How investors can protect their portfolio amid trading frenzy

Yahoo Finance’s Akiko Fujita and Zack Guzman discuss the market action for Gamestop with Rob Christian, CO-CIO of K2 Advisors.

Video Transcript

ZACK GUZMAN: But first, I want to start with the market jitters we are seeing play out right now. As we said, GameStop spiking, yet, again in today's session back from the dead. So what does it mean for the overall market? Well, here to break that down for us is Rob Christian, CO-CIO of K2 Advisors. And he joins us now.

Rob, obviously last time, we saw the biggest sell off this year in 2021 when GameStop really started to spike the first time around. I'm not sure how many people had this coming back from where it was trading before. So how do you couch this in today's sell off? Is this more driven by that, you think or maybe what we're seeing play out in the 10 year and on the yield side?

ROB CHRISTIAN: Yeah, GameStop kind of comes in and out of play, as you know. But we think today in kind of longer-term picture that the market is starting to digest growth, inflation. And they're trying to-- the market's trying to price in inflation and really struggling with the question-- and our investors and internally, we were focused on this question.

But the big question I think the market is struggling with-- is inflation a blip? We certainly see growth coming in in 2021. The recovery, the vaccination globally eventually will help all this. Corporate earnings have been strong. We've seen revisions upward. Some of the economic forecasts are also good.

The Atlanta Fed GDP now cast last week was forecasting 9.1% first quarter. That's out later today. But bottom line, strong growth expected for the next nine months or so. But really, the question is what happens after that?

So in 2022, are we going to see an inflation blip and then back to kind of deflationary trends, which are probably set by demographics, globalization, and the internet and the [AUDIO OUT]? Or will the Fed be able to manufacture sustained inflation and wage inflation above 2% at [AUDIO OUT]?

And if they do, the 10 year at 145, 150, probably now that we're speaking, you know, that yield should probably go north of 2%. So I think today in the last couple of days, the selloff's been more related to rising rates and a steeper yield curve as well.

AKIKO FUJITA: Yeah, Rob. That's a lot of factors you just added in there. But bottom line, when you talk about these signals that you're seeing in the market, what does that mean from an investor's standpoint where you should be positioned?

ROB CHRISTIAN: From an investor standpoint, it depends on where you're standing. But long only, long-biased investors I think had a great run the last seven, eight years, say 60-40. But I think at a minimum, you need to start thinking of how to protect your portfolio. And active management is a way to do that.

Obviously we focus on hedge funds at K2, but we think it's a great time. There's dispersion in the fundamentals. And earlier before I came on, just hearing about supply chain disruptions. You're also having a huge demand change. And we don't know what will be the new normal coming back.

So all these factors are in play. There's a lot of uncertainty. But it bodes well for some companies. And it bodes less well for other companies. But so active management of your portfolio and the ability to go long and short we think will really help investors going forward.

ZACK GUZMAN: Yeah, and yet again today, as you talk about the steepening of the yield curve there, technology again, one of the hardest hit sectors when you look at the S&P 500. So we'll keep our eyes glued on that action. But for now, Rob Christian, CO-CIO of K2 Advisors-- appreciate you hopping on here.