John J. Edwards III chatted on AOL MarketTalk on Monday, July 24. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live).

OnlineHost:

Live from New York, N.Y., please welcome John Edwards, assistant managing editor,

TheStreet.com

. John can answer questions about the latest market-moving news.

OnlineHost:

John does

not

offer individual stock commentaries or recommendations.

SageMoola:

Good afternoon and welcome to MarketTalk, Mr. Edwards!

Jedwards:

Thanks for having me. As always, great to be here!

Question:

To what do you attribute the recent volatility in this market?

Jedwards:

As ever, it's a combination of factors. There's growing confidence that the Fed will hold off on raising interest rates Aug. 22 (although there isn't certainty), but that raises the question of whether the economic slowdown that's keeping the Fed at bay is entirely a good thing.

Jedwards:

Even though most companies are beating earnings estimates handily, there are questions about the quality of the earnings they're reporting (too many one-time investment gains?) and about the future prospects for growth. All in all, it's a skittish time in which people can't figure out a catalyst for a real return to the go-go market of late '99 and early 2000.

Question:

When is this market going to start acting normal again??? When something bad happens?

Jedwards:

Well, it depends on your definition of normal. If normal to you is the kind of stunning leaps we saw in the Nasdaq last year and into March, I think you'll be waiting a long time. There was no fundamental underpinning for those kinds of gains, and there still isn't.

Jedwards:

We're into a period where investing is again more the focus than speculating. Companies that are truly good investments will still generate handsome returns, but we won't get back to the abnormal normality you may be pining for.

Question:

My year-to-date returns for the year just went from black to red today. How are you doing and should I stay on the side lines with the cash I have built up?

Jedwards:

For good or ill, we on the editorial staff of

TheStreet.com

can't invest in individual stocks at all, except our own company's stock. My 401(k) is doing all right, but I've just changed the mix to be a bit more aggressive and won't know how that turns out for a while.

Jedwards:

As for you, I would suggest that you conserve at least some of your cash and keep it in less risky instruments. How aggressive you should be with your investing capital depends on a great many personal factors, such as your age, family status, etc. Try to understand well your own capacity for risk, and don't chase after gains if you feel uncertain you can afford to lose what you're risking. Good luck!

Question:

What are you liking these days?

Jedwards:

I think the drug sector may have some room to run. And for really aggressive and skillful traders, I'd say the optical networking area could be an interesting one to play -- although you should note that the consolidation phase in the industry is already fast concluding.

Question:

What mix of investments do you prefer for your 401(k) during the recent volatility of the market?

Jedwards:

Well, I'm 30 and just about to get married in September, so my fiance and I are in a fairly aggressive investing mode. I've focused more of my funds into an aggressive growth fund, about 50%, with the rest divided among smaller- and mid-cap funds and an international fund.

SageMoola:

Thank you very much for joining us today, Mr. Edwards. It's always a pleasure!

Jedwards:

Always a pleasure to be here! Thanks for chatting, and I'll see you at

TheStreet.com

!