About this Video

• Video Title: How smart investors stay ahead of the next market shift
• Channel: Yahoo Finance
• Speakers: Jared Blicker, Alec Canal, Steve Sausnik
• Duration: 00:23:01

Introduction

This Yahoo Finance video podcast discusses current market trends, focusing on market rotation and the impact of the Federal Reserve's actions. The hosts interview Steve Sausnik, chief strategist at Interactive Brokers, to gain insights into investor behavior and potential market shifts.

Key Takeaways

• Market Resilience: The market has shown resilience, with investors consistently buying the dip. This has created a "ratchet effect," where upward movements are larger than downward ones.
• Market Rotation: Market rotation, the shift of investments from less popular to more popular sectors, is occurring. Big cap technology, particularly AI-related stocks, have seen some pullback, influencing indices disproportionately. This rotation, while initially concerning for some investors, is considered a healthy aspect of a bull market.
• Retail vs. Institutional Investors: Retail traders' "buy the dip" strategy doesn't always impact stock prices as significantly as institutional investors' actions, due to the scale of institutional trading.
• Fed Policy and Rate Cuts: The market anticipates potential rate cuts, possibly starting in September. However, the Fed's decisions will depend on upcoming economic data, particularly concerning inflation. Services inflation, showing stickiness, presents a potential challenge for the Fed's target of stable prices.
• VIX as a Market Risk Gauge: The 30-day VIX (reflecting institutional hedging) and the 1-day VIX (reflecting retail investor activity) offer different perspectives on market risk. The 9-day VIX provides an intermediate timeframe, currently showing a lack of anticipation for volatility despite potential catalysts.

The transcript explains that the VIX (volatility index) is measured through S&P 500 options activity. There are different VIX measures based on the timeframe considered: a 30-day VIX (reflecting institutional hedging activity), a 1-day VIX (reflecting retail investor activity), and a 9-day VIX (providing an intermediate timeframe). The speakers also note that the VIX is often mistakenly referred to as a "fear gauge," but it's more accurately a proxy for the demand for volatility protection.