The global market sell-off is 'temporary': Strategist

The number of initial jobless claims filed for the week ending in August 3 fell to 233,000, coming in below the expected 240,000. The cooler-than-expected data is a sign of relief for investors after July's jobs report stoked recession fears and kicked off a three-day global market sell-off. Glenmede Chief of Investment Strategy and Research Jason Pride joins Catalysts to discuss the latest labor print and what it signals for major markets.

"We had a little bit of an economic surprise that people are still, I think, deciphering that employment report. I mean, even today with the jobless claims numbers, people are kind of looking back and questioning, well, how do you reconcile these two?" Pride explains. He adds that the Bank of Japan initiating an interest rate hike cycle threw markets into further turmoil as the yen carry trade unwinded. With these factors combined, Pride argues it kicked off "a series of dislocations in the market that probably will eventually turn out to be, when we look back, temporary in nature in terms of the pressures on the market."

He notes that market corrections of 5% or 10% are normal, explaining, "This is actually not that unusual, particularly if you think about what the market's been through. We were up 15% plus through June for the S&P 500 (^GSPC), so to see a 5% pullback on a 15% up year in just the first half, it actually feels a little bit from our perspective, a little bit healthy in nature. It resets valuations in a more kind of stable basis." Yet, Pride believes the economy is likely in a slowdown, and says it will be reflected in the second half of the year. However, he adds that at this point, a recession is not guaranteed as there needs to be more data pointing to increased economic weakness.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written. by Melanie Riehl

Transcripción del vídeo

I want to pull up a chart if we can from our control room that just takes a look at the velocity of sell off over the course of the past century here.

And you can see that yellow bar on your screen here is right where we've been the past couple of days.

And I was a little surprise frankly that our, our sell off that we've seen over the past five days here was not less of a big deal in comparison with history.

So my question to you is to what extent do you see this sell off continuing and therefore becoming an even more historic moment?

Look, I, I think we are probably a little bit hesitant to say that this c is gonna continue at near the same speed.

We had a confluence of events that happened all at the same time.

We had a little bit of an economic surprise that people are still, I think deciphering that employment report.

I mean, even today with the jobless claims numbers, people are kind of looking back and questioning.

Well, how do you reconcile these two?

But really what you had on top of it is you had the Bank of Japan starting a rate hike cycle or officially like kind of heading that direction that kicking off a a currency movement, which kicked off some forced selling for people in a care trade position using yen as a funding source.

Uh and those things together kind of like other previous big really rapid declines just kind of happened at the same time and kicked off a series of dislocations in the market that probably will eventually turn out to be when we look back, it's temporary in nature.

In terms of the pressures on the market, there's still gonna be some recalibration on the economic front for people.

But the market shifts were very kind of pressured in that moment, Jason that volatility has a fully worked its way through the market, it doesn't seem to have.

So.

So I guess maybe what is that?

Then tell us about that expected volatility or maybe some of the future losses that we could see as a result.

Sure.

One thing that we'd like to say is is corrections like this 5 10% or 5% plus corrections they occur on average at least once a year, sometimes +23 times, sometimes more.

This is actually not that unusual, particularly if you think about what the market's been through, we are up 15% plus through June for the S and P 500.

So to see a 5% pullback on a 15% up year, just first half, that actually feels a little bit from our perspective, a little bit healthy in nature.

It resets valuations in a more kind of stable basis.

Now, get to your question of, of what does that mean on a go forward basis?

We're probably still going to be picking through this economic information.

We are likely in a little bit of a slowdown from an economic and profit standpoint uh heading into the back part of this year.

Uh Our models are basically saying this is not a, you know, guaranteed or, or high likelihood of recession, even with some of the unemployment numbers.

Uh We still think we're gonna be in expansion mode, but it's probably gonna be a little bit softer and people are gonna be trying to decipher that in the back half of this year.

I think it just, it takes some time for us to see enough economic data for people to get comfortable with the fact that OK, this isn't a recessionary environment yet.