Volatility is spreading like a virus: Strategist

While broad measures of market volatility aren't showing outlandish readings, volatility is being transmitted among subsets of the market like a virus. So observes Nicholas Colas, chief market strategist at Convergex.

"We're seeing risk filter through in ways that aren't linear," Colas said Monday. "The transmission mechanism of communicable disease and investor fear works in much the same way, and we have some time to go before we either find a cure or the illness runs its course."

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In other words, since the current volatility being experienced doesn't have any one cause, it's not likely to simply evaporate.

"We're going to have a very volatile first half of next year in my mind, because what we're seeing is different threads of volatility and different concerns feed off each other," Colas said in a Monday "Trading Nation" segment.

"For example, we have energy prices down over the last 18 months. That infected the high-yield market for bonds, and that in turn is beginning to cause some concern in the investment-grade market for corporate bonds as well," he said. "So we're seeing threats and threads of volatility feed on themselves, and we're going to see more of that next year."

Still, after a choppy first half, Colas expects stocks to begin to move higher in the second half of the year — based on his bullish or at least unbearish take on the U.S. economy.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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