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Market volatility to ‘continue through the summer’: People's United Advisors CIO

In this article:
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John Traynor, CIO of People's United Advisors, joins Yahoo Finance’s Kristin Myers to discuss market outlook amid the economic recovery and cryptocurrency.

Video Transcript

KRISTIN MYERS: Let's turn now to talk about the broader market action. We've got John Traynor with us now, chief investment officer at People's United Advisors. John, great to have you with us.

So there is a lot happening in the markets right now. Let's just talk with what we're seeing right now. As I've been mentioning, three majors right now in the red. We've been seeing a fair bit of whipsaw action in the markets lately. You mentioned in your notes that it's around the confusion and the economic data. How long do you think this volatility, this choppiness that we've been seeing continues?

JOHN TRAYNOR: We actually think that this is going to continue through the summer. We really don't think we're going to get a very clear view until we get through September or October. So we're preparing clients for this back and forth.

You've got some economic statistics that say we're too strong, some that are saying-- like the employment data that came out-- saying, gee, you know, maybe we're not as strong as we thought we were. And you see the shift back and forth between growth and value. Well, we think that's going to continue.

So we actually we took our growth tilt off portfolios last year. And we're fairly neutral between growth and value. We're saying now is not the time to make a big bet. Let's see what happens. And then we should get better indications as we move into the late summer into the fall.

KRISTIN MYERS: So is the barbell approach the best way for investors really to protect against some of these downside risks as we see this back and forth in the markets? How should investors be approaching their portfolios, as you mentioned, through the summer when you guys see this volatility continuing until?

JOHN TRAYNOR: Oh, sure, I'll give you one example. In the mid-cap space, we had all of our mid-cap exposure in a mid-cap growth fund. Last November we said, let's take that off. The fund had done very, very well for us. And we shifted half of those assets to IJJ, which is the mid-cap value ETF.

So we went 50-50. So rather than sprinkling assets on the barbell, we're trying to be fairly close across the spectrum, and really go back to a 50-50 stance, rather than be in that growth camp where we were. The same thing with some of the large-cap tech stocks, take those profits, and we've been moving more toward the core in our large-cap space.

KRISTIN MYERS: Do you view, however, this rotation that we are seeing out of some of these big growth names that we're seeing out of the tech sector as a buying opportunity, or should folks not be too enthusiastic to jump straight into that space, and really give it some time?

JOHN TRAYNOR: No, actually, well, two things. Number one, we see it as actually being very, very healthy. One of the charts that I have at all of my client presentations is the chart that showed how the big five stocks in the S&P 500 did last year, and then how the other 495 did since September 1 last year. Those FANG stocks are basically flat, whereas the other stocks, the other 495, have actually outperformed very nicely. They've done very, very well.

We think that's a trend that's going to continue. So we're telling our clients we still think that the tech stocks are good companies, we just think they're fully valued. So we actually think the market could do well without the big tech stocks. And it's really going to be the other 495 that are going to really drive this market forward. And that's where your emphasis should be.

KRISTIN MYERS: I have to ask you, just because we have been chatting about it so much, and Jared was just highlighting it, which is cryptocurrency.

JOHN TRAYNOR: Right.

KRISTIN MYERS: I don't think I have ever spoken so much about cryptos to anyone before. How should investors be approaching that space? Do you have any cryptocurrency that you like in particular, Bitcoin over Ether over Dogecoin, which Jared, of course, mentioned as a joke, but so many people are putting so much money into right now.

JOHN TRAYNOR: You know, it's interesting. And I'm here in Fairfield County, and I've got so many friends of mine that show me their Bitcoin wallets. And there is a lot going on.

But I will say for our clients, we're generally running their safe money. And we have been telling them, you know, maybe in your play account you can buy some of this, but with your serious money we have been saying, stay away. We really have a hard time understanding the real intrinsic value in these assets. Yes, they're moving up, but we've seen that happen with other assets in the past. And we just don't think that they're suitable for most of our clients.

KRISTIN MYERS: Yeah, you're not alone, definitely, in holding that thought. A lot of people talking about just flat out gambling happening right now in the market.

JOHN TRAYNOR: Yep.

KRISTIN MYERS: John Traynor, chief investment officer People's United Advisors, thanks so much for joining us.