Portfolio manager explains why increase in volatility is a good reminder to investors
A further drop in US stock indexes yesterday was simply a short-term reaction to changing interest rates, according to one advisor.
Concerns over inflation and rising bond yields sent major benchmarks to their worst week in two years last week. Yesterday, the S&P 500 Index and Dow Jones Industrial Average hit session lows, with the Dow falling more than 400 points, while the Stoxx Europe 600 Index retreated for a sixth day, its longest losing streak since November.
Wolfgang Klein, portfolio manager, senior vice president with Canaccord Genuity Wealth Management, believes there is a lot of complacency in the market and expects volatility to rise this year. But he says there is absolutely no reason to panic and that overall economic conditions, for now, remain good.
Celebrating our industry successes in the wealth management industry
He said: “There’s no panic selling yet. There’s panic selling in bitcoin, there’s maybe some panic selling in pot stocks, but no panic selling in the broad market. Not yet.
“It’s just interest rates, yields going up, bonds going down, so it’s a risk-off environment. It’s very, very short term.”
He added: “You’ve got yourself in accommodative monetary policy, earnings are rising, revenue is rising and you’ve got global synchronised growth. Markets had a good move, markets are not cheap, so if interest rates are going down the market will probably sell off; if interest rates are going up the market will sell off. So it’s just a change in rates that’s causing the jitteries and I believe weakness should be bought.”
If anything, Klein said, rather than trying to play the market, the increase in volatility should be a reminder for investors to review their asset mix.
He said: “My advice is maintain course. It’s boring advice, I say it all the time. It’s all about asset mix; it’s not about the market. So this is always a time, with volatility, to review your asset mix. Is it correct for you?
“If you have too much stock and can’t handle the pain, sell down to the sleeping point. It’s a good reminder: the asset mix must always be correct, so if you’ve got too much stock you’re realising it because you’re feeling the pain. Sell some stock.
“If you have all pot stocks you’re probably not too happy. You were a hero three months ago, now you’re mud. It’s all about the asset mix, get it right and stick with it and adjust it and fine-tune it but don’t react to nonsense that’s taking place.”
Klein said that the stage of the US presidential cycle may have had some influence in the sudden stock decline but talk of anything other than interest rates is just hyperbole. For him, there is no change in strategy,
He said: “You’re in the sweet spot of the cycle from a market point of view. From a presidential point of view you are in the second year of the election, which tends to be the weakest year, so that might have something to do with it. But really, it’s all about interest rates rising. That’s it.”
Concerns over inflation and rising bond yields sent major benchmarks to their worst week in two years last week. Yesterday, the S&P 500 Index and Dow Jones Industrial Average hit session lows, with the Dow falling more than 400 points, while the Stoxx Europe 600 Index retreated for a sixth day, its longest losing streak since November.
Wolfgang Klein, portfolio manager, senior vice president with Canaccord Genuity Wealth Management, believes there is a lot of complacency in the market and expects volatility to rise this year. But he says there is absolutely no reason to panic and that overall economic conditions, for now, remain good.
Celebrating our industry successes in the wealth management industry
He said: “There’s no panic selling yet. There’s panic selling in bitcoin, there’s maybe some panic selling in pot stocks, but no panic selling in the broad market. Not yet.
“It’s just interest rates, yields going up, bonds going down, so it’s a risk-off environment. It’s very, very short term.”
He added: “You’ve got yourself in accommodative monetary policy, earnings are rising, revenue is rising and you’ve got global synchronised growth. Markets had a good move, markets are not cheap, so if interest rates are going down the market will probably sell off; if interest rates are going up the market will sell off. So it’s just a change in rates that’s causing the jitteries and I believe weakness should be bought.”
If anything, Klein said, rather than trying to play the market, the increase in volatility should be a reminder for investors to review their asset mix.
He said: “My advice is maintain course. It’s boring advice, I say it all the time. It’s all about asset mix; it’s not about the market. So this is always a time, with volatility, to review your asset mix. Is it correct for you?
“If you have too much stock and can’t handle the pain, sell down to the sleeping point. It’s a good reminder: the asset mix must always be correct, so if you’ve got too much stock you’re realising it because you’re feeling the pain. Sell some stock.
“If you have all pot stocks you’re probably not too happy. You were a hero three months ago, now you’re mud. It’s all about the asset mix, get it right and stick with it and adjust it and fine-tune it but don’t react to nonsense that’s taking place.”
Klein said that the stage of the US presidential cycle may have had some influence in the sudden stock decline but talk of anything other than interest rates is just hyperbole. For him, there is no change in strategy,
He said: “You’re in the sweet spot of the cycle from a market point of view. From a presidential point of view you are in the second year of the election, which tends to be the weakest year, so that might have something to do with it. But really, it’s all about interest rates rising. That’s it.”
