New Year, Big Volatility

If the first six trading days of 2015 are any harbinger of what’s to come for the entire year, then strap on your seatbelts and get ready for an “A-ticket” rollercoaster ride.

Since the start of the year, there has been BIG volatility in the equity markets, as stocks are getting pulled down and then pushed back up by conflicted traders trying to make sense of it all.

Now, for the past several weeks I’ve been telling my podcast listeners that 2015 is going to be much different than 2014. I suspect that we’ll see much more volatility this year, and things have certainly started out that way.

Forces such as a rising U.S. dollar and plunging oil prices (see accompanying charts), as well as ultra-low bond yields and the omnipresent uncertainty about when the Federal Reserve will start to raise interest rates, have contributed to the push-pull that we’ve seen this year and that we are likely to keep seeing for at least the first half of 2015.

My advice to investors right now is to make sure you have plenty of cash on the sidelines in case this market volatility morphs into a markedly across-the-board decline.

If that doesn’t happen, and if stocks shrug off the negatives of falling oil prices, then you can always put that cash to work in targeted exchange-traded funds (ETFs) offering the best risk-reward proposition.