Volatility doesn’t equal risk

 

Mike Sorrentino has a simple explanation for the stock market’s erratic nature.

“It’s been almost unprecedented the sheer stupidity in the market,” says Sorrentino, who appears on national financial media as chief strategist for Global Wealth Management (GWM).

Sorrentino, who is based in New York City, spoke at a lunchtime event organized by GWM at the new Fort Lauderdale Audi dealership. The cutting-edge dealership, will be included in an October SFBW story on car dealers of the future.

Sorrentino says he focuses on investing in the right sectors, since his research indicates 95 percent of success is based on doing that rather than figuring out individual stocks. For example, rather than bet on a few biotechs, he would rather use the iShares Nasdaq Biotechnology ETF (Nasdaq: IBB), which has a basket of stocks in the Nasdaq biotech index.

One of the key aspects of the market to understand is volatility doesn’t equal risk. Fear, panic, greed and stupidity are driving the market and volatility is just a measure of emotion, he says.

Dips can present buying opportunities for investors who have their eye on a particular stock. For example, Apple (NASDAQ: AAPL) being down 15 percent in a day doesn’t reflect any actual change in earnings.

Sorrentino offered some bullet points on the recent worries:

  • China: In the long run, China letting its currency float is a plus as it turns into a consumer economy.
  • Oil: The drop in prices is good for consumers and the U.S. economy. Electricity prices have dropped 15 percent, which is helping fuel a return of manufacturing.
  • Interest rates: He does not expect rates to rise this year, but if they do, the Fed believes the economy is healthy enough to withstand them. Savers would benefit from higher CD and bond rates.

 

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