Concerns are increasing that the U.S. stock market could be on the edge of a correction- but the best way for investors to adapt to the new volatility is up for debate. Bobbi Rebell reports.
This week was a wake up call for investors. Volatility is back- so pay attention. After weak economic data ratcheted up concerns about Europe - investors are now bracing for earnings season in the US. Oppenheimer Funds Alec Young: SOUNDBITE: ALEC YOUNG, INVESTMENT STRATEGIST, OPPENHEIMER FUNDS (ENGLISH) SAYING: "The guidance is really going to be the key especially given how concerned people are increasingly, and this is now a new thing in the last few weeks, about the global growth outlook. People are going to want to hear from senior managements at bellwether companies across sectors that are playing in a lot of different parts of the world. What are they seeing in Europe? There is a big concern right now that a European recession could have a pretty negative impact on U.S. earnings, not this quarter, but going forward. " Until global economic concerns calm down, the U.S. stock market will stay in holding pattern - at best - says Jim Bianco, who heads Bianco Research: SOUNDBITE: JIM BIANCO, PRESIDENT, BIANCO RESEARCH (ENGLISH) SAYING: "There is the problem with the market. It needs earnings and in order to get earnings, it needs growth. It needs world growth because 45 percent of earnings - or revenues come overseas and its not getting that. And it's getting kind of so-so growth out of the United States, so we struggle along here and we have low single digit returns for the year in stocks." REPORTER BRIDGE: BOBBI REBELL, REUTERS REPORTER (ENGLISH) SAYING: Both Bianco and Young believe U.S. stocks are overdue for a correction - but differ on how investors should play this market: "It's just more 100 point days kind of bouncing around going nowhere and yields will probably continue to tack where they are, and maybe slightly lower closer to probably 2 percent. So if there is anywhere to get a return it's probably going to be in the bond market. I know everybody hates it, but that is the place where you have been getting returns in 2014. " Young however says to buy stocks on weakness: SOUNDBITE: ALEC YOUNG, INVESTMENT STRATEGIST, OPPENHEIMER FUNDS (ENGLISH) SAYING: "We think one of the biggest reasons is that the alternatives, you know core bonds, long term treasury bonds, you know very unattractive, very tough to stay ahead of inflation with those types of investments. We think for long term investors - you get a chance to buy world class companies at more attractive prices . We think that is the right place to be. " Analysts agree the markets seem to be at a tipping point, but the direction of the next phase is still unclear. Earnings will only be one influence. Concerns about an escalating conflict in the Middle East, the Ebola virus crisis, and economic data will also play a part.