It's been quite a week for the S&P/ASX 200 Index (ASX: XJO) and global stock markets.
If you've been following the price charts on a daily basis, you'd be forgiven for checking your medicine cabinet for some Dramamine.
Here's what I mean.
A week ago on Friday, 2 August, the ASX 200 closed 2.1% lower, following the lead of US stock markets.
Monday was even worse, with the ASX 200 plunging 3.7% on the day after another round of steep losses on the Nasdaq Composite Index (INDEXNASDAQ: .IXIC) and S&P 500 Index (INDEXSP: .INX).
Investors were hitting their sell buttons amid fears that the US economy was heading into recession.
But by the end of the week, those fears had abated, with some strong job data from the world's biggest economy rekindling hopes of a 'soft landing'.
That news sent US stock markets surging and saw the ASX 200 close up 1.25% on Friday.
Talk about volatility!
With all of these ups and downs, we take a look at how these experts are riding out the waves.
How to navigate the stock market volatility
Greg Burke, lead portfolio manager at Wilsons Advisory's Australian Equity Focus Portfolio, believes ASX 200 and global stock market investors overreacted to last week's news of a potential US recession.
"The current bout of market volatility has been indiscriminate in nature and driven by concerns that are excessive considering broadly benign economic conditions," Burke said (quoted by The Australian Financial Review).
And that could offer up some potential stock market bargains.
According to Burke:
The sell-off has the potential to offer up attractive buying opportunities in high quality ASX companies that have been fundamentally oversold.
We are focused on businesses that, while cyclical, also have bottom-up structural growth levers that are independent of macro conditions.
Burke pointed to Lovisa Holdings Ltd (ASX: LOV), CAR Group Ltd (ASX: CAR) and ARB Corp Ltd (ASX: ARB) as stocks that fit the bill.
Seema Shah, chief global strategist at Principal Asset Management, was cautious about the near-term outlook for tech stocks but said that stock markets still held opportunities for investors who knew where to look.
According to Shah (quoted by Bloomberg):
Undoubtedly the market is concentrated and it's very vulnerable to a pullback in tech.
I think there are pockets around the market where you want to be looking that still have that catchup trade.
Emily Roland, co-chief investment strategist at John Hancock Investment Management, remained upbeat on the longer-term prospect of tech companies.
Roland said:
Some of the weakness in tech is just a function of the fact that there was a lot priced in prior to earnings season. People are making these analogies to the late 1990s, but the earnings are there.
The earnings are far outstripping the earnings of other sectors in the market. Fundamentally, there is nothing wrong with the tech space. The price just got ahead of itself.
And Anthony Roth, chief investment officer at Wilmington Trust Investment Advisors, said companies at the smaller end of the stock market were looking more attractive in the current environment.
"We just increased our overweight in small-cap stocks," Roth said (quoted by Bloomberg).
Roth added:
As interest rates come down, it makes it much more attractive for smaller companies to finance their businesses again, and small-caps are much more levered to their financing than large-cap companies are.
Not that stock market investors should turn their backs on the big tech companies like Alphabet Inc Class A (NASDAQ: GOOGL), Nvidia Corporation (NASDAQ: NVDA) or Apple Inc (NASDAQ: AAPL).
"We believe it's very important to never underweight big tech. You have to take the lumps as they correct because over long periods of time, they're going to perform strongly," Roth said.
