Over the last week, the U.S. equity markets have experienced an increase in volatility. The VIX, which is known as the “fear index” spiked up from 12 to about 25 in a very short period. CNBC Asia, turned to Robert Luna, Surevest CEO & Chief Investment Strategist for answers.
Robert believes that the S&P 500 is trading in a range between 2700 and 2900. “Until we can get more clarity on trade, an advancement in foreign markets or a suddenly dovish Fed statement, the S&P 500 will have a hard time breaking out of these levels,” said Robert. The S&P 500 is trading in the mid-2700, closer to the lower range, which does not concern him. He goes on to say, “Long-term investors can use the big down days as an opportunity to add quality to their portfolio and the big up days to lighten up on some of the speculation they may own. Even though we expect markets to be range bound, the big intraday swings are likely to continue with all the momentum players and expected headlines with mid-terms around the corner.”
In a volatile environment, Robert thinks, “best in breed, bottom up investing is more important than ever here.” He goes on to say, “there are two important factors at work with this strategy. First, understanding and believing in what you own gives investors conviction to stay the course during periods of volatility. Second, there is typically better opportunities in individual companies vs. the broader market this late in the cycle.
As market volatility continues to pick up, we will begin to see down days that will test investors tolerance for market risk. However, when put in the perspective of long-term investors, big down days provide an opportunity to purchase good quality companies at lower prices.
Listen in to the rest of the interview to get an insight on Robert’s thoughts on the current investment environment.