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US stocks closed lower on Wednesday, failing to build on a two-day winning streak. The pair marks another episode in what has been a very difficult year for stock markets. Aswat Damodaran, professor of finance at New York University’s Stern School of Business, believes volatility boils down to two main factors — what’s happening in the macro environment and “sentiment and momentum” in the market. “My advice to investors is to realize that the daily movements you see in this market have nothing to do with fundamentals and have a lot to do with sentiment and motivation because people are balanced,” Damodaran, sometimes called the “Dean of Price,” told CNBC’s “Street Signals Asia” on Wednesday. “A lot has happened this year for people to try to understand what’s coming and we’ll have this volatility, these ups and downs in the days until we get some consensus on where we’re going,” he said. Damodaran believes this is a temporary phenomenon, with fundamentals eventually returning to be the main driving force for stocks. You have to be ready when he comes back. Stock ‘bargaining’ Now how can investors trade if the stock market is unpredictable? “If you’re an investor, your biggest risk is buying companies that are going to weather a hurricane, if it happens it’s a disaster, because it’s not likely to happen,” Damodaran said. But we could be in for a serious downturn and capitalize on the risk of not getting back into the game for a year or two, maybe three years. Damodaran said he is leading from companies with strong operating and financial strength and strong earnings and cash flow – even if they are unable to deliver growth this season. Read More The Market Is Heading For ‘Best Week Of The Year’, Pro Says – And Names 2 Stocks To Play It Should Investors Avoid Stocks? Strategists give their opinion – and explain how to trade volatility. Investment Pro says AFAs are now better than stocks – and show ‘very large’ value positions in the big tech space, Damodaran on Meta, Amazon, Alphabet, Apple and Microsoft. It owns “winners that have fallen on hard times” like Nvidia. With their stock prices down significantly this year, he said, investors are getting these shares at a “bargain.” “These companies – they’re not going anywhere. These companies aren’t, they don’t have a lot of debt. They’re going to survive. They’re going to make money, they’re going to sell their products. So, from that perspective, I feel more comfortable with these stocks than traditional safe-haven companies. For example, Damodaran’s former great “staying power.” Given that, he said he’d rather put money in Apple than Coca-Cola. “But I think big tech has more staying power than people give it credit for in terms of revenues and earnings,” he said.
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