What’s Behind the Market Selloff?

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July 31 (Bloomberg) -- Stifel Nicolaus' Kevin Caron discusses today's selloff in U.S. stocks with Julie Hyman on "Street Smart." (Source: Bloomberg)

-- stifel nicolas market strategist and portfolio manager.

It seems like the domination of factors is what really drove things down.

I think it was a bunch of surprise factors that hit a market that i think is poised for a bit of a pullback.

The vix has moved to very low levels, 10, 11, 12, and when you look at the pricing, particularly in equity markets, equity markets have gotten a little bit pricey.

The bond market, would you look at spreads all over the place, they are very tight.

All around the world, there's not much of a place for a miss or error.

When you look at argentina, lingering problems in europe, geopolitics, all of that can lead to a selloff like what we got today.

When we had selloffs before, people stepped into a breach and bought, and it has not gotten to 5% or let alone 10%. do you think that will happen again where we will not see continued declines but we will see people come in and by?

I think eventually, you will see buyers come back come a particularly because the economy is moving in the right direction.

We are going to get some data on employment tomorrow.

We expect to see something like -- between 200000 and 252,000 jobs created.

Our expectation is that we remain in a bull market, but we are a little bit stretched in terms of eluate shannon we are due for a bit of a correction.

I was not also prize to see what we got today.

One of the data points i mentioned that created some concern today was wage inflation that came up with an increased higher than estimated.

We will get more of that tomorrow from the jobs report.

Are you concerned about that at all and the fed reaction to it?

Do you think that the wage inflation is still firmly in check?

The absence of any wage inflation has been a mainstay of the bearish camp.

Bears have looked at that and said that there was something amiss -- that that is a sign the economy is weaker than people think?

Yes, and you cannot see final demand without a pick up in wages.

Today, we got a reading that shows we may have a little bit of a pick up and wage inflation.

It was a little bit out of line with what was normal.

A firmer number, nonetheless, i think ultimately, the big teacher and what we have to focus on is the economy needs to get better.

We are seeing the unemployment rate come down.

Core inflation is measured by the fed at the low end of their range.

All of this is positive stuff, but i would say that valuations matter, and we did get to the point where valuations are evident in terms of where they were pricing things.

Where are you in terms of strategy?

We are overweight equities, short in terms of duration, in terms of bond market.

We have lightened up on credit.

We reinstituted emerging markets into the portfolio a few weeks ago.

We have to leave it there.

Thanks so much.

Good to see you in person.

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


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