Markets have been relatively flat in recent weeks, but investors should prepare for a massive wave of volatility.

Markets have been relatively flat in recent weeks, but investors should prepare for a massive wave of volatility, according to MarketWatch.

Scott Minerd of Guggenheim Partners believes the 2020 presidential election and the slow economic recovery will contribute to this volatility. “The market’s performance and the economy’s recovery is calm compared to the volatility of March and April, but several issues concern me as the eyewall approaches,” Minerd said.

Monetary and fiscal policy measures have helped mitigate many of the financial effects of COVID-19, but there are still underlying problems. Furthermore, the unsuccessful attempts of lawmakers in passing additional stimulus could contribute. “Without fiscal stimulus, personal income will stagnate, job gains will slow, consumers will pull back, and more small and medium-sized businesses will fail, explains the Guggenheim money manager.

However, many market bulls disagree. They cite that the US savings rate is at its highest rate in a decade, the University of Michigan's consumer-sentiment index increased to 81.2 this month, and the September retail sales numbers increasing by 1.9 percent. Minerd believes these figures don't represent the underlying issues within the slowly recovering economy.

“The economic fallout from lack of fiscal actions increases the likelihood of a negative fourth-quarter GDP print while Main Street remains in depression,” Minerd said. “If we are in the eye of the storm, mounting economic and political turmoil will likely cause the stock market to go lower once it breaks its coiling range and before it can resume its rise.”

US treasury bond yields have been rallying, but a sharp decline may be on the horizon.“We could ultimately see a ‘yield’ of negative 50 basis points on the 10-year note, and corporate yields in the neighborhood of 1 percent for investment-grade corporate debt,” he said.

Time will tell, but markets could be headed for a wave of volatility.

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Economics, Finance and Investing