Markets have shown remarkable resilience, bouncing back from the lows seen in early April. But beneath this recent resurgence, a key shift has emerged: significantly elevated volatility. While the broader market indices’ year-to-date returns suggest some sense of stability, the volatility seen last month was reminiscent of March 2020 and even the 2008 Global Financial Crisis (GFC) — periods marked by far steeper drawdowns.
In April, the Cboe Volatility Index (VIX) — a key measure of market volatility and often referred to as the “fear gauge” — spiked above 50, a level rarely seen outside of a major market crisis. Yet, the S&P 500 is currently down ~5% from its February 19th high of 6,144[1]. Today, the VIX has cooled off, but remains elevated at around 20, above the more subdued norms of the pre-pandemic era.
A New Regime of Volatility
Looking back over the last two decades, periods of low volatility were often supported by accommodative monetary policy and ample global liquidity. Following the GFC, for example, the VIX often hovered below 15 as central banks maintained ultra-low interest rates and supported asset prices.
That environment has changed. Since the onset of the pandemic, markets have been in a more volatile regime. Structural changes — including persistent inflation, tighter monetary policy, and multiple instances of geopolitical uncertainty — seem to have made volatility more of a fixture than a passing phase.
Even sectors traditionally seen as stable, like utilities and financials, have experienced heightened swings alongside more volatile areas like tech — a trend that, if continued, could benefit covered call strategies like our YIELD MAXIMIZER™ ETFs, which are designed to generate higher monthly income from the most popular sectors in North America.
What Higher Volatility Means for Investors
While elevated volatility can be unsettling, it can also create opportunities, particularly for option-selling strategies. When volatility rises, so do the premiums available on options (see chart below). Covered call strategies, like those employed by our YIELD MAXIMIZER™ ETFs, are built to capitalize on these conditions by generating income from selling call options while retaining exposure to the underlying equities.
Importantly, higher volatility can allow call-writing managers to reach target income levels with lower option coverage, preserving more upside potential. This environment is especially attractive for investors seeking enhanced income.
Source: S&P Dow Jones Indices, Bloomberg, Hamilton ETFs.
Why Elevated Volatility May Persist
Looking forward, we believe it’s unlikely that volatility will return to pre-COVID lows anytime soon. The current global economic and fiscal policy landscapes suggest that a higher baseline level of uncertainty may persist. Inflation remains a key constraint on central banks’ ability to respond quickly to economic slowdowns. Unlike the post-GFC era, where disinflationary forces from China helped contain prices, current global dynamics — such as supply chain realignments and rising geopolitical tensions — have reversed that trend.
In short, it is our view that we are currently in an environment where both positive and negative surprises are more likely to spark larger market reactions. Even in the event of a continued rally, volatility could remain stubbornly high. Conversely, negative developments could push volatility even higher from already elevated levels.
Navigating a Volatile Market
For investors, the current environment presents both challenges and opportunities. While elevated volatility may test market confidence, it also creates conditions that reward income-generating strategies such as covered calls. To learn more about our YIELD MAXIMIZER™ ETFs and how they deliver high income while maintaining equity exposure in today’s elevated volatility environment, CLICK HERE.
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[1] As of May 23, 2025. Source: Bloomberg.
[2] Based on the S&P 500 (SPXT Index) and the Cboe Volatility Index (VIX index) from January 01, 2005, as at April 17, 2025. Source: S&P Dow Jones Indices, Bloomberg, Hamilton ETFs.
[3] Target yield is the estimated annualized yield the ETF aims to earn based on current investments. It’s not guaranteed and can change over time.