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Playing the Markets While Expecting Volatility

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    David Kudla of Mainstay Capital Management weighs in on the future of the markets.

  • Duration 3:38
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Well it has been a volatile month for the S&P 500 that's for sure just.

Look at April started out strong yesterday hitting a four year high on the second day of the month but then worries over -- -- earning season prompted a big selloff.

Painful sell off with markets tumbling more than 4% in just couple days.

Well now we've recovered about half of that loss from early April but of course the question is -- we just hover around those levels are we push back toward the April highs.

-- pretty easy to -- he CEO.

And -- -- strategist at mainstay capital management -- it's great to have you on the show again you know you're with us a couple months ago and -- credit you actually predicted this early April sell off.

It's -- given your strong traffic which -- -- -- where the markets go next.

Well yeah we did talk about another.

5% or so sell off which -- as you said we got that.

And you know we're in the middle of an earning season here that is going better than expected.

A lot better than many analysts had expected.

Lot of cash on the sidelines of their people who had had stepped aside at some point in the fourth quarter or third quarter been waiting to get back and I think that's what we're saying a lot of money coming in.

To the market -- and not keeping a floor under stock.

Prices -- -- -- sound relatively bullish that we mentioned in our lead.

Volatility is coming in and that makes things especially outlooks tricky.

Yeah absolutely.

You know if you look at it in the first quarter of the year.

We only had one day -- -- more than 1% down move for stocks for the S&P 500 so far in April.

We've already had for those -- so volatility is coming back into the market.

Europe is moving back to that -- if the first page of the newspapers.

We had you know relative calm -- melt up for stocks in the first quarter.

You know we can expect volatility here in the second quarter we can expect.

Some more corrections like like we saw here in early April but we're still bullish on stocks.

What do you think about that what your thoughts on -- saying -- -- go away and you say some corrections will they be is.

Enough you can call 4% all that painful but will they be similar here it is that what -- describing.

Yet we could certainly get you know a deeper correction of eight to 10% but in terms of that sell in May and go away.

Sell in May and go where go to treasuries go to Europe.

You know I'm more concerned right now about people selling bonds and selling stocks you know we got a ten year a lesson -- 2% yield.

And probably the risk is for rates it now -- multi near multi decade lows to go higher.

Not lower so I'm more concerned about the bond exposure interest rate sensitive bond exposure in treasuries that investors have.

Rather -- exposure.

Played every you -- been hearing so many people David -- to stay away from treasuries daily from treasuries they've they've -- they're at the bubbles gonna -- Every time that happens of people keep -- had a little scare we -- interest rates come up about a month or so -- And a way as you pointed out way back down specially in the tenure so I you know they they'd still that the best safety play.

Especially with all the concerns in Europe and you know who knows a -- next economic like it's gonna be here in the US.

-- -- -- -- You know an allocation to bonds and we just think there's more attractive areas.

In corporates high yield bonds emerging market bonds there's just a lot of risk in treasuries that one.

Sector.

Within the -- spaces we just think there's a lot of -- we saw that in one week we saw rates go about a quarter percent didn't end treasuries sell off 3%.

And so for those investors who think -- and high quality.

Bonds and that's a safe place to be.

You know that risk is real that risk is -- and president and and we will experience that over time.

And we think that investors sent to be really careful about that -- interest rate sensitive portion of their bond portfolio -- -- we'll take your advice David to eleven.

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