Structural Volatility Won't End For Several Years, Derivatives Strategist Says

While short-term traders are trying to trade some of the wild swings in the volatile 2016 market, MKM Partners analyst Jim Strugger has been looking at the longer-term implications of this market volatility.

In a new report, Strugger compared the current volatility to similar market stretches in 1997 and 2007. While both periods ultimately preceded a recession, the 1997 bull market continued for another three years prior to the recession, while the 2007 bull market lasted only another four months.

Volatility And Recessions

Strugger feels that the current volatility is once again an indication of a recession on the horizon, but he isn’t convinced it’s coming anytime soon.

“Perhaps it has already begun as some contend, but that is not confirmed from a volatility perspective,” he explained. “If the current volatility event continues to abate as we expect, U.S. equities should be due for a nice bounce in the coming weeks.”

Related Link: M&A Expert Says Market Volatility Delaying Deals, But Not Discouraging Them

Testing: One, Two, Three

With that prediction in mind, MKM ran a screen of stocks and ETF’s with the steepest call skews and found Sarepta Therapeutics Inc SRPT and Cal-Maine Foods Inc CALM at the top of the list for stocks, and Guggenheim CurrencyShares Japanese FXY and iShares Barclays 7-10 Year Trasry Bnd Fd IEF topping the ETF list.

Disclosure: The author holds no position in the stocks mentioned.