Stocks choppy following yesterday’s surge

Anik Sen, Global Head of Equities, PineBridge Investments, joins Yahoo Finance’s Kristin Myers to discuss volatility and mixed signals in the market.

Video Transcript

KRISTIN MYERS: Let's have a nice market conversation. Let's bring on Anik Sen, global head of equities at PineBridge Investments. Always great chatting with you. So let's start with what we're seeing in the markets right now. A bit of a mixed bag. However, bond yields right now are in the red, at least when we look at that 10-year, down over 2% right now. Of course, the bond yield had been keeping markets under pressure in the last couple of trading sessions. Why do you think we're seeing this mixed bag today, especially after the rally yesterday?

ANIK SEN: Hi, Kristin. Thank you for having me. I think that the key question that's facing markets right now is the nature of the cycle. It's a longer-term question, of course, but you know, there are two things that are going on here. One is that is this cycle that we have ahead a prolongation of the cycle that we had before the virus. So in other words, have we seen a pause and a continuation of the path that we were on. Or is this a cycle where we have a new cycle starting, you know, with a lot of the pent-up demand that we've seen that we've talked about before over the last four or five years, with all of the uncertainty due to trade wars and so on now receding into the background.

So where the bond market today is is obviously very important in the sense that we have the steepest curve today in the last-- compared to the last five years or so, it's steeper than it's-- than we've seen more recently. And clearly, what the Fed does in terms of this cyclical outlook is extremely important. What we've heard from Chairman Powell and others in the Fed is that they're willing to be extremely patient about the cycle going forward.

They have a dual mandate, as you know. The situation with the employment numbers here still has a long way to run before they will even think about moving. And so I think the market is kind of getting more comfortable that the Fed is going to be extremely patient. But on the other hand, you have the numerator at work, where you have a very strong outlook in terms of company earnings coming through.

KRISTIN MYERS: I can't believe we're almost running out of time. I have a little bit over a minute left with you here, Anik. I do want to ask you, looking out more broadly at 2021, given the backdrop that you've just painted, and also so many risks that still remain to the markets right now, and also to the economy, how volatile are you anticipating 2021 to be for equities?

ANIK SEN: I think that is exactly the right question. I think volatility is likely to rise, for two or three reasons. One, valuations are high across all asset classes, not just equities. Two, there's a great deal of dependency on how central banks around the world maintain their current posture. And three, whether we see pockets of inflation.

Generally speaking, there are a lot of mixed signals coming through right now, be it from the commodities markets, which are reacting to the bottlenecks we've had because of the lockdown. And of course, there are some shortages that are actually coming through already. And in addition to all of that, as we've just heard on your program, there are a lot of reasons to be optimistic that we are past the worst in terms of the numbers surrounding the pandemic. But put it all together, valuations that high, uncertainties to do with expectations of earnings will keep volatility levels in the market rising from here on.

KRISTIN MYERS: All right, Anik. We do not have nearly enough time, and I always love and appreciate chatting with you, so we'll have to bring you on again soon to chat more about what we see going on in the markets. Anik Sen, global head of equities at PineBridge Investments, thanks so much for joining us today.