Japanese yen
and the other underperformers have been the Swiss Franc and 1-3 Year Treasuries.
All in all, these traditional or generic hedges have been a disappointment. In my next post, I will look at some hedges that are better suited to the Russia-Ukraine situation and have delivered much better results.
[source(s): StockCharts.com]
Further
Reading:
Safe
Haven Options Shrinking?
Chart
of the Week: Flight-to-Safety ETPs
Revisiting
the Flight-to-Safety Trade
Chart
of the Week: The Flight-to-Safety Trade
Why
Not Point Hedges?
Forces
Acting on the VIX
A
Conceptual Framework for Volatility Events
While it has not been updated in a while, new readers may also enjoy older
posts that have been tagged with the Hall of
Fame label.
For those who may be interested, you can always follow me on Twitter at @VIXandMore
Disclosure(s): Net short VXX and long GLD and SHY at time of
writing
