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S&P 500 looks to clinch 7th straight winning month

Darren Schuringa, ASYMmetric ETFs Founder & CEO joins the Yahoo Finance Live panel to discuss the latest market action.

Video Transcript

[MUSIC PLAYING]

AKIJO FUJITA: But let's get straight to our first guest for the hour. We've got Darren Schuringa, he is ASYMmetric ETFs founder and CEO. And Darren, we're talking about a seventh straight month of gains for the S&P 500. The Dow and the NASDAQ also looking to end the month on a positive note. How are you looking at things as we look ahead to the fall and potential volatility and questions around what could happen with the Fed?

DARREN SCHURINGA: Sure. Akiko, I think it's a confusing market right now. You have the equity markets reaching all-time highs, S&P 500 will close this month, its seventh straight consecutive month of gains. And yet, you have bond yields that just cannot rally from the bottom. In a healthy economy where inflation is real and sustainable, your bond yields should be coming up and they're just not moving. So I think that makes for a confusing market for investors.

AKIJO FUJITA: What do you think that says about where we're headed?

DARREN SCHURINGA: So I think where we're headed then is probably a lot of questions, right? If the markets are going to continue to rally, we have to have a handoff from the Fed with their stimulative and their quantitative easing, to the real economy. And I think that's where investors are on the sidelines. So they're looking at it and saying well, I'm not so sure that the economy is as strong as the headline numbers and the inflation numbers are showing right now because we're coming out of a recession. So I think there's a lot of wait and see right now from market participants.

AKIJO FUJITA: One of the things that you've highlighted is the record level of margin debt you're seeing. You say that's a bad sign of things to come. What do you mean specifically?

DARREN SCHURINGA: Well, I think it shows two things, it shows speculation, it shows excess, so I'd say speculative excess when you look at margin debt. In the chart that I provided you with you can see margin debt spikes every time before a major market correction. So over the past 12 months, margin debt in the United States has almost doubled. It's sitting at record highs. And so that leaves me-- the questioner to pause is the market at all-time highs right now. Margin debt historically when it peaks has pointed to all-time highs. So I think right now when you're borrowing, you're bringing in more risk into the market.

AKIJO FUJITA: Yeah, I think a lot of people are asking that question about have we reached the high, especially when you consider seven straight months of gains for the S&P 500. How do you think investors should be positioning themselves in the face of that? You know, it feels like there's still a lot of cash on the sidelines right now. Should they be putting that to work, or do you think right now is the time to maybe kind of pause a bit to see where this is all headed?

DARREN SCHURINGA: Again, a tough decision, question for investors to deal with right now, what to do? I mean, clearly, you don't want to be putting your money into fixed income at this point because if you do and interest rates continue to rise then your principal's at risk. So fixed income is not a great investment option currently.

Equities are at all-time highs. Are you going to chase technology higher and hope that it continues to run? Which it may but ultimately, technology depends on a healthy economy as well.

And then your reflationary trades that were doing so well in the beginning part of the year have faded with yields interestingly enough. So at this point in time, investors are sitting here thinking what should I do? And there's really not a clear path forward for them.

AKIJO FUJITA: Darren Schuringa, ASYMmetric ETFs founder and CEO. It's good to talk to you today. Appreciate the time.