Firms in Australia’s financial market have continued to be resilient against cyber threats, with improvement rates in cyber resiliency remaining steady, the Australian Securities and Investment Commission (ASIC) reported on Monday.
This finding was published in the corporate regulator’s latest report [PDF], which compiled trends from self-assessment surveys completed by financial markets firms. The report, titled Cyber resilience of firms in Australia’s financial markets: 2020–21, is an update to a similar cyber resilience report published by ASIC two years ago.
In both 2020 and 2021, ASIC asked participants to reassess their cyber resilience against the National Institute of Standards in Technology (NIST) Cybersecurity Framework. The NIST Framework allows firms to assess cyber resilience against five functions: Identify, protect, detect, respond, and recover, using a maturity scale of where they are now and where they intend to be in 12-18 months.
In the new report, ASIC identified that cyber resiliency among firms operating within Australia’s financial market increased by 1.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} overall, but this fell short of the 14.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} improvement targeted for the period. It was also lower than the 15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} improvement that was achieved between 2017 and 2019.
ASIC attributed the shortfall to a combination of reasons including overly ambitious targets, a rise in the cyber threat environment, and disruptions caused by the COVID-19 pandemic, which resulted in organisations directing resources towards enabling secure remote working and ensuring products and services could be delivered to customers as supply chains were burdened with growing cyber activists.
Improvement in cyber resilience preparedness between cycles (by function).
Image: ASIC
Overall, 2021 saw improvements in the management of digital assets, business environment, staff awareness and training, and protective security controls.
“Firms operating in Australia’s markets continue to be resilient against a rapidly changing cyber threat environment. The COVID-19 pandemic has increased opportunities for threat actors to target remote workers, and access remote infrastructure and supply chains critical to the delivery of products and services. However, the response from firms has been robust,” ASIC commissioner Cathie Armour said.
The report said 90{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of firms strengthened user and privileged access management, 88{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of firms ensured users were trained and aware of cyber risks, and 86{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} had mature cyber incident response plans in place.
Other key findings from the report included the gap between large firms and small to medium-sized enterprises (SMEs) continued to close, with an overall improvement of 3.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. In contrast, larger firms reported a slight drop in confidence of 2.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, ASIC said.
“This comes off a strong base and can be attributed to large firms reassessing their response and recovery capabilities in light of: Increased complexity of their business operating models [and] a significant increase in threats to critical products and services reliant on third parties and supply chains,” the corporate regulator said.
ASIC also highlighted the greatest gaps between larger firms and SMEs continued to be in supply chain risk management where 40{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of SMEs indicated weak supply chain risk management practices, but a majority of firms identified that this would be an ongoing priority over the next period.
Investment in cyber resiliency by credit rating agencies increased during the period, ASIC said, triggered by the 2017 Equifax incident, while investment banks continued to set high targets for all NIST Framework categories.
The release of the reports follows ASIC recently putting forward a recommendation for market operators and participants to simulate outages and recovery strategies to improve resiliency. It was off the back of an investigation into the Australian Securities Exchange (ASX) software issues that arose when the refresh of its trade equity platform went live in November last year, causing the exchange to pause trade.
As stock market investors have learned over the past week, it’s tricky to time the next move in the Dow Jones Industrial Average after a big selloff. Buyers stepped in Monday after the 900-point Nov. 26 dive, but there were signs of weakness. Stocks tanked Tuesday, soared back Wednesday before whipsawing into the close, and then had a huge day on Thursday before ending the week’s trading with another loss for the Dow.
“Always tricky,” says Keith Lerner, co-chief investment officer and chief market strategist at Truist.
Looking to market history can help.
Some are betting on the Santa Claus rally for a big December, even as clarity on the omicron variant threat remains lacking and cases spread, including in the U.S. And even after a week in which Fed Chair Jerome Powell surprised the market — with timing that was “curious,” according to Mohamed El-Erian — saying the Fed’s taper may be accelerated and inflation should no longer be described as “transitory.”
Traders work in the S&P 500 options pit at Cboe Global Markets Inc. in Chicago, Illinois.
Daniel Acker | Bloomberg | Getty Images
Lerner is looking to market history, and he sees an environment in which the patient investors will be ahead, if not in December, a year from now.
“We want at least a 12-month trend, because even if your entry point is not exactly right, you have greater chances of success in that timeframe,” he said.
The “Black Friday” Nov. 26 spike in the VIX volatility index of 54{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} was among the five biggest single-day volatility moves in the past three decades. Since 1990, there have been 19 trading sessions during which the VIX spiked by 40{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} or more. In 18 of those 19 instances, or 95{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of the time, the S&P 500 Index was higher one-year later, and the gains were large — an average of 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
With the U.S. market still up more than 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} this year even after the recent volatility, another 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} might be aspirational. Lerner noted that before the recent market whipsaw, stocks had gained 9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} since early October, and that is a negative as far as having confidence the market will move up substantially in the short-term. That implies the immediate future is “vulnerable” to more moves down.
But the more important data point is the longer-term trend in the VIX history: there isn’t any instance across the 19 biggest VIX spikes of the past three decades after which stocks weren’t positive a majority of the time one month, three months, six months, and one year later. One month later, stocks were only up an average of 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, but were positive 70{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of the time, and the numbers get better with time.
The caveat: Covid is a type of risk that the markets have not seen often over the past three decades, and two of the biggest VIX spikes came as Covid first hit the U.S. in February 2020. After both, the one-month period for stocks was brutal. That implies a market that remains on edge for now, and that should not come as a surprise — especially after the past week of trading. But the only of the 19 instances in which stocks were still down a year later was at the onset of the financial crisis. That data point gives Lerner more confidence in remaining bullish.
Volatility will remain the headline before the dominant trend returns, but that trend, he says, will be an economy that continues to expand and support further stock gains.
“In the last decade, we’ve had these V-shaped recoveries. They have been more normal,” he said. “Go back to the pandemic low, when you had a sharp move down and you get a kick back rally and a battle between greed and fear ensues. But in general, over the last 5 to 10 years, we’ve seen more of these come-down and go-back-up markets, as if nothing happened,” he added.
The last time was the end of September when the financial issues at Chinese property giant Evergrande sent the global equity markets into a tailspin.
Fear of missing out in a Covid market
The base case, Lerner says, is more of a tug-of-war until more of the news filters out and the market is able to get a better gauge on this new variant. This doesn’t change his view that investors are more likely to be rewarded by sitting tight rather than sitting out the market. In a “fear of missing out” era, that’s a lesson many investors learned from Spring 2020, the fastest bull market in history based on S&P 500 price gains.
“For people who missed out that time, it is a reminder about becoming too negative too fast,” Lerner said. “Even if you had had all the news on the pandemic, you would have been better staying in the market. By the time we have the all clear the market has moved,” he said.
The stock market was at a record shortly before Nov. 26, and when markets come off new highs, history says investors should be prepared for more downside over the next one to three months. A pandemic may heighten that volatility since the science is a type of uncertainty the market isn’t accustomed to analyzing. But the market does now have the 2020 Covid playbook to learn from.
“In February 2020, it was all new,” Lerner said. “We didn’t know how businesses would adapt, and now there is playbook. We saw they become more digital. There will be winners and losers, no matter what, but companies and consumers have adapted and will again.”
The Federal Reserve is on record as saying one of the lessons of the Covid era is that the economy has gotten better at adapting to pandemic during each successive wave. When Fed Chair Powell outlined a more hawkish position during Senate testimony this week, some market pundits pointed to the inflationary risks from an economy that is too hot as being the larger concern than a new Covid variant.
Like many market experts, Lerner says on the margins inflation may become even worse because of an exacerbation of the existing supply chain issues, which were starting to show signs of easing and now with a new variant unknown could go back up again on new factory shutdowns and delays in transportation.
“It is a risk to the market,” he said, and another reason volatility may remain elevated in the near-term.
Fed Chair Powell said this week that the omicron variant “complicates” the inflation picture.
But another difference between now and Spring 2020: the economy is not in a recession, which it quickly entered during lockdowns and stay-at-home orders during the initial Covid wave. “Now we know, even with this variant, it may slow activity down, but I still think recession risk is low. That’s a key difference from February and March 2020 when a recession happened so quickly,” Lerner said.
“Especially in the U.S. market, composition does matter,” Lerner said.
Reflation trades may ultimately benefit if omicron doesn’t turn out to be as bad as feared and the economic expansion remains on track, but “right now, the strongest sector is tech and that’s the most important sector for those investing at the index level,” he said. “If the big mega-cap tech stocks hold up, you may see the headline index hold up better and more bifurcation below the surface. The knee jerk is investors will rotate to companies that can still create a lot of cash flow and have bigger balance sheets, so if there is a slowdown, they have enough to get through. They’ve become more defensive in some ways,” he added.
This view also makes Lerner in favor of continuing a tilt to U.S. equities versus peer markets around the globe, even as international and emerging markets trade at significant discounts to U.S. stocks. He noted that international equity prices are making fresh lows relative to the U.S., and in the case of the EAFE index versus the S&P 500, a relative price that is at the lowest level in history.
The sector composition of the S&P 500 and outsize role of mega-cap is a major reason for that versus the European market and the EAFE universe, in which financial and industrials are the top two sectors. Lerner stressed that this doesn’t mean gains won’t eventually come to those who enter early into discounted overseas equities trades. In fact, he has told clients that part of sticking with a U.S. equities tilt and technology for now likely means missing the onset of an investor rotation that is inevitably going to favor overseas markets as earnings power improves, but it’s a price he is willing to pay.
“Valuations are cheap overseas but that hasn’t been a catalyst,” he said. “We will miss the turn, but we are willing to wait for stability and earning trends, and that has served us well in being overweight U.S. … If there is a sustainable move, there should be sustainable upside,” he added. “You don’t need to be a hero trying to buy those markets.”
Equity market strategists remain cautious on any sustainable bounce in the U.S., too, based on this past week’s action. Monday’s big really featured an advance/decline breakdown of 1,834 winning stocks versus 1,502 losing ones — “not a resounding up day.” Lerner said. But Thursday’s big bounce was more encouraging. Advances: 2,525. Declines: 868. “You want to see an advance-decline that is three-to-one,” Lerner said, and the market delivered that on Thursday — though that confidence didn’t last.
The Russell 2,000, a broader look at the U.S. market and domestic economy than the large-cap S&P, broke it’s four-day losing streak on Thursday, but by Friday’s close was 12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of its 5-week high. Lerner’s says the action in the small-cap Russell 2000 is an example of the “nice kickback but more mixed below the surface” market action investors will need to keep an eye on, and not let themselves be fooled by any “all clear” signal amid the stock nibbling and, most importantly, continued uncertainty over the course of the omicron variant.
The market had its best day since March 2021 on Thursday, but strategists remain wary. Tom Lee’s Fundstrat Global Advisors, which called for “aggressive buying” early in the week, said after both the Monday and Thursday rallies that the market wasn’t sending an all-clear signal.
According to Bank of America and FactSet Research Systems, headed into Friday’s trading action only 32 S&P 500 stocks were off their highs less than the S&P 500 Index.
“Thursday’s rally, similar to Wednesday’s bounce, failed to show sufficient strength to think a low is in,” Fundstrat Global Advisors wrote to clients on Thursday night. “This rally could still weaken further into next week. … Given the extreme drop off in breadth in recent weeks, a monumental effort is necessary along with broad-based participation to have confidence.”
On Friday, the S&P 500 barely avoided its sixth-consecutive trading session with a move of 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} or more, declining by 0.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Lerner pointed out in a note to clients last Thursday that the percentage of retail investors with a bullish view has dropped to just 27{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} versus 48{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} a few weeks ago, according to the latest survey from the American Association of Individual Investors (AAII), while the percentage of bearish investors jumped to the highest level in more than a year. He sees investor patience as being as important as confidence. Corporations and consumers have adapted to Covid, pent-up demand remains, and the economy remains on solid footing, all which leads him to that bottom-line takeaway that the primary market trend is higher, but it will likely continue to be a rocky near-term road.
While the S&P 500 is below its peak from a month ago; the ARK Innovation ETF that made fund manager Cathie Wood a star in recent years and during the pandemic: now down 40{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from its February high and its largest pullback since the onset of the pandemic. The iShares Tech-Software ETF, which includes DocuSign, was below its 200-day moving average for the first time since May on Friday, and more than 14{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} below its intraday all-time high from November.
The one factor investors should not let set their investment course is fear. Fear in the market right now is being driven by a factor that is real, and to get to the other side of that fear can takes weeks, if not months. But fear can also rotate from a market headwind to market tailwind, and that is what the history of big spikes in the VIX index shows. “The same fear becomes the catalyst,” Lerner said.
After the “Black Friday” selloff, Lee said the lack of an inversion in the VIX, when the nearer-term risk is being priced higher than the outer risk, was a positive sign. But by this past Friday, the VIX curve had inverted, which is a sign of portfolio stress. While that “can occur near the climax of a selloff, as fear peaks,” the VIX will have to un-invert again for more confidence.
“We have to say with humility what we know and don’t know,” Lerner said, but he added that if the catalyst for the S&P being down is renewed Covid fears, and we find out these concerns are overblow and won’t disrupt the economic trajectory and won’t effect corporate profits, the headlines that had people braced for negative news become a positive catalyst for the market because expectations were reset lower.
“There are times like 2007 when investors weren’t fearful enough,” he said. “But our baseline view is that we’re not going into a recession, this doesn’t change the economic expansion materially.”
Friday’s monthly jobs report was below expectations in number of jobs added by the U.S. economy in November, but it was a mixed report, with the unemployment rate falling and labor participation rising, both encouraging signs for the economic outlook.
A “garden-variety” correction in stocks, was how S&P 500 technician Ed Yardeni described it early last week.
By Friday’s close, the Nasdaq was down more than 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from its 52-week high; the off Dow over 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}; and the S&P less than 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from its annual high.
“5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} corrections are the admission price to the market,” Lerner often says. “Investors are better served by focusing on the longer term trend.”
(Bloomberg) — Facebook parent Meta Platforms Inc. dropped on Friday, bringing its shares closer to a bear market after months of volatility triggered by a whistle-blower’s revelations and disappointing quarterly results.
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The selloff was 19.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} since its closing record on Sept. 7, erasing about $224 billion in market value. Meta’s stock has been pressured this week as investors grappled with uncertainty surrounding the omicron variant and the possibility that the Federal Reserve will end its pandemic support program sooner than expected. It closed 1.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} lower to $306.84 on Friday, paring an earlier drop of as much 3.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Meta shares have been hurt in recent months by negative comments about Facebook’s business model from whistle-blower Frances Haugen, according to David Trainer, who covers Meta for investment research firm New Constructs. Haugen appeared before the House subcommittee on technology earlier this week, after accusing the social media giant of putting “profit over safety” of its users in October.
Mounting concerns about the impact of Apple Inc.’s data collection rules and supply-chain challenges have also contributed to the decline and spurred Meta’s biggest drop in nearly a year in October.
Meta shares fell 7.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the week, suffering their worst weekly decline since June 2020.
A weaker-than-expected quarterly report released in October also hurt investor sentiment. The company’s third-quarter revenues fell short of consensus estimates, as did its expectations for the fourth quarter. Several analysts trimmed their price targets for the stock in the wake of results, though they remained broadly positive on the firm, citing its long-term growth potential and valuation.
Prior to the pandemic-driven market rout last year, the company last entered a technical bear market in June 2019, when the U.S. Federal Trade Commission began an investigation into potential antitrust violations.
Still, the stock rallied through the pandemic and had been on a tear this year, rising 42{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from Jan. 4 to its Sept. 7 peak, outperforming peers like Twitter Inc. and Netflix Inc. But its recent plunge has the shares trading around 19.8 times forward earnings, making Meta the cheapest stock among mega-cap U.S. technology companies.
Newbridge Securities Chief Market Strategist Donald Selkin said Meta appears reasonably valued at current levels, with the decline discounting a lot of the bad news surrounding Facebook.
“It’s worth sticking your toe in the water,” he said in a phone interview.
The lower valuation doesn’t make the stock more attractive to Trainer of New Constructs, who views Meta as the worst positioned company among its mega-cap peers. He expects the stock to be a “perennial underperformer” for the next several years given the headwinds at the legacy Facebook business. Trainer said he is interested to monitor the company’s shift in focus toward the metaverse, especially the pace of the transition as competition in the field increases.
Yet, Meta has so far held on to its fans on Wall Street, with more than 80{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of analysts recommending that investors snap up shares, according to data compiled by Bloomberg. The stock’s 12-month average analyst price target of $400 implies about 31{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} return potential from current levels.
Markets should be wary of high inflation and the potential spread of new COVID variants in 2022, a new Bank of America (BAC) report warns.
“Future COVID waves are the biggest downside risk,” the report noted. “On the upside, the supply-side wakes up to meet the gains in demand.”
Authored by several Bank of America Global Research economists, the report mainly focuses on the various threats to the global economy in 2022 and beyond.
Among these economic risks are high inflation rates, the spread of variants like the recent Omicron strain, climate change, and supply constraints.
The emergence of the Omicron variant in November left its mark on markets at the end of last month, with the Dow Jones falling over 1500 points the week following Thanksgiving.
Earlier this month, World Health Organization chief scientist Soumya Swaminathan spoke at the Reuters NEXT Conference where she emphasized the variant’s high transmissibility and noted that it could one day become the dominant COVID strain around the world.
The report found that the unprecedented fiscal stimulus enacted by the federal government to counter COVID-related economic issues should ensure that “the U.S. will resume its role as an engine of global growth, while China will be a reluctant laggard.”
China-US relations were a cause for concern for the global economy as well, the authors wrote in the report. “There is also considerable uncertainty about how relations between China and the West will develop. A rapid unravelling of economic interlinkages could trigger a global recession.”
Even if the new COVID variants which emerge in the next year are controlled to the utmost extent, inflation concerns still might make for a murky future for US economic growth.
Trader John Romolo works on the floor of the New York Stock Exchange, Thursday, Dec. 2, 2021. Stocks are opening mostly higher on Wall Street Thursday as investors continue to monitor the spread of the new coronavirus variant as well as measures that the U.S. and other governments are taking to restrain it. (AP Photo/Richard Drew)
A ranking from the report of 10 different currencies from around the world found that the U.S. had the highest inflation score, at 46. It was followed by the New Zealand dollar, at 38, and the Great Britain Pound, at 37.
“It’s been a bit nerve wracking to watch the recent very strong inflation readings,” the report noted. “In the summer, most of the increase was driven by spikes in specific sectors, but in the last few months the pressure has moved into the middle of the inflation distribution … Relative to a year ago, we have raised our global CPI inflation forecast for this year from 2.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to 3.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and for next year from 2.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to 3.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.”
Overall, inflation should cool, even in the U.S. The CPI was 6.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in October, continuing the rampant inflation not seen domestically in decades. Although this rate of inflation may subside slightly, Bank of America Global Research cautioned that inflation may still be a significant issue for the economy in the short run. BofA’s Chief US Economist Michelle Meyer and VP Alexander Lin wrote that three rate hikes in 2022 were very possible, looking forward.
“Inflation will cool from the current highs but remain well above target, leaving the Fed to move into action,” the report predicted. “While 2021 was a story of excess demand and a dearth of supply, we think 2022 will be one of rebalancing, albeit only gradually. This should take some of the heat off of inflation but not quickly enough, leaving the Fed to hike three times starting in June and continuing on a quarterly cadence.”
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.
Stock valuations are still looking too lofty even as the major indices continue to retrench on the one-two punch of Omicron variant fears and a hawkish shift in Federal Reserve policy.
“I worry about markets because stock market valuations look relatively high,” said Torsten Slok, Apollo Global Management chief economist, on Yahoo Finance Live. (Apollo is the parent company of Yahoo Finance.)
Slok said the potential for interest rate hikes from the Fed in 2022 could be a headwind to markets, especially in light of valuations that aren’t too far removed from record highs.
Added Slok, “I think the economy would still be OK [if the Fed raises rates next year], but I am actually quite worried about the vulnerabilities and the sensitivities simply because valuations are so stretched.”
Berkshire Hathaway’s Charlie Munger voiced similar concerns on Friday about stock valuations, noting they are “crazier” than the dot-com bubble.
Indeed, air continues to be let out of what may be the near-term bubble in broader markets.
The Dow Jones Industrial Average (^DJI) fell 162 points in afternoon trading Friday, as the World Health Organization (WHO) reported the Omicron variant has now been found in 38 countries. All three major indices came under selling pressure, also not helped by a lower than expected 210,000 increase for November non-farm payrolls.
Trading has been volatile to say the very least going back to a 1,010-point drubbing on the Dow the day after Thanksgiving.
The Dow tanked 652 points in Tuesday trading, while the Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) were also deeply in the red. Tepid action persisted into Wednesday, with the Dow reversing a 520-point intraday gain to finish down 461 points. The Dow clawed back more than 600 points on Thursday in what is being seen by pros as a short-term relief rally.
Most market pros say caution will be the name of the game right now.
“It’s not the end of the world. These things are normal and they are healthy. But it will be a stock picker’s market, and people will have to be a lot more careful,” said Matt Maley, Miller Tabak chief markets strategist, on Yahoo Finance Live.
The stock market has been hit with a double whammy of unsavory news, explains Charles Schwab Chief Investment Officer Liz Ann Sonders.
“I think at this stage in the economic cycle and the market cycle, the move from very loose policy to tighter policy has been a factor in the volatility [we are seeing]. You add that to an environment where we started to see a tremendous amount of speculative froth and then add to that Omicron [concerns], you get the double whammy catalysts that sometimes can cause an eruption in volatility,” said Sonders on Yahoo Finance Live.
The heightened volatility reflects the one-two punch of Omicron variant concerns and surprisingly hawkish testimony to lawmakers by Federal Reserve Chairman Jerome Powell this week.
Indeed, the markets continue to endure a turbulent stretch as a result, which began with an awful 1,000-plus point loss for the Dow Jones Industrial Average on the day after Thanksgiving.
The Dow plunged 652 points in Tuesday trading, while the Nasdaq Composite and S&P 500 were also deeply in the red. All 30 Dow components were in the red for the session, except for Apple and Merck.
Tepid action persisted into Wednesday, with the Dow reversing a 520-point intraday gain to finish down 461 points. Markets were in the green by early afternoon trading Thursday, but traders remain on high alert.
Sonders is in good company with her view on the Fed injecting unknown into the markets.
“I think the risk for the market generally is how the market responds to the Federal Reserve kind of tightening up financial conditions,” Pershing Square Capital founder Bill Ackman told Yahoo Finance. “I think that’s the risk for the market.”
As for what moves one should be making in this riskier market backdrop, there continues to be a firm bull camp on Wall Street who believe buying dips is prudent.
“I think if there are certain names you have been wanting to add to your portfolio, you can use [weakness] to your advantage,” said Crossmark Global Investments Victoria Fernandez on Yahoo Finance Live. Fernandez believes the market reaction to this week’s news has been “overdone.”
Fernandez said she is buying Apple’s stock on weakness, for instance.
