Stocks have rallied to begin a historically weak month.
The S&P 500 has risen 3% in the past two days, bucking what is seasonally a rough February stretch – the index has been flat on average during that month over the past 15 years.
The market has even more historical trends rooting against it. The S&P 500 traditionally underperforms from February into early March in the first year of a new presidency as Washington, D.C., and Wall Street process a change of leadership, according to LPL Research.
Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, said weakness equals opportunity.
“We continue to see volatility I think that’s driven by short-term trading,” Bapis told CNBC’s “Trading Nation” on Monday. “We look to buy on dips right now because there is so much cash on the sidelines that people are just waiting for the time to jump in.”
The VIX volatility index, a “fear” gauge that represents investors’ expectations for future moves, traded above 25 on Tuesday. It spiked above 37 last week. Last week marked its largest spike since June.
“In the near term, we definitely think GARP, growth at a reasonable price, [is a buy]. I think you are going to see a rotation into that and into value. A lot of these companies haven’t moved yet, so we are looking for dividend yield given the interest rates, looking for value and quality companies,” Bapis added.
Matt Maley, chief market strategist at Miller Tabak, said it’s not just seasonal weakness that could impact markets. He said last week’s short squeeze in GameStop and the subsequent S&P 500 market sell-off are a sign of a growing problem for markets.
“I’m a little concerned because of what happened last week, this whole thing with the speculative fervor in the marketplace,” Maley said in the same interview. “When we saw this sell-off in the market last week, it was forced selling, it came from a huge amount of leverage in the system. … What it tells me is that, at some point, some of that margin debt, that leverage, is going to be unwound.”
Should, say, the Covid-19 variants worsen the pandemic, he said that could exacerbate the situation.
“If that causes some unwinding of leverage, that will cause some problems, although I do think it will create a great buying opportunity. But I just think it will be a deep correction,” Maley said.