The sharp reversal in stocks and oil illustrates an important feature of this market: In a world of higher volatility, lower liquidity and economic uncertainty, investors can expect acute market swings to continue. Although stocks and oil have rallied over the past week, several former momentum plays are producing disappointing results. Apple is contending with a slowdown in iPhone sales while Amazon was hit after missing earnings. And prior to Friday’s rally, the once mighty biotech sector had declined roughly 20% in January alone. The key message for investors: Proceed with caution when chasing momentum themes.
Russ Koesterich, CFA, is BlackRock's global chief investment strategist and head of the Model Portfolio & Solutions Business.