JJ Kinahan Talks 'Healthy' Volatility, High-Frequency Trading And The Fed Rate Hike

Benzinga on Thursday spoke with TD Ameritrade Chief Strategist JJ Kinahan about macro topics including volatility, defensive sectors, high-frequency trading and the Fed rate hike.

Volatility

Regarding volatility, Kinahan highlighted that, while the Volatility S&P 500 VIX index might seem high around 20, it is not elevated from a historical perspective. “Actually, I think it might be kind of healthy for the market if it stayed up there,” he added.

What has been happening in the past few years is that investors have been buying protection, “and every time they do, the protection immediately sort of gets swooshed; it looses so much value so quickly.” So with this, he said, it would be very nice to see people buying protection that actually hangs in there.

Related Link: Stock Rebound Best Viewed In Context of VIX, Bond Markets

Defensive Sectors

Kinahan went into defensive sectors, noting that, “utilities remain attractive, while rates remain low, only because they pay pretty good yields usually.”

Healthcare, for its part, is all about “the aging of American population," while consumer defensive stocks will feel the effects of volatility on consumer confidence.

HFTs

HFTs saw substantial and unusual activity on Monday. However, Kinahan highlighted, there were “a ton of unknowns” and selling pressure. “With that, the market got wider [and] everybody needs it a little bit wider not to get ran over” and to be able to draw out some liquidity.

“As much as I want to see every market high as possible all day long, nobody is going to take unreasonable risk to their capital here,” he concluded.

Fed Rate Hike

Finally, Kinahan looked into the Fed rate hike, assuring that “the Fed funds are pricing less and less of a probability” of a rate hike before the end of the year.