NDR's Clissold: This market needs to price in 'an uncertainty discount'

Money Life with Chuck Jaffe

Ed Clissold, chief U.S. strategist at Ned Davis Research says that he expects the stock market to back off of its current "pretty elevated" levels as it prices in a discount for uncertainty. "Whether or not you think in the long run that changes by the Administration are good or bad, while we go through them means that probably valuations need to be lower," Clissold says, noting that the discount will be accompanied by choppier market action, heightened volatility and more pullbacks and corrections. Further, Clissold notes that the situation could last until the economy digests a workforce shift as public workers move into jobs in the private sector and consumers curb spending during the adjustment period. D.R. Barton Jr., director of market research for the Foundation for the Study of Cycles, says the current cycle may be changing, and he is watching whether the Standard & Poor's 500 can stay above its 200-day moving average, which it has been close to breaking the last few days. Barton says the pullback could reach the point of being a correction -- a decline of 10 percent or more -- if the trend line is broken, but he thinks the market needs to take a breather and re-gather itself before it can resume making real progress. Kimberly Flynn, president of XA Investments, says healthy borrowers and minimal defaults make the loan space attractive, with concerns over tariffs and Federal Reserve policies leading to more volatility but also new opportunities.