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Market strategist thinks 'volatility is here to stay'

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ASYMmetric ETFs Founder and CEO Darren Schuringa joins Yahoo Finance Live to discuss what to expect from Friday's jobs report, broad volatility in the stock market, and the outlook for the labor market.

Video Transcript

AKIKO FUJITA: Private payrolls declined unexpectedly last month, falling 300-- falling by 301,000 in January. The noted pullback coming ahead of that all-important non-farm payrolls print coming out this Friday. Let's bring in Darren Schuringa, ASYMmetric ETFs founder and CEO. Darren, you know, we've been talking about how it sort of feels like the White House is kind of warning of a disappointing number ahead come Friday, especially because of the impact from Omicron in the month. How choppy do you think things could get around that number?

DARREN SCHURINGA: I think that most of the information is baked into the market already. The expectations are since-- it'll be a weaker number. What we've seen out of ADP this morning, it was very disappointing as a preliminary look at the jobs numbers. So I don't imagine a lot of volatility will come from the Friday's job report. Again, baked into it, market's expecting it. And so unless it's a shock to the market, I think it's going to be business as usual.

BRIAN CHEUNG: Hey, Darren. It's Brian Cheung here. At the same time, the broad volatility that we've seen in the market, irrespective of the data on the labor market or even inflation, has gotten a lot of people concerned, as the Fed messages its intention to tighten this year. How do you think that presents any sort of risk to trading and portfolio building in this year?

DARREN SCHURINGA: I think volatility is here to stay. We have a proprietary measure, which is called price vol measures, realized volatility of the overall market. In this case, we look at the volatility of the S&P 500. And what we witnessed in the first month of the year was that volatility had crested its threshold between bull and bear markets.

And to put it in perspective, between the Great Recession and COVID, there were two times that price vol crested the number 10, which is the threshold, again, between bull and bear markets. And we saw a third of January price vol above this threshold. So volatility is here to stay, and that's going to make it more difficult for investors who are looking to trade around it. But if you're a buy and hold investor, stay the course. It's probably the safest way to go at this stage.

AKIKO FUJITA: So you're saying the choppiness will continue, but you think that things have kind of bottomed out in January. You know, what's the piece of news here, the data that you think could move the market, you know, push it a little-- a leg higher? I mean, is it economic data? Is it earnings? What do you think could be the big driver?

DARREN SCHURINGA: The-- it's removing a negative. So right now, I'd say that at this point, the Fed and what they've telegraphed in terms of inflation being their focus at this stage, unemployment or employment is under control. And I think the Fed will look at the unemployment numbers, the headline numbers, and say, we've done a good job there. One or two data points, we can't make decisions on it.

So we're focused on inflation, and we're going to raise interest rates. The market's freaked out over that for a while. I think they're calming down now a little bit, feeling more secure that the Fed is going to act rationally and fighting and combating inflation, although it is their major focus. So that has been removed is a fear, what's the Fed going to do? I think the market now anticipates or has a better idea of how the Fed will proceed, right, or at least, believes they have a better idea of how the Fed will proceed.

So by removing that, you're taking out some of the uncertainty on the market at this point. So I think removing the Fed, which was one of the greatest headwinds and risks mainly to fixed income, but to equities as we witnessed, gives the markets a little bit more breathing room. And now it's just like, let's wait and see what happens next on a fundamental level.

BRIAN CHEUNG: Darren, I want to talk about your business, ASYMmetric ETFs. You offer a product that's a hedged ETF. It's supposed to be countercyclical, so making money during bear markets. But if you're saying things aren't really all that bad right now, and in fact, some of that uncertainty around the Fed's been removed, have you seen demand kind of lift from some of those types of products? What are you seeing in terms of just your ASYMmetric product?

DARREN SCHURINGA: Well, we're seeing a couple of things. We're seeing demand for people looking for fixed income substitutes. Correct, at this point, what do we do with rising interest rates? 60-40 portfolios have been broken. 40% of your asset's in fixed income. You have the prospect of losing more money. Fixed income basically across the board was underwater in 2021. Interest rates continue to rise. Fixed income continues to go down.

What do advisors, what do retail investors do? They're looking for ways to find alternatives that they can take some of their non-productive fixed income assets, put them into productive assets, but at the same time, not take on more risk.

And that's where ASYMmetric comes in. With ASPY, we give investors the option to stay invested, have a hedge against inflation, because you're invested in equities, and then at the same time, not giving up the buffer that fixed income offers because we offer hedge, and we go net short in a bear market. So our ASPY, again, has the prospect of being able to deliver positive returns in bear markets.