While short-term traders are trying to trade some of the wild swings in the volatile 2016 market, MKM Partners analyst Jim Strugger has been looking at the longer-term implications of this market volatility.
In a new report, Strugger compared the current volatility to similar market stretches in 1997 and 2007. While both periods ultimately preceded a recession, the 1997 bull market continued for another three years prior to the recession, while the 2007 bull market lasted only another four months.
Volatility And Recessions
Strugger feels that the current volatility is once again an indication of a recession on the horizon, but he isnt convinced its coming anytime soon.
Perhaps it has already begun as some contend, but that is not confirmed from a volatility perspective, he explained. If the current volatility event continues to abate as we expect, U.S. equities should be due for a nice bounce in the coming weeks.
Testing: One, Two, Three
With that prediction in mind, MKM ran a screen of stocks and ETFs with the steepest call skews and found Sarepta Therapeutics Inc (NASDAQ:SRPT) and Cal-Maine Foods Inc (NASDAQ:CALM) at the top of the list for stocks, and Guggenheim CurrencyShares Japanese (NYSE:FXY) and iShares Barclays 7-10 Year Trasry Bnd Fd (NYSE:IEF) topping the ETF list.
Disclosure: The author holds no position in the stocks mentioned.
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