After the best start in many years for the Wall Street, equities pulled back with the Dow and the S&P 500 indexes marking their biggest one-day declines in about five months.

Meanwhile, the CBOE Volatility Index (VIX), also known as the fear gauge, jumped 26.5% to $14.02 — its highest close since Aug 18. This suggests that market fears have started to set in. The fear gauge measures investors’ perception of the market’s risks and tends to rise when stock falls or investor panic starts to set in.

The appeal for equities seems diminishing on rising borrowing cost, which could put a halt to the bull market drawing close to nine years. Notably, the 10-year Treasury yields rose to its highest level since April 2014 on the prospect of global monetary tightening following the European Central Bank (ECB) intention to end its bond purchases this year.

Additionally, the recent rally has triggered fears of overvaluation in an aging bull market. According to Jim Paulsen, chief investment strategist at Leuthold Group, “For the first time in this recovery, the stock market has finally become expensive based on its ‘new valuation range,’” referring to record-high price-to-earnings multiple.

ETF Impact

Given this, volatility ETFs jumped on the day with Rex Volmaxx Long Vix Weekly Futures Strategy ETF (VMAX – Free Report) climbing the most by 8.4%. It provides long exposure to the VIX Index by holding a combination of VIX futures contracts that are near expiration. It has amassed $2.8 million in AUM and charges 2.90% in fees per year. It sees a meager volume of about 7,000 shares a day.

VelocityShares Daily Long VIX Short-Term ETN (VIIX – Free Report) gained 7.4%. This ETN follows the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility of the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second month VIX futures contracts. VIIX is unpopular, having just $9.8 million in its asset base, and sees moderate volume of 109,000 shares per day. The ETN charges 89 bps in annual fees.