Beware of the `Wolf Market'

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July 9 (Bloomberg) -- Weeden & Co. Chief Global Strategist Michael Purves discusses the meaning of "wolf market" and his investment ideas with Julie Hyman on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

What do you mean by wolf's market?

It is a somewhat timeless range-bound market.

Like an angry wolf?

Well, to make money, you have to be quick like a wolf.

You are not necessarily making a big somatic that long or short.

You have got to be fast and quick and decisive.

Why do you think that is happening?

In terms of being cast in quick and decisive -- give us a little more detail -- maybe a summer wolf.

Sleepy after fourth of july week.

We've had big wolf markets like, for example, 2011 where the s&p finish where it started almost of the penny.

Right now we've had a major correction off the may highs and the market is its footing again that -- the market has found its footing again.

We have the secular potential massive tidal shift with what is happening with the rates.

While this could be good for equities from a flow point of view, ultimately because it is a reflection of the real economy is starting to improve.

The market still has to process this.

I think it has processed a fair amount of this, but over the summer i think equity market volatility will range higher and there is a lot of structural themes supporting equities throughout the summer.

What it really sounds like to me is that we're back to earnings.

We are over gree ce, turkey, figure out what is happening in egypt.

Now it is back to the u.s. and dr.


-- and back to earnings.

And the markets have incorporated a lot of the tapering discussion.

We are just getting into the season here and typically over the last three or four years you have seen the markets that have flight to the season and make a judgment about what corporate earnings are reflecting about the real economy.

This season is going to be very different for one key reason -- a lot of stocks may benefit from the higher rate and -- higher volatility upgrade.

On the stocks will start showing signs of weakness.

Investors will be increasingly looking at that for the season.

You could look at that and say that this confirms the economy is good or confirms the economy is bad.

You think that fundamental economic backdrop will be more important to companies than the rate environment?

Outside financials, one would think that what how the the economy is doing is the driving factor.

Corporate earnings are going to be very important and they reflect the economy, but there is a lot of economic meant -- economic earnings outside of metrics that reflect that.

We have seen that in the jobs data with the last three days.

We've seen that throughout a variety of economic metrics.

I think it is one more factor here.

I know a lot of people are focused that it is all about earnings, and it is.

But the point i'm making is that there is a lot more stock -- single site dishes going on here -- you can't just say "i like the market or i like tech." you have to go back to individual names and stories.

Right, exactly.

For you as a strategist, where you tend to be big picture, what is that mean as you talk to clients -- as you get into the sectors, clearly we have had massive volatility and that impact everything from what i called the convertible bottle-like stocks.

Those you will see continued volatility.

Interesting tactical traits from alongside.

On the short side there is a lot of companies that have huge exposure to the construction sector.

Those are things that are going to the a little what more into the microscope for weakness.

I could be anything from the home depot to homebuilder -- rising rates will discourage people from buying?

Yes -- don't you usually get that sort of rush -- the train has left the station.

The mortgage data doesn't confirm that yet.

A lot of people are just confused here.

It is may be starting to show up if not in the actual results of this quarter into some of the forecasts.

I think those are the key watchpoints for the summer season.

Certainly a lot to watch.

Michael says that earnings are the story right now.

This text has been automatically generated. It may not be 100% accurate.


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