Tags: Calhoun | volatility | stocks | bonds

Alhambra's Calhoun: 'Volatility in Stocks and Bonds Seems Likely to Continue'

By    |   Wednesday, 18 March 2015 07:40 AM

Volatility in financial markets is on the upswing, with the CBOE Volatility Index (VIX), which measures expected volatility for the S&P 500 index, soaring 22 percent in the last two weeks.
 
This volatility is likely here to stay, at least for a while, says Joseph Calhoun, CEO of Alhambra Investment Partners.
 
"Volatility in and of itself isn't necessarily a bad thing, as markets can continue to climb even as volatility does the same," he writes in a market commentary. Indeed, the S&P 500 stands less than 3 percent from its record high.
 
"But it does make one a bit nervous to recognize that the last time it happened we were in the middle of a stock market mania," Calhoun explains.
 
And what of the future? "With an economic slowdown getting more obvious with every — or maybe every other — economic report and the continued rapid movement of the dollar and other currencies, the volatility in stocks and bonds seems likely to continue," he says.
 
As for reports of economic weakness, retail sales fell 0.6 percent in February, the third straight month of decline. The dollar has soared to multi-year highs against multiple currencies in recent weeks.
 
"Volatility in the economic data is picking up and that is being reflected across a wide array of markets. It started in the currency markets, moved to the bond markets and is now starting to infect the stock market."
 
Meanwhile, the fact that unemployment claims have stood below 300,000 per week for much of the time since last summer — they totaled 289,000 in the week ended March 7 — could mean trouble for stocks, says James Paulsen, chief investment strategist at Wells Capital Management.
 
"This does not necessarily imply the contemporary bull market is over. Indeed, we continue to believe the bull market may extend for the next several years," he writes in a commentary provided to Newsmax Finance.
 
"However, it is suggesting the stock market may be in for some additional near-term turbulence." The S&P 500 index has tripled over the past six years.
 
So why does the 300,000-claim level signal trouble? "We think it represents an inflection point in recoveries, which forces the stock market to adjust," Paulsen says.
 
"Similar to reaching full employment, a 300K claims level signifies resource pressures, which alters the interpretation of economic growth."

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Volatility in financial markets is on the upswing, with the CBOE Volatility Index (VIX), which measures expected volatility for the S&P 500 index, soaring 22 percent in the last two weeks.
Calhoun, volatility, stocks, bonds
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2015-40-18
Wednesday, 18 March 2015 07:40 AM
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