Kingsview CIO Scott Martin talks about bullishness sentiment, historical corrections in the market, and what factor might mitigate pullbacks.
Program: Making Money with Charles Payne
Station: Fox Business News
CHARLES PAYNE: Meanwhile, there is other stuff happening, tangible stuff, in fact, that should inform and really, really help investors and I think encourage investors. Joining me now to discuss all of these things Kingsview Wealth Management CIO Scott Martin. TJM Institutional Service Director Jim Iuirio, and Advisors Capital Managing partner Joanne Feeney. Jim, let me start with you. If the administration was looking to see how Wall Street would handle the world’s highest capital gains tax. I think they got their answer. You think they’ll listen?
JIM IUIRIO: Well, first of all, they could have just asked us ahead of time what we are going to think about a forty-three percent cap on the gains. They didn’t have to actually plug that out. Remember, they are politicians. So if there were not a forty three percent capital gains rate, they know that’s absurd. They probably have in their sights realistically at 30 percent. And then they want to make us think that we negotiated back. So we feel like we got some sort of deal. But let’s keep it in perspective. 30 percent is awful. It’s toxic and destructive policy, and it’s destructive for the middle class. Those people make over a million dollars that they’re trying to target. Those are the people that employed the middle class. So the question becomes, are they willing to signal that they’re anti wealth or against the wealthy at the risk of damaging the middle class and damaging the economy? And I think the answer to that is yes, I think they are willing to do that. I think it’s terrible policy. And I think that if they really get far in pushing it, that Wall Street will have a bit of a tantrum. But in the end, I think it’ll be OK for stocks.
CHARLES PAYNE: Yeah, you know, to that point, it feels like this administration is really worried about their strategy is to win the polls and message things and public relations things and get the media to win the polls and then try to force the action. You know, Joanne, of course, there was also even coming into yesterday, it felt like different things bother in this market. I mean, I’m looking at the internals every day at the close. They’ve been unimpressive, even on Update’s volume drying up. Even today, we’re having a really strong day, you know, with respect to the bounce back economic data. And yet volume is extremely low again. Where is this trepidation coming from?
JOANNE FEENEY: Well, you know, Charles, I think a lot of folks are a little bit fearful, valuations in many stocks are quite high and a lot of investors have pretty concentrated portfolios and they’re trying to figure out what to do potentially with rising rates on the horizon and maybe that capital gains tax. That’s why we think right now index investing can be particularly fraught. You know we invest in individual stocks for our clients, either for appreciation or looking for income. And we still think you can find good values here, but you just have to be a lot more selective because of those real significant concerns over some of the headwinds that will come into play once we get through this Goldilocks period of fast growth, lots of fiscal spending.
CHARLES PAYNE: I’m going to come back to you about those individual ideas, because I’m all about individual ideas to, you know, Scott now, despite all of this angst, right, there are two things that have remained constant. The market is higher. It’s, in fact, having a pretty good year So far. Individual investors remain very bullish that AAAI number is a monster. It won’t go down. But I thought that that was supposed to be negative for the markets. What’s going on here?
SCOTT MARTIN: Well, it could eventually be negative, Charles. I mean, yes, you’re right. The bullish bullishness sentiment, easy for me to say is, you know, that’s that’s a concern. And I think the funny part, as you mentioned, just with behavioral finance, I mean, you look back to some of these big corrections, whether it was, you know, last March, the two thousand fourteen, fifteen sixteen area, the crash of 08, of course, and then other ones, when the sentiment gets really low is actually the time you want to buy, when things get bullishness at these heights, when it gets really sanguine. Those are the times you should actually be somewhat careful. So I agree with you. I think that will eventually happen again because it has proved itself out over history. But it can the market can stay bullish and the market can keep going up until that last investor is in. That’s when things will turn over.
PAYNE: You know, Joanne, I want to come back to you because I’m thinking about this individual stock thing and earnings season, we’re two weeks and really the only word I can use is amazing revenues, earnings, crushing it much better than than we thought they would be on January 1st and April 1st. But for the most part, a lot of these stocks are popping in the aftermarket, then selling off. So how do you find I mean, someone who zeroes in on this, it certainly must inform you, particularly the ones with these amazing numbers and for whatever reason, they’re selling off how should our viewers deal with that.
FEENEY: Yeah, you know, it should be expected to some extent, expectations were really high coming into this earning season, right? We knew these companies were getting back to where profits were rising. So in some sense, expectations were above the official numbers….
PAYNE: So let me jump in – let me jump in. Would you would you sell then, like a Whirlpool? Two days ago after the closed Whirlpool go straight up yesterday, it got hammered. I didn’t see it today. But if I’m holding Whirlpool, what message do I take the earnings in the initial pop or do I sell with the crowd?
FEENEY: Now, you look at the fundamentals, Whirlpool is a stock we’ve owned for a long time, we really like it here. The temporary sell off is some folks may be taking some profits, but you got to look at the fundamentals. And the outlook for Whirlpool is really strong because look at the housing market, right? Housing market is on fire. People are going to be buying new appliances. And that’s not the only place one can look for these good opportunities. You know, auto is doing very well. Even with the slowdown in production company like Texas Instruments or NXPI, really gives investors opportunities, even if there’s a sell off at earnings.
PAYNE: Jim, your thoughts on the earning season so far? What have you learned? What do you like or dislike?
IUIRIO: The one thing and Joanne mentioned that you mentioned it too the one thing that makes me a little bit more cautious is the fact that some acceptable earnings have been met with some selling. But realistically, for me, nothing matters as much as big tech earnings season, which is next week. So to me, I’m going to be looking at that. This was three weeks ago and I think the market was anticipating that interest rates were going to go much higher. I think that we’re going to scrutinize those tech earnings more based on those discounted cash flow models that tech stocks, you know, we presuppose such high earnings in the future now that we think that rates are going to be stable. And thank you for bad policy for stabling at stabilizing rates yesterday. Now, I think some of those tech earnings will be more accepted. So I’m actually looking and I think the Nasdaq is going to break through fourteen thousand in the next couple of days, particularly after those earnings. And I’m looking to get long some of the longer some of those names afterwards. But to me, earnings season is tech, earnings is 60 percent, bank earnings is 20 percent. And the rest of it is just bits and pieces.
PAYNE: I got you. Hey, let’s talk about some other catalysts for a potential rally, Scott buybacks, corporations came in sitting a record amount of money. A lot of them are telling us they’re going to put it to work, buy back their own stock. What does it mean for the market? And are there any names that may have swayed you because of this?
MARTIN: Well, I think Jim talked about some of the financials, we’ve seen it in some other areas where you’ve had a lot of cash, like you mentioned, Charles, on the balance sheets. I mean, don’t forget too – it could be buybacks, maybe some dividend increases. I mean, you’re right. Cash was not only king, but cash was also all the gestures and all the servants and everything in cash was everywhere for a while. And it’s still kind of is. I mean, so we have like this ability for these companies now to utilize that cash to issue debt at low interest rates to do so. And I think that’s going to be the continuing driver that will mitigate some of the pullbacks that we’ve talked about in the segment so far when those buybacks kick in, when maybe dividend increases come down the line. Because don’t forget, guys, as companies are out there and having, you know, let’s say back in the day, favorable dividend rates maybe at two percent. But is that tenure creeps up closer to two percent. Maybe companies start raising their dividends in anticipation of something better down the line for their own future. So therefore, health care companies and things like that might actually start raising dividends.
PAYNE: All right, and Joanne, let me ask you real quick about the reopening trade, is it back on and what do you like?
FEENEY: Yeah, I think we’re going to continue to see that play out over the year, the reopening trade is good for energy stocks. We like a couple of banks, you know, to the point of seeing increased buybacks and increased dividends. You know, we think Citigroup is in that position. MetLife is in that position. JP Morgan, these are stocks we’ve held for clients for a long time. And we think there’s definitely more room to run there. But you’ve also got like a TJ Max, for example, that really has underperformed, but really is going to benefit from the reopening as folks go back into the brick and mortar shops, Constellation brands, Casey General Stores, people getting back out on the road, back out to bars. So a lot of opportunity out there to play this rotation.
PAYNE: Yeah, well, we already saw it in that last retail sales report, which probably was just the tip of the iceberg. They call it revenge buying. We’ll see. Scott, Jim. Joanne, thank you all very much. Have a great weekend. Fantastic stuff.