Is the volatility in autumn a sign of the future?

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    Taylor said, “The question is, if we switch back and forth between the bulls and the bears, the next few months could be even more volatile because we’ve had a pretty good run. You will see some performance chases, people trying to keep up with the market. But that could be overused – and that will be the big debate in the future. “

    He added: “When you see the market this way up in the year, it is valued for perfection. The other thing from a volatility standpoint is that we had this nice backstop last year as the Fed is incredibly market friendly and does something to support it every time the market goes down. But it feels like it is a time to change and they are starting to remove incentives and focus less on future markets. That could lead to some volatility, and that increases the uncertainty for the stocks. “

    Fears of inflation still hang over investors, of course. Is it temporary or temporary, and where do you draw the line? As the reporting season has shown, some companies have coped with supply chain problems better than others. Taylor believes the market now seems to think this is temporary and we can get through this, but if doubts re-emerge it could be a significant headwind. Lots of people expect things to go really well right now, he added, but if a stumble occurs when you’re at all-time highs, it could trigger volatility.

    Taylor also said that concerns about the rise in oil prices feed into the inflation theme and concerns about future earnings. He explained, “This time there really isn’t any capacity that can just be turned on. We also find that companies don’t drill that much; It’s hard to get crews. That means that the price of oil could go up [in this range] much longer than people think – and if oil stays above $ 70 next year, prices will rise across the supply chain. At this point, the Fed should be a little more controlled in some of its comments to address this as companies adjust to higher costs that could start to depress margins. “

    This potential squeeze in earnings, along with high multipliers and the threat of inflation, suggests that advisors and investors will have to dampen return expectations by 2022. According to Taylor, investors should be wary of crowded trades and the fact that there is still a lot of complacency going on in the market.

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