With oil above $100 a barrel, interest rates elevated, and the Federal Reserve potentially poised to raise rates, it is easy to see an S&P 500 near record highs as a market asking investors to take on too much risk.
Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management, sees a different problem for long-term, buy-and-hold investors: moving to the sidelines to avoid a pullback and then missing the rebound. He spoke with TheStreet's Caroline Woods to explain his concern and discuss how he thinks smart investors should navigate current market conditions.
Mahn's case is not that volatility has disappeared. He expects it to persist as the Iran War, the Strait of Hormuz, inflation reports, and U.S. midterm elections keep investors on edge. His approach is to remain invested, stay diversified according to risk tolerance, and make selective decisions with new money rather than trying to predict the market's next down day.
Mahn's view comes with clear limits. He says a sustained move in oil above $120 a barrel or a 10-year Treasury yield above 5% would make him more concerned about the economic backdrop. Those are conditions he believes could pressure consumers, complicate the Federal Reserve's choices, and turn intermittent declines into a more serious correction.
Here is how Mahn separates normal volatility from a changing market outlook.