Displaying items by tag: volatility

Due to their difficult to resist growth potential, many investors rock on small cap stocks – less than $1 billion market cap, according to talkmarkets.com.

Thing is, because of their volatility, which translates into factors such as a stepped up risk of bankruptcy, the stocks are surrounded by less than favorable sentiment. While a valid point of view, the perspective, seemingly, is at least a tad overblown. Over the long run, numerous small caps hit pay dirt.

That said, due to sometimes daunting wild swings in pricing, like a bad date, compatibility among  conservative investors and small caps might be zilch. Some apps, y’know…

Meantime, what do factors such as the Ukraine war, escalating oil prices and interest rates sending U.S. equity markets into the blender this year add up to? Why, greater volatility, of course.

And compared to their large cap counterparts, there’s this, well, thing, about U.S. small stocks compared to their large cap counterparts: greater risk, according to oakfunds.com. While it might seem somewhat, well, illogical to propose ratcheting up the allocation of small cap stocks into your portfolio, it might serve as a buffer against these tumultuous times and offset harrowing times that could be linked with large cap stocks. 

More interest rate hikes looming? Put it this way: look out below.

Or at least it’s exceedingly likely, according to cnbc.com. That’s because, even though year over year inflation receded slightly in August to 8.3%, from July’s 8.5%, it continues to hover well above the Fed target: 2%. Hence the likelihood of additional upticks.

Now, naturally, to pile on, with unemployment still low at August’s 3.7% mark, up from 3.5% in July, some clients of financial advisors are fretting over their jobs taking a hike.

Home affordability? No exception – especially in light of escalating mortgage rates and prices that are a little rich for the wallet, tamping down the potential pool of buyers.

Despite the whirlwind whipped up my volatility, with penny stocks, there’s still money to be made, according to marketweatch.com.

A catch, however: in the eye of a mercurial stock market, knowing how to invest isn’t easy. A few tips:

Do your research – especially in the land of penny stocks. Dig down and, prior to investing, learn all you can about the company. 

Have a plan. In the clutches of volatility, have a plan and don’t deviate from it  

Diversify your portfolio. Putting all your eggs and one basket. Nada. Don’t

According to an index that measures Treasury market volatility, bond volatility is at a level not seen since the peak of the COVID market crisis in March 2020. This is a worrisome sign that the Treasuries markets, which are considered a safe haven for investors, are not functioning as they should. For context, the biggest one-day move for the benchmark 10-year Treasury in 2021 was 0.16. This year, there have been seven days with larger moves. Liquidity is evaporating, which has caused the soaring volatility. A Bloomberg index is currently showing that liquidity in the Treasury markets is worse now than in the early days of the pandemic, while implied volatility, measured by the ICE BofA MOVE Index is near its highest since 2009. This is coming at a time when Bloomberg News reports that the largest buyers of Treasuries, including Japanese pensions, life insurers, foreign governments, and US commercial banks, are pulling back at the same time. Even Treasury Secretary Janet Yellen has expressed concern about a potential breakdown in trading, saying that her department is “worried about a loss of adequate liquidity” in the US government securities market.

Finsum: A lack of liquidity and a pullback in large-scale treasury purchases has triggered volatility not seen since March 2020.

Many investors are now adding private credit investments to their portfolios according to a global survey of institutional investors conducted by State Street Global Advisors. The survey report, The Future of Fixed Income, asked institutional investors how they view the fixed income market and how they’re allocating their investments amid the current market volatility. The findings were based on answers from 700 pension funds, endowments, foundations, and sovereign wealth funds, as well as wealth and asset managers. The results also found that investors have become more open to systematic fixed income strategies to help them fight the impact of rising prices and inflation. In addition, 51% of survey respondents stated their interest in increasing allocations to bank loans and 42% want to increase their allocation to inflation-linked bonds over the next 12 months. The findings also showed that investors are embracing index-tracking investments to gain efficient access to attractive sectors due to fee pressure and increased transparency. Over one-third of the respondents said that more than 20% of their fixed income portfolio is allocated to index strategies. The figure rises to 57% for investors with AUM over $10 billion.

Finsum: A survey conducted by SSGA noted that institutional investors are shifting their fixed income allocations amid the current market environment.

According to a recent article on CNBC, market volatility is a big concern for clients right now. The author spoke to experts from CNBC’s Financial Advisor Council to see what advisors were discussing with their clients. According to the advisors, many clients, including retired investors and those that rely on savings, are especially worried about volatility in the market. The article quoted Carolyn McClanahan of Life Planning Partners in Florida, who stated that “The biggest concern for my clients is all of the uncertainty in the world. They wonder ‘what’s next and how that would affect the market — so it’s along the lines of fear of market volatility.” Investors are also fearful of large-scale job losses triggered by their memories of the Great Recession when unemployment peaked at 10% in October 2009. Home prices are another concern. While there are some signs that the housing market may be cooling down, a combination of rising mortgage rates and high prices are still causing concern for investors.

Finsum: Based on recent discussions with advisors, market volatility, job losses, and high home prices are huge concerns for clients right now.