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Summer has proven to be a wild season for the markets, with wild highs and lows and serious talk of volatility and misery.
However, the recent market decline does not mean that investors should give up and pull all their money out of the market.
“Look at potential opportunities during times of crisis or turmoil,” Katherine Kaminsky, chief research strategist at Alpha Simplex, said on Yahoo Finance editor-in-chief Brian Sozzi’s “Opening Bid” podcast (watch the video above or listen to the video below).
A former visiting scholar at the MIT Laboratory for Financial Engineering, she has studied markets, trading and emotions and has experienced financial crises and investor reactions first-hand, beginning her investing career in 2008 as the world was rocked by the Great Recession.
“Rather than reacting hastily, what’s important now is to look at the data and see if this is a real crisis that will lead to a bigger recession,” she added.
Kaminski said it’s good practice to take a long-term view and stick to a key investment theme, such as AI.
To be sure, Kaminski’s calm leadership has been put to the test this month.
On August 5, concerns over slowing US economic growth and the unwinding of the yen carry trade shook market sentiment, leading to an unexpected surge in selling.
On the day, the Dow Jones Industrial Average (^DJI) fell 2.6%, the S&P 500 Average (^GSPC) fell 3%, and the Nasdaq Composite Index (^IXIC) fell 3%.
All three major stock indexes are trading below their all-time highs hit in mid-July, according to data from Yahoo Finance.
The same goes for popular stocks like Nvidia (NVDA), whose shares have fallen 13% since mid-July.
Kaminsky said he “started to worry” in June as the market “started to see some pretty significant cross-asset selling.” He noted that commodities were shifting signals from long to short and bonds were shifting signals from short to long, “which are both classic risk-averse potential recessionary trades.”
“Corrections often signal that a crisis may be looming,” Kaminsky acknowledged, but he’s on the lookout for solid investment themes like these.
As September approaches, no one knows where we will ultimately head.
Mislav Matejka, JPMorgan’s head of global equity strategy, warned in an Aug. 12 client note that stocks could fall further as the summer continues.
Concerns are numerous, including weakening economic activity, renewed downward earnings revisions, growing geopolitical uncertainty and concentration risks.
The story continues
The Fed “will start cutting rates, but this could be seen as reactive and outdated,” Matejka said.
“You have to rely on diversification,” Kaminski said.
It seems perfect for this chaotic environment.
Three times each week, Yahoo Finance Editor-in-Chief Brian Sozzi hosts insightful conversations and chats with luminaries from business and markets on Opening Bid. Additional episodes are available to watch on our video hub or on your favorite streaming service.
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