AGFiQ: Bill DeRoche On The Return of Market Volatility in Late 2020

With the calendar ticking over to Q4 2020, the U.S. presidential election looming and an uptick in Covid-19 cases, market volatility is returning. It could be a cause for investors and advisors to keep their heads up and eyes open. ETF Trends spoke with Bill DeRoche, Chief Investments Officer for AGF Investments LLC, and Head of AGFiQ Alternative Strategies, to shed some light on how they are handling the situation and the advice they have for advisors.

Looking at things as they stand, entering October, the market will appear to be down from the highs, although it will only be down around 5% when considering the S&P total return index.

“It was more of a factor rotation than a correction,” DeRoche explains. “The reality is, a lot of those higher market cap names really got a hit. We saw how the S&P got concentrated. One of the things we look at is the equally weighted S&P, and typically during sell-offs, it does worse, as this was concentrated on those larger cap names. So, from our perspective, it was probably something needed, healthy in some sense, as we were getting very top-heavy.”

From the AGFiQ perspective, as far as the shorter-term reaction, DeRoche notes how this current state of affairs portends that the market has issues and that it’s in trouble to the point of needing investors to be headed for the exits. In reality, for the short term, things look constructive.

Ongoing Troubles Causing Concern

The election and Covid-19 concerns are areas creating a fair amount of uncertainty. That will make things range-bound until these issues have some sort of resolution. The election, in particular, is currently the most significant issue. However, as DeRoche explains, there is a reasonably large uptick in Covid-19 cases around the country.

If there’s a way to derive any good news from this, it is related to how the medical industry has learned from their efforts back in early Spring. So now, while the cases are much higher than preferred, the number of people needing to be hospitalized is lower.

All that means is that this is still a current issue, and it will make it more challenging to continue opening the economy the way the U.S. and the markets would hope and have it set back the way it was.

As DeRoche makes clear, “The big point is: we’re not suggesting anyone needs to exit the market. However, we do think it is going to be range-bound until there’s some uncertainty that’s been resolved, most notably the election.”

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