Kingsview CIO Scott Martin discusses interest rates, “good” inflation and reinflating stocks after the stimulus.
Program: Making Money with Charles Payne
Station: Fox Business News
CHARLES PAYNE: Investors want J. Powell to be the sledgehammer so badly yesterday, but instead some think he brought out a fiddle. OK, and the market did burn yesterday. It was down earlier this morning. Of course. You know what? It’s pretty obvious that people are on pins and needles now.
It is true that the Fed should not make policy based on Wall Street’s every need and all of the whining of Wall Street. But let’s not forget Jerome Powell, chairman of the Federal Reserve, sort of put the situation into place and now he’s paying the price. So is the market. Ironically, though, investors that were hoping for Operation Twist or some other things got nothing. And we’ve got some guests today who actually think that was the best medicine. Anyway, the whole affair right now feels like a swan song, but it may not be. So, don’t panic until you watch this show, because there’s a lot going on wit. the sell off. And as you can see, subsequent rebound. Maybe Jay Powell did the right thing after all. Maybe he should hold on to what he’s doing and maybe you should hold on to what you’re doing. On that note, I want to bring in two of my favorite guests, Rob LUNA, Scott Martin. And I got to tell you guys, let me start with you, Rob, because you were a little bit more bullish, I think than Scott the last time we spoke, this reaction from last week to yesterday, even today is resolved. What do you make of it?
ROB LUNA: I think it’s all really healthy, actually, Charles. I mean, if you look at the moving averages, we said last week we’re going to test the fifty. We did that. We saw the QQQ break below that. But you know what’s happening, Charles? If you look at some of the stocks and we said this, you’re going to have your leading stocks, your Facebook, Amazon went down to that two hundred today, bounced off that. And if you look at that, that’s when the market turned around. I think this is all really healthy. We need to wash out those we can in order to see that next move up.
PAYNE: And hey, you know, so, Scott, you’ve been a lot more conservative, if you will, about the market. And I know you know, it’s interesting because we go up usually in the Stairsteps and we come down in the elevator, and that’s when a guy like you would say, hey, you got to pay attention to those elevator ride sometimes. So, what are you feeling right now about the way the markets reacted, particularly to interest rates? OK, one point six, two percent on the 10 year. Still not the worst thing in the world.
SCOTT MARTIN: Not at all, and it’s surprising, Charles, to see the market react so terribly to that because we knew this was coming, I mean, maybe it came a little faster and say furious or if I may, than it was expected to be. But this isn’t a terrible thing. I mean, rates going up, rates normalizing, maybe a little inflation should be good for stocks. And I agree with Rob’s point. I mean, if you look at even beyond some of those big cap techs out there, Charles, I mean, look at the Twilio, the Snowflakes, the PayPal’s, the Squares, the Teladoc, the Zoom’s. I could go on. I mean, there’s a host of I mean, there’s a few dozen out there that have totally reversed today and balanced. I mean, I haven’t seen opportunity in tech like this since I was prom king in the 90s. That should tell you something. Yeah.
PAYNE: And that’s when everybody is excited about the calculator. Right. They had like five windows. So that was a long time ago. The Commodore the Commodore computer was reigning back then. All right. So, let’s talk about then the changes in portfolios. Right. You know, Scott pointed it out. People are being opportunistic, by the way, being opportunistic, buying dips has only worked since two thousand and nine. Rob have you made any changes today or in the last couple of sessions?
LUNA: No. You know, we’ve been I know you hate this, Charles, using the barbell, but let’s give people actionable strategies. Oh, look, look, look, look at the Aristocrat Index it’s helping people. And you beat me up, rightfully so about Chevron last year. But look, that paid off. We bought the dips on that. But what we’re doing now, we’re holding on to that Chevron position. But now it’s time to reload on some of these tech names. Like Scott said, Paypal, Zoom’s these are long term winners. You don’t get opportunities like this a lot. We like those names right here.
PAYNE: You know, here’s the thing, though, and listen, I’m in oil, I’m in it big, and I’ve been talking about the commodity supercycle, in fact, pounding the
table on it, you know, but now you’ve got this interesting thing, oil also getting a help from OPEC’s. There’s a little bit of a different story. But back to these potential opportunities, Scott. You know, for someone like you who has been relatively cautious, that’s obvious. You were waiting your time. So, what about this inflation scare? Is this overdone? I mean, yeah, of course, we know there is going to be some inflation, but is there enough to derail all of the amazing powder we’ve got from household spending to corporations to the jobs report this morning? I mean, to me, that should be a bigger macro story.
MARTIN: Yeah, the pattern is going to be fine and like everybody’s freaked about inflation, maybe going to war, like, I don’t know, two and a half, three percent, like, oh, my goodness. I mean, it’s so scary when if you look in past decades when inflation was a real problem, I mean, you’re pushing double digits in some cases, especially overseas. So, I mean, that’s not a concern. Like that’s actually good inflation. In fact, as the economy reopens, Charles, and maybe hopefully, I mean, God willing, we pull away from all this crazy stimulus we’re getting, which I think the market is telling you we don’t really need. I mean, that’s why rates, in my opinion, are going up so much. Maybe a little inflation could go actually a long way to kind of reinflate stocks a bit because they’re going to need a kick once we’re done with the stimulus and things like that. So, with respect to the inflation expectations, keep them coming as long as they don’t go crazy. And three percent inflation, if we get it, isn’t that bad.
PAYNE: You know, I always tell people we love when our paychecks inflate. We love when the value of our home inflates. We love when the value of our Tom Brady rookie card inflates. So, there’s not all inflation is not a four-letter word, right, Rob?
LUNA: No, it’s true. I mean, Scott’s right on with that. And we need some inflation. But you know what the next word is, right? Once we get this economy set, we’re setting the stage for a huge rally. It’s taxes. It’s regulation. Once you start hearing about that forty percent long term capital gains rate, that’s going to be our next worry that we’re going to have to overcome.
PAYNE: Well, I’m hoping that’s like November, December. So that’s it could be a long time.
So, both of you guys, before I let you go, then, do you see new market highs? And we pulled back, will Scott, we see new highs in the market, and will it be led by big tech?
MARTIN: Yes, I believe we will, Charles, and we’re going to get some help, as Rob said, from energy and industrials and some financials, too, which have not been there. See, that’s the cool thing that I think that’s happening with the market so far, let’s say this year. And as we’ve been waiting, like you said, Charles, to kind of put more money to work here on these pullbacks, we’re starting to get other areas of the market. And yes, I know they’re smaller than tech. I get it. You can save the emails to me on that health care as well. But you’re starting to get some help from other areas of the market that have completely lagged in the last couple, say, years. And that will help the overall breadth of the market stay strong long term here this year.
PAYNE: Gentlemen, I got to leave it there. You are two of the best. I feel so much strong. I feel strong, like bull after talking to you guys. Had to start. Started out very much. Have a great weekend. Thanks, guys. As of the barbell approaches.