Wall Street is familiar with the “yo-yo” effect, when the stock market rises and falls significantly in a short period of time.
The past week is one of those times, says TheStreet’s James “Rev Shark” Deporre, and it comes with a historical twist. Volatility, he believes, is attached to markets that move in only one direction – down.
“Over the past week, the S&P 500 has had both its best day and worst day in many months,” Deporre said. “This was driven in part by oil and commodities, which had their best day and worst day in over 12 years.”
In other words, the market is highly volatile as it deals with extremely dramatic events. “This sort of action doesn't occur in bull markets - it is a function of bear markets when market participants are highly emotional, and valuation and fundamentals are not important,” Rev Shark noted.
With gasoline, commodities, and food all rising due to the Ukraine war, inflationary pressure is not going to go away soon, and that is going to be one of the most severe economic consequences of the situation.
“While the market is likely to remain very volatile, one positive is that there has been more focus on stock picking,” Deporre said. “Secondary stocks, small-caps, and names that have been under pressure for over a year are seeing more interest, and there are some signs of technical support.”
“These stocks are jerked around quickly when there are macro-economic headlines, but the dip buyers are coming back to this each time, and there are some with very solid valuations,” he added.
