Seize Stock Market Volatility: A Must for Investors, says Mona Mahajan

**Script Losses: The Nasdaq Trading 10% off Recent High S&P – Similar Situation**

The stock market has been experiencing some turbulence recently, with the Nasdaq trading 10% off its recent high and the S&P 500 also facing a similar situation. Traders are now weighing new inflation data after the Federal Reserve’s core Personal Consumption Expenditures (PCE) increased by 0.3% in the last month and 0.37% year over year. To gain some insights into the current market conditions, we have invited a senior investment strategist with Edward Jones and the chief market strategist with Dynasty Financial Partners, who is also a CNBC contributor.

**Introduction**

The stock market has been on a roller coaster ride lately, with the Nasdaq and S&P 500 experiencing significant losses. Traders are now closely monitoring new inflation data after the Federal Reserve’s core PCE increased by 0.3% in the last month and 0.37% year over year. In this article, we will discuss the current market situation and gain insights from industry experts on how investors should navigate these uncertain times.

**Market Analysis**

Mona, the senior investment strategist with Edward Jones, starts the discussion by highlighting the technical levels that have been broken in the S&P 500 and the Nasdaq. Both indices had previously held above their 200-day moving averages, but in the last couple of days, they have broken lower. This suggests the possibility of additional volatility and downside momentum in the market.

From an economic perspective, Mona points out that while the GDP print for the third quarter was impressive at 4.9%, it is important to note that it was backward-looking. The economy may face headwinds in the coming months, such as consumers working down excess savings, high interest rates, elevated mortgage rates, and tight bank lending standards. These factors, combined with high expectations heading into earnings season, may have led to the recent market reaction.

Mona believes that inflation could continue to moderate in the coming years, although not in a straight line. She also expects yields to head towards a peak and anticipates a potential reacceleration of earnings growth next year. She sees the current market volatility as an opportunity for investors in the months ahead.

Ron, the chief market strategist with Dynasty Financial Partners, agrees with Mona’s analysis. He adds that the uncertainty surrounding geopolitical events, such as the intensifying ground action in Gaza and the potential for U.S. involvement, is also impacting the market. Ron believes that inflation is coming down and the economy will slow at some point next year. He suggests that the Federal Reserve could become a tailwind rather than a headwind, but this pivot is still several months away.

When asked about the slowing of inflation, Ron explains that while oil prices may be up, other leading economic indicators such as gasoline prices, natural gas prices, copper prices, and lumber prices have come down. He expects a slowing rate of growth in inflation, assuming there is relief on the mortgage front, which would reduce the cost of shelter and ultimately bring down consumer prices.

**Investment Opportunities**

Mona believes that there are opportunities forming in both the equities and bond space. In equities, she expects a broadening in market leadership and participation. While the “Magnificent Seven” have led the rally this year, she believes that as inflation and yield trends improve, areas like small-cap stocks, cyclical parts of the market, and international stocks could play catch-up.

In the bond space, Mona sees a compelling opportunity in investment-grade bonds. Investors can lock in yields for a longer period of time and potentially benefit from price appreciation when the Federal Reserve eventually pivots to lower rates. She suggests that investors take advantage of the current window of opportunity to add investment-grade bonds to their portfolios, alongside the broadening participation in equities.

Ron agrees with Mona’s assessment and believes that a 60/40 portfolio, consisting of stocks and bonds, is still a viable option for investors. He emphasizes the importance of diversification and suggests that investors carefully consider their risk tolerance and investment goals before making any decisions.

**Frequently Asked Questions (FAQs)**

1. What is the current situation in the stock market?

The stock market has been experiencing losses, with the Nasdaq trading 10% off its recent high and the S&P 500 facing a similar situation.

2. What is the impact of the Federal Reserve’s core PCE data?

Traders are now weighing new inflation data after the Federal Reserve’s core PCE increased by 0.3% in the last month and 0.37% year over year.

3. What are the factors contributing to the market volatility?

Factors such as broken technical levels, high expectations heading into earnings season, and potential economic headwinds are contributing to the market volatility.

4. How do experts view the future of inflation and yields?

Experts believe that inflation could continue to moderate in the coming years, while yields are expected to head towards a peak.

5. Where are the investment opportunities in the current market?

There are opportunities forming in both the equities and bond space. In equities, a broadening in market leadership and participation is expected. In the bond space, investment-grade bonds are seen as a compelling opportunity.

6. What is the outlook for the 60/40 portfolio?

Experts believe that the 60/40 portfolio, consisting of stocks and bonds, is still a viable option for investors. Diversification and careful consideration of risk tolerance and investment goals are important.

**Conclusion**

The stock market is currently facing some challenges, with the Nasdaq and S&P 500 experiencing losses. Traders are closely monitoring new inflation data after the Federal Reserve’s core PCE increased. Experts believe that the market volatility presents opportunities for investors, with potential broadening in market leadership and participation in equities, as well as compelling opportunities in investment-grade bonds. It is important for investors to carefully consider their risk tolerance and investment goals before making any decisions.