For years, December has behaved like the financial markets' warm cup of cocoa: smooth, comforting, and reliably sweet. But strategists warn this year's holiday season may be serving something closer to an espresso shot with a trembling hand. With volatility creeping back, and megacaps wobbling like ornaments on a thin branch, ETFs tied to defensive positioning and dispersion may become December's unlikely headliners.
Volatility ETFs Take Center Stage
According to Yahoo Finance, Amy Wu Silverman, of RBC, said investors are leaning harder into downside protection, which means ditching the usual year-end optimism in favor of a sturdier shield. That puts volatility-linked ETFs squarely in focus: the ProShares VIX Short-Term Futures ETF (BATS:VIXY), ProShares VIX Mid-Term Futures ETF (BATS:VIXM), and ProShares Ultra VIX Short-Term Futures ETF (BATS:UVXY).
December is usually a sleepy month for volatility trades ― the financial equivalent of everyone taking a long nap after Thanksgiving leftovers. But this year’s script has been shredded by earlier shocks: DeepSeek’s meltdown, unexpected tariffs, and AI valuation spasms that made even seasoned traders reach for antacids. If the market hits another one of Silverman’s “volatility potholes,” these funds may see heightened interest.
Momentum Unwinds Favor Equal-Weight And Defensive Plays
But Schwab Asset Management CEO Omar Aguilar sees growing dispersion beneath the surface, per Yahoo Finance; early signs that the once-dominant momentum trade is wobbling. That’s setting up ETFs such as the Invesco S&P 500 Equal Weight ETF (NYSE:RSP) as potential beneficiaries in the event megacaps loosen their grip, while defensive funds such as the iShares MSCI USA Minimum Volatility Factor ETF (BATS:USMV) may shine if December does turn choppy.
Holiday Whiplash Hits Megacap Tech ETFs
Megacaps have whipped markets both higher and lower in recent weeks, sending tech-heavy ETFs such as the Invesco QQQ Trust (NASDAQ:QQQ), Invesco NASDAQ Next Gen 100 ETF (NASDAQ:QQQJ), iShares Expanded Tech-Software Sector ETF (BATS:IGV), iShares Semiconductor ETF (NASDAQ:SOXX), and VanEck Semiconductor ETF (NASDAQ:SMH) on an unseasonably wild roller coaster. But with AI-induced uncertainty rewriting market behavior, these ETFs could swing sharply in either direction.
This December, the real story might not be about holiday cheer, but about which ETFs hold steady when Santa’s sleigh refuses to take flight.
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