Kingsview CIO Scott Martin discusses how the stimulus is baked into the market, and why Chairman Powell Chairman Powell will need to stay on the path he’s on for the time being.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: You know, this is a big what if, but what if this whole thing fails? What if it goes kaput? What if they don’t get their differences reconciled and that one point nine trillion-dollar stimulus plan, the sort of the battle holy grail for this new administration, what if it just doesn’t happen? What would be the fallout? Scott Martin, Kingsview Asset Management. Susan Li, our superstar here at Fox Business. You know, I got to wonder, Susan, since the markets have factored in that it’s going to happen. It’s unlikely that it doesn’t, but it could. I mean, there were already a number of Republicans who’ve got at least a couple of Democrats with them worried about the price tag, worried about jamming in some of these other features. So then what?
SUSAN LI: Yeah, what a tangled web we weave, right. Thought you’d like that – that was for you Neil. So, yes, I think the markets are anticipating some sort of stimulus, whether it’s one point nine trillion or just a few billion. I think they pretty much said that you have to follow the money, and the money is telling you that there’s going to be money printing coming from either the White House and the government administration or from the Federal Reserve. As you’ve heard two days now with Jerome Powell, the Federal Reserve chair in front of Congress. So I think people are anticipating something. And don’t forget, you still have another trillion-dollar package infrastructure that will be also discussed and pushed for apparently already by the White House. So I think Wall Street needs something.
CAVUTO: If they don’t get it, Scott, of course, Mitt Romney has a column today ducking and bemoaning about all the issues that others are ignoring, that a lot of this is backloaded. A lot of this spending seven hundred, eight hundred billion dollars worth is meant for twenty twenty-two. So this idea that we urgently need it like now, now, now isn’t out there. So, again, I’ll ask you what I asked Susan. If this doesn’t come to be because the trip-ups on these issues, how will the market respond?
SCOTT MARTIN: It’ll feel a lot more than just a simple insect bite, Neil, where you can put some cortisone on it and take care of it in a few days, because if you want any evidence of that, I’ll tell you. Look, yesterday, yesterday, the Nasdaq is down about three and a half percent in the morning. Fed Chairman Powell comes out and starts talking about, don’t worry about inflation. We’re here for the markets. Unemployment is still terrible, et cetera, et cetera. Meaning we’ll be there for you, Mr. or Mrs. Market, as well as his partner in crime, Super Dove, Janet Yellen, treasury secretary, who’s been out talking about more stimulus, more trillions, wherever we can find it, print it, sell it and send it out. So the reality is, Neil, this is kind of baked in the markets to a degree, I believe. But the more it’s talked about in, the more becomes a reality, more the market loves it. The scary thing I will tell you, though, is even if Chairman Powell wants to get out of this situation and say, hey, if data changes, maybe we’ll change our role or slow our roll, the markets freak out. So he’s got to stay in the path he is on for now at least.
CAVUTO: Do you think, Susan, that that’s another superhero analogy? If you think about it, he’s in that role, Chairman Powell, of being like the superhero is going to guard and protect the markets. And his stance over the last two days is where I’ve got your back, does he?
LI: Yeah, that’s exactly what you’ve heard. You’ve heard all the right things being that we’re going to stay low, lower for longer and continue buying more than one hundred billion dollars of bonds each and every month. And what I took away yesterday was at six percent GDP forecast that he made for twenty twenty-one, saying that the recovery in the back half of this year is going to be stronger than the first half. And that will be, by the way, pushed through by the Federal Reserve or the White House and the government printing more money. There will be trillions of dollars there that will liquidate the market. And as we say that, you have to follow the money and watch growth managers. And what the money is telling you is that it’s still going into stock markets that’s liquify. So I use the wrong verb there. But you know what I mean? Meaning that you have to follow where the money is going and it’s going into stock markets right now and risk assets.
CAVUTO: So real quickly, Scott, do you see that changing? I mean, give me sort of your lay of the land for at least the next few weeks here.
MARTIN: No. And we’re cautious as far as bonds go, Neil. So Susan’s right. Money goes into stocks as a result. It goes into Bitcoin, it goes into gold, which are things that appreciate when there’s so much Fed printing. And I love the numbers. Susan threw out six percent GDP growth. We’ve got an improving, improving economic picture, yet Fed funds rate at zero and the Fed’s buying one hundred billion a month. Hey, why not start the party and keep it going?
LI: And by the way, six percent, just my follow up on that, Neil, six percent is almost three times the average for the GDP growth that we’ve seen over the past ten years. So that’s a lot. That’s a big bet. That’s your V shape recovery right there.
CAVUTO: But do you think we’re coming from awful levels, right? So, yes, it is good. I’m not minimizing that. But again, you know, it’s coming from depressed levels, but we’ll see. Guys, thank you both very, very much.