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.
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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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