Investors, brace yourselves for the rollercoaster that is September and October. But before hitting the panic button, BlackRock managing director Gargi Pal Chaudhuri offers reassurance, urging that investors not be alarmed by near-term volatility in U.S. equity markets.
In a recent CNBC interview, Chaudhuri — Head of BlackRock's iShares Investment Strategy-Americas — emphasized that whether it's small-cap stocks, large-caps, or the tech sector, "these months tend to be seasonally volatile, a trend observed over the past decade."
We looked into the past trend for validation.
Seasonal Market Swings: A Recurring Phenomenon
Above is the graph of the CBOE Volatility Index, also known as, VIX — over the past decade. It can be observed, that the index tends to gain strength during these two months Chaudhuri mentioned (taking into account that the extremely high wave in 2020 is accountable to Covid).
Investors who track market volatility often tend to book gains through its swings via ETFs such as the iPath Series B S&P 500 VIX Short-Term Futures ETN (NYSE:VXX) or the ProShares VIX Short-Term Futures ETF (NYSE:VIXY)
Chaudhuri also mentioned that this year, the uncertainty around the upcoming U.S. election adds to the already jittery markets, creating more potential for fluctuations.
Read Also: Institutional Investors Buy The Dip After August Volatility Spike: Wall Street Analyst
Medium- To Long-Term? Still Bright
Despite the near-term uncertainty, Chaudhuri remains upbeat about the medium- to long-term outlook for U.S. equities. She believes high-quality stocks are poised to perform well over the next six to twelve months, especially as the Federal Reserve is expected to begin cutting interest rates.
Chaudhuri stated, "Historically, rate cuts have benefited both stocks and bonds," adding that she expects the Fed to start normalizing interest rates later this month with a 25-basis point cut.
India: The Emerging Market Opportunity
But Chaudhuri's focus isn't solely on the U.S. With India's growing influence on the global stage, she believes foreign investors should reconsider their current underweight positions.
"I think investors need to at least get back to benchmark weights with respect to emerging markets (EMs) and with respect to India specifically. And I think that is the opportunity," she said.
While India's market valuations are on the higher end, Chaudhuri noted that "this is not just about valuations." India's economic potential and its increasing importance make it a key area for future growth.
Popular ETFs tracking Indian equity include the iShares MSCI India ETF (NYSE:INDA), the WisdomTree India Earnings Fund (NYSE:EPI) and the Franklin FTSE India ETF (NYSE:FLIN)
Overall, Chaudhuri's message is clear: ride out the short-term volatility and stay focused on the long-term opportunities.
- From Stocks To Bonds: CBOE's VIXTLT Index Adds New Twist To Volatility
