SVP Paul Nolte Interviewed on WGN Radio 7.21.22
Paul Nolte, Senior VP at Kingsview Wealth Management, joined Bob Sirott to talk about some companies slowing down their hiring process and the decrease in stocks.
Portfolio Manager Insights | Weekly Investor Commentary – 7.20.22
Download the PDF here for the full commentary.
PORTFOLIO MANAGER INSIGHTS
WEEKLY INVESTOR COMMENTARY | 7.20.22
Investment Committee
Recent economic reports show that inflation continues to accelerate. Not only does this impact consumers’ wallets but it also has wide-ranging implications for corporations, the broader economy, and investment portfolios. However, it’s important to consider how inflation affects both sides of the income statement when making long-term financial decisions. After all, while expenses are increasing for consumers and businesses, inflation also allows corporations to raise prices. How can investors focus on both sides of this equation?
Last week’s Consumer Price Index report showed that prices rose by 1.3% over the month of June which amounts to 9.1% compared to the prior year. This is the fastest annual pace since 1981 when inflation was falling and since 1978 when inflation was rising. While nearly all price categories increased, suggesting that inflation is broad-based, by far the largest contributor was energy with gasoline prices rising 60%. Another report on the Producer Price Index showed that the prices charged by suppliers rose 11.3% on a year-over-year basis.
Inflation continues to accelerate both broadly and due to energy prices
No matter how you slice it, inflation is at its hottest level in four decades. These reports all but lock in another 75 basis point rate hike by the Fed later this month and many are wondering if they may raise by a full percentage point. However, there are some positive signs too. To the extent that energy and gasoline are the biggest contributors to inflation, it’s good news that oil prices have been stuck in a range since March, even falling under $100 per barrel briefly. What’s more, the price of wholesale gasoline produced by refiners, known as “Reformulated Blendstock for Oxygenate Blending” (or RBOB for short), has plummeted nearly 25% from its June peak. So, while the nationwide price of gasoline remains high at $4.50 per gallon, it has already fallen 10%.
In the long run, corporate earnings drive the stock market higher
Relief at the pump, if it happens, couldn’t come soon enough since higher prices have weighed on consumer sentiment. Still, there are signs that consumers continue to open their wallets. Last week’s retail sales numbers grew 1% in June after shrinking the prior month, representing an 8.4% jump from last year. This is partly due to inflation itself raising prices, but also because the average consumer is still doing well financially due to high savings rates over the past two years, despite the stock and bond market declines. Regardless of the cause, ongoing consumer spending, coupled with price increases, helps the top-line sales figures of public companies.
This makes the current earnings season even more important as a gauge of how companies are adapting to this inflationary environment. So far, companies are beating analyst estimates with Wall Street forecasts suggesting that S&P 500 profits may reach $225 per share by year end, an 11% year-on-year growth rate. Even if this decelerates, earnings could still grow faster than the historical average of 7 to 8%. Earnings growth helps to improve valuation metrics such as the price-to-earnings ratio which supports long-run returns.
Earnings are expected to grow across nearly all sectors
These patterns hold true across almost all sectors. Ten of the eleven sectors are expected to have positive earnings growth over the next year, with sectors such as industrials, consumer discretionary, energy and technology expected to grow earnings faster than the overall S&P 500. The exception is real estate which is directly hurt by rising mortgage rates.
History shows that as long as revenue and earnings growth remain steady, the stock market and investment portfolios can benefit over time. Thus, while inflation hurts the spending side of the equation for consumers and investors, it can help their investment portfolios. This is because investors don’t invest in the economy directly. Instead, when the economy grows, portfolios benefit as companies earn more which supports stock prices over time. Thus, investing in stocks which benefit from rising prices can be a way for investors to hedge inflation risks in other parts of their everyday lives.
The bottom line? While inflation is challenging for consumers, especially when filling up their cars at the pump, it can also help corporate earnings. As always, it’s best to hold a portfolio that is diversified across different parts of the market that can benefit from rising prices.
Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. (2022)
SVP Paul Nolte Interviewed on TD Ameritrade 7.19.22
EUR/USD extended its daily rally Tuesday toward the mid-1.0200s while the US Dollar (/DX) struggles. Paul Nolte discusses what’s driving the dollar selloff.
Click here to watch to the interview.
Kingsview SVP Paul Nolte takes a deeper dive into oil, automobiles, retail sales slowing, inflation, and the raising of interest rates that will invert the yield curve.
CIO Scott Martin Interviewed on Fox News 7.18.22 Cavuto live
Kingsview CIO Scott Martin discusses the free market, price adjustments, and whether the administration should get involved in costs for things like eggs, milk, gasoline, and more.
Program: Cavuto Live
Date: 7/18/2022
Station: Fox Business News
Time: 12:00PM
MIKE: With inflation rising at a record pace, high prices at the pump are not not the only surging cost weighing heavy on Americans. Joining me now live to weigh in, Kingsview Wealth Management chief investment officer and FOX business contributor Scott Martin. Scott, welcome.
SCOTT MARTIN: Hey, Mike, fist bump to you, by the way. How are you doing.
MIKE: From the Fox poll? The brand new Fox poll condition of the economy, 17%, excellent or good, 84% fair or poor. Scott, what is your assessment?
MARTIN: Oh, terrible. Is that on the list, Mike? I tell you, I’m surprised about that 17% that actually think things are okay. But the reality is this it’s where the numbers are really going and they’re going down, as was talked about in the previous segment. We’re trying to claw our way back to all these mistakes that have been made, whether it’s in gas prices, general inflation, overseas policy and so forth. And right now, the administration is struggling to even get back to say, halfway to where we were. And so you’re going to see those polls continue to fall as some of the economic data, the inflation numbers and sorts keep can continue to get worse.
MIKE: Gasoline prices, $4.53 a gallon today on average. Nationally, that’s down from five bucks a month ago, but up from 3.17 a year ago. What’s the big picture impact on the US economy?
MARTIN: It’s terrible. I mean, especially if you think about it on the consumer level, but also think about it on the producer level. I mean, think about all the costs as far as gasoline, diesel fuel that go into selling the goods and delivering them if you’re a company out there. So it’s affecting everyone. And I love the perspective, Mike, that you mentioned there. It’s like, yeah, sure, gas prices have fallen maybe in the last two weeks and the administration is taking a huge victory lap on it, or at least starting to warm up to take one. Yet, if you look at it over the last year, it’s a bad situation and that’s exactly what they want to do. They want to do these smoke and mirrors to tell you, hey, things are better over the last two weeks. But if you look beyond that or before that, it looks terrible. So therefore they need to get a lot more improvement going as far as getting the American people back to where they were.
MIKE: And it’s of course, it’s not just as the fuel pump, notable price hikes, eggs up 33%, but are up 21%. Milk up 16%. Gasoline up 59%. Airline fares up 34%. What tools should the Biden administration be using on these issues?
MARTIN: Well, hopefully none. Mike, because they’ve said they’ve tried to do everything they can. And when they can’t do anything, they say it’s part of the plan. So I want them to get out of the way. I mean, the reality is you have to let the free market operate and adjust price accordingly. It’s when they get involved. And that’s is the case for a lot of government issues. When they get involved, that’s when things get very skewed. And you’re right about those percentages. You know, the CPI, the Consumer Price Index, as we’re told, is about 9% to the high side right now as far as growth year over year. But some of these price fixtures, as far as some of the fixes in the prices that they’ve already tried to suggest they’re doing aren’t working because the numbers you showed there show that things are getting out of hand more than they are than they are less.
MIKE: So folks who’ve looked at their 401. KS retirement accounts, other investment accounts, notice they have taken a beating. What is your advice for investors right no
MARTIN: Well, everybody’s got a different kind of risk horizon and risk profile. But the reality is we’ve been through markets like this before. I know it feels like it’s different every time we’re investment advisors and we’ve seen markets like this with stress and so forth. So the reality is you’ve got to check yourself a little bit on your risk profile, see what you own, but realize this too shall pass eventually. Don does come even though it’s dark in the middle of the night here. But at least as far as the markets go, they will rally to a head mike of, say, an economic recovery because they always do. They preempt that recovery. So I think the market recovery is going to come sooner than people think, especially if the economy continues to languish here.
MIKE: And Scott, let’s end on a bright note. If the market’s down right now, is there an opportunity for investors to buy value?
MARTIN: Yes, depending on what you mean by value, I would tend to buy growth here because value is actually held in there pretty well vis a vis some of the growth components or counterparts. So you want to have a diversified basket of stocks for sure. But the reality is looking at what has probably the best potential to go up from here. I believe it’s growth stocks and things in technology.
MIKE: Scott Martin looking sharp on a Sunday. Scott, thanks very much.
MARTIN: And ending on a bright spot. Thank you, Mike.
MIKE: Thank you, sir.
Portfolio Manager Insights | Weekly Investor Commentary – 7.13.22
Download the PDF here for the full commentary.
PORTFOLIO MANAGER INSIGHTS
WEEKLY INVESTOR COMMENTARY | 7.13.22
Investment Committee
As the economy responds to inflationary pressures, investors continue to struggle with daily price swings across the stock market. This level of market volatility can be disorienting for even the most experienced investors, and some may even want to wait it out on the sidelines. While this may be tempting, history shows that this is neither the best approach to lower risk nor to take advantage of a future recovery. Instead, in challenging markets such as these, long-term investors can use valuations as a North Star to guide them over the coming years and decades. What do valuations tell us about long run returns today?
First, it’s important to discuss why valuations matter. In short, valuation measures are the best tools that investors have to gauge the attractiveness of the stock market over years and decades. Unlike stock prices on their own, valuations don’t just tell you how much something costs, but tell you what you get for your money in terms of earnings, book value, cash flow, dividends, and other fundamental measures. After all, holding shares of a company means you are entitled to a portion of its profitability, so paying an appropriate price for this can improve the odds of future gains.
Valuations are highly correlated with long-run returns
Valuations are correlated with long-term portfolio returns for this reason – i.e., buying when the market is cheap improves the chances of success, and vice versa. The chart above shows how the forward price-to-earnings ratio, which uses earnings estimates over the next twelve months, correspond to subsequent 1-year and 10-year annualized returns. The dots for 10-year annualized returns cluster more tightly around the trend line than do 1-year returns which can vary significantly.
The fact that any metric is this highly correlated with stock market returns is quite amazing. To a large extent, the reason this pattern exists is exactly because it is difficult to stay invested when markets fall and valuations are the most attractive. Just think about how most investors feel today, or back in March 2020, or during 2008. Staying patient is much easier said than done, but this data emphasizes how important it is in order to achieve financial goals.
There are other reasons valuations are much better indicators than prices alone. Prices can rise over long periods of time, just as they have for the U.S. stock market over the past century, despite bear markets and short-term corrections. Comparing prices today to previous peaks and troughs doesn’t make much sense across these distinct time periods. Valuations, on the other hand, “normalize” prices by some important measure such as sales, earnings or cash flow, and can thus be a guide across different market cycles. This adjustment makes prices more comparable over time to determine whether an asset class, sector or individual investment is attractive.
Today, various measures of value are far more attractive than they were even six months ago. As the chart below shows, the price-to-earnings ratio of the S&P 500 has fallen from near the peaks last seen during the dot-com bubble of the late 1990s and early 2000s, back toward the long run historical average. This closely-watched measure using next-twelve-month earnings estimates is hovering around 16.1x. Similarly, the Shiller P/E ratio, also known as the cyclically-adjusted P/E since it uses ten years of inflation-adjusted earnings, has declined to 28.9 from almost 39 at the end of 2021.
Stock market valuations are more attractive today
This same pattern can be found across a wide variety of valuation measures, from price-to-sales to dividend yields. Across asset classes, especially public equities, valuations are much more attractive today than at any point since mid-2020. Could valuations fluctuate further? Of course. If the market declines, valuation levels could look even more attractive. Conversely, if earnings decline as the economy decelerates, this could push valuations higher since lower profits mean that share prices are more expensive.
However, the point is that valuations are not a timing tool. As discussed above, valuations have very little historical correlation with returns over shorter time periods including one-year periods. It’s over several years or more that they begin to correspond to more attractive expected returns. For this reason, valuations are among the most important tools for constructing long-run portfolios. This is true even though markets can continue to rise or fall regardless of valuations in the meantime.
Different sizes, styles and sectors are more cheaply valued
Thus, in today’s difficult market environment in which all asset classes face significant uncertainty, investors ought to focus on valuation measures and not just daily price swings. The broad market is now cheaper than it has been in years, and many sizes, styles and sectors are more attractive as well. Large-cap growth stocks are still quite expensive after their significant run, despite this year’s drawdown. However, market sentiment has shifted in favor of areas such as value whose valuations are still much lower. Ultimately, diversifying across all of these areas, with an eye toward relative attractiveness, can help investors to position for future growth.
Where valuations go from here will be important for the direction of long run returns. However, investors should continue to stay invested and diversified as the cycle shifts from a bear market to an eventual recovery.
Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. (2022)
SVP Paul Nolte Interviewed on WGN Radio 7.12.22
Paul Nolte, Senior VP at Kingsview Wealth Management, joined Bob Sirott to talk about the rise in housing prices, the recovery of lost jobs, and when to expect another rate hike. He also explains what demand destruction is and what durable goods orders can predict.
SVP Paul Nolte Interviewed By Reuters 7.12.22
Reuters interviews Paul Nolte, SVP & Sr. Portfolio Manager
Kingsview SVP Paul Nolte discusses the risk of more volatility for bank stocks, but says the sector looks attractive over the long term.
CIO Scott Martin Interviewed on Fox News 7.8.22 Making Money With Charles Payne
Kingsview CIO Scott Martin discusses diversification and looking at stocks like 3M, LRCX and Cleveland Cliffs due to how they’re trading versus historical norms. He also talks about further Fed hikes and how those will affect the consumer.
Program: Making Money with Charles Payne
Date: 7/08/2022
Station: Fox Business News
Time: 2:00PM
CHARLES PAYNE: All right, folks, I don’t want to jinx it, but don’t look. Now, we may have our first five day winning streak of 2022. Of course, most market observers are going to write it off. They’re going to say it’s just a bear market bounce. Some will also say, hey, it’s just seasonal. By the way, historically, the 27th week of the year, which this is generally the second best of any given year. Now for the answer, though, I got the market bros together. We got Qorvo CEO Rob Lowe and a King’s View Wealth Management CEO Scott Martin. Let me start with you, Rob. I mean, listen, you have been more constructive the last few times you come on this show. So how are you feeling about the action we’re seeing this week?
ROB LUNA: I mean, I think the action is absolutely telling us that the market’s trying to put in a bottom, Charles. I mean, even today, you know, we’re not having quite the strength that we had the previous few days. But look, we had some bad news with that jobs number. We easily could have seen a retracement being down 2 to 3%. So the fact that the stocks are hanging in there, especially some of those leading stocks that we’ve been talking about, is exactly what you want to see if you’re an investor right now,
PAYNE: Scott.
SCOTT MARTIN: Yeah, I agree. I mean, some of the reactions to, like Rob said, the bad data. Charles and just frankly, that wave of selling pressure has been met with visceral buying pressure. I mean, you’ve had days where the market’s down in the morning, you take your eyes off the screen for about an hour, you come back. And we’ve rallied 20 S&P points in the amount of time it takes me to crush a lunch at White Castle, which I did earlier today. So there’s a lot of things to be excited about. I’m in Nashville, Tennessee, man, so that’s what you got to do. So the reality is this, Charles, going forward, I think Rob’s right. You’ve got to build on some of the foundation principles of good investing with respect to, yes, diversification, but also get into some of those names that are not being talked about, being thrown out with the baby, the bathwater and the bathtub, knowing that this is a possibly new market environment where passion is going to be met on the buy side finally versus the sell side.
PAYNE: Well, then let’s drill down on that. Right, because I’m looking at this market in two ways. You can either say I’m going to buy the most oversold stocks out there or I’m going to chase the ones that are ahead of the pack. Right. Because that’s what we’ve seen. Whatever sparks off, everyone jumps in, they ride it till it dies, and then they look for the next thing. Is that the way to go about it then?
MARTIN: Yes, in some cases. And in my case, I would throw this into your great alignment there, which is I’m buying stuff now. Charles Just to be a little safer, maybe a little more cushion, stuff that’s cheap and stuff that has been absolutely decimated as far as a P valuation or a price to book or a price to sales level. Those three names, for example, that I’m looking at today, 3M LRCX and Cleveland Cliffs, if you want to get a laugh and make sure you’re strapped into your chair, look how cheap these stocks are trading vis a vis their peers, as well as as well as historical norms. And realizing that you’re getting some of these stocks at very cheap levels in a growth phase for a lot of those names, especially LRCX, one of the best of the chips out there, a great sector, those are names that you can have, I think some safety in if the market doesn’t keep going up like it is the last few weeks.
PAYNE: Rob, what are you looking at?
LUNA: Yeah, I mean, I’m going to stick with the name like Restoration Hardware that I just personally picked up last week. Charles, you know, keep playing the crowd strikes, keep playing the Palo Alto networks because irrespective of recession, those names are going to hold up a name I really like. New name, UI Path, symbol path. These guys are creating efficiencies, using software to take people out of the workplace. If the economy gets tougher, businesses are going to start operating more efficiently, making money off of things like algorithms. You’ve got to look at this company. Charles Path. Pat It’s going to be a winner.
PAYNE: I’ve looked at it. I mean, I think it might have been one of those hot IPOs that then turn around and crashed and burned. I love this idea of Restoration Hardware. I haven’t gone in there yet, but it was already down from 700 to 200 when they warned and it went down even more. I think that’s overkill. All right. Let’s talk about the Fed for a moment. I want to see what camp you guys are in, soft landing, deep recession or they go to. They don’t go far enough. Let me go back to you, Rob. Are you comfortable that the Fed is going to be able to help engineer this market rebound you’re talking about?
LUNA: Yeah, I mean, I’m definitely in the minority camp here. I think we have the potential to do that yet. Jim Awad on there talking earlier. Right. Look, there’s still some inflation, but it’s coming down. Look at the jobs report. It’s not anywhere near as bad as what people thought it was. Things are slowing down. But all this is telling me, Charles, is we’re getting to a more normalized environment, more normalized economy, where there’s some rationality in terms of pricing and all these different things we’ve been looking at.
PAYNE: Yeah, Scott, you can definitely argue that that jobs report was somewhat Goldilocks, right? It wasn’t so bad that, you know, you know, listen, I know a lot of people want it to be bad because they want us to get out of the inflation argument and into the recession argument. So the Fed will stop hiking rates, but maybe they can glide their way out of this.
MARTIN: Yeah. I got good news for people who love bad news. That’s an album cover that I used to love from somebody anyway. The point is, is this, though you’re right, like it’s the Fed is in an interesting spot, though, Charles, because the market has already kind of baked in. I think a lot of the Fed rate hikes that are coming, at least the ones the next to say in July, in September. But if they go beyond that and inflation data starts to say cool off, and as Rob pointed out, as we’ve talked about, a recession is definitely here. A further Fed rate hikes, let’s say, after September, is probably going to be the worst thing to happen to the consumer since Paris Hilton came out with her debut music album. So think about that.
PAYNE: Hey, I got less than a minute to go. Earnings season next week. Everyone’s looking for a bunch of disasters because they say estimates are too high. I want you both, if you can, to give me a name that you think in the season will blow away. Consensus. Scott, you first.
MARTIN: Yeah, I think, Charles, you got to look at the Microsoft and the Apples because I think they’ve been to ratchet it down. A lot of analysts are starting to come on board with those. But if you look at some of the earnings history and we’ve gone through periods like this before for those two companies, those are areas, especially in some other tech fringe into what they do. Those companies really start to outperform, especially if we’re at the end of what I think is this short lived, very shallow recession,
PAYNE: Rob.
LUNA: Take a look at Amazon. I think that name has been beaten up. I don’t think it’s been nearly as bad as people think. They’re not looking at the U.S. side. Amazon, I think, is going to be big.
PAYNE: By the way. Google is talking about splitting up into two companies to avoid any sort of regulatory stuff. Would that make any of you a buyer?
MARTIN / LUNA: Yeah. Charles, the problem is valuations of each company.
PAYNE: Yeah, it sounds like two yeses. Rob Scott. Guys, have a great weekend.
CIO Scott Martin Interviewed on Fox News 7.8.22 Your World With Cavuto
Kingsview CIO Scott Martin discusses the work-from-home movement and national employment numbers.
Program: Your World with Cavuto
Date: 7/08/2022
Station: Fox Business News
Time: 4:00PM
CHARLES PAYNE: Should the U.S. be going Dutch? FOX News legal analyst Mercedes Colvin is with us along with Kingsville Asset Management. Scott Martin. Scott, I’m going to pick up on the productivity thing and America, this last labor productivity report we had was down 7.3%. Now there’s a lot of variables in there. But, you know, you hear folks from Elon Musk to Jamie Dimon all saying we need people to collaborate face to face. I think this would put employers at a serious disadvantage. Your thoughts?
SCOTT MARTIN: It does, Charles. And you’re right about the productivity numbers. They are ugly. And what a coincidence that kind of goes in line with a lot more folks working from home over that time period, huh? So just. Just data. Just statistics. But I think Jackie pointed out some interesting things. I was shocked to hear that they actually do work in Europe. That’s a new one for me. But let’s see, it does spill over to United States. You know, we hire a lot of folks every year, Charles. And I will tell you, man, a lot of folks that we have the requirement for the job, whether it’s the trading and the operations compliance at our firm. We require those folks to be in the office. And a lot of folks I mean, you look at the JOLTS survey, by the way, the job opening and labor turnover survey, try to say that three times fast, 11.3 million jobs are out there for folks to take. But similar to what we’ve been trying to hiring, trying to hire this year, Charles, these folks don’t want to come into the office or they want to work two days from home, then three, then four, and it keeps accelerating and get full benefits and full salaries. So as Elon Musk pointed out, we want to require, at least on our firm folks to be in the office for a minimum amount of hours or give up some of the benefits or the salary if they want to stay home.
PAYNE: Mercedes, the legalities of this could have could the nation even force what this even be legal?
MERCEDES COWIN: Well, there could be. I mean, we saw that we have regulations that a lot of corporations was concerned about during the COVID. And obviously we’re still in the COVID phase. But when you look at some of the regulations that come down, yes, they can make those types of laws, but frankly, it’s not necessary. I mean, we saw a lot of overreach by some of the regulation that came down during the last couple of years. So there are mandates that can come forward and regulate this type of of hiring and firing and whatnot. But at the end of the day, if the employees want to work from home, guess what? They can choose other places to work. Employers have to make the decision whether that that talented candidate who wants to work from home can actually work in their in their offices without this government oversight and regulation. I think it’s kind of ridiculous. It’s self regulating. The corporations can do it on their own without needing government to really have a say in it.
PAYNE: Right. Right. I mean, right now, that’s the way it is. But, you know, there’s a big push in this country to sort of follow what Scott was saying, that sort of European model on things like that. And if if they did try to this, though, I mean, would there be a good challenge, what I’m worried about? For instance, the American Psychiatric Association did a big survey earlier this year, and over half the folks complained about some sort of mental issues associated with having work from home, loneliness, isolation, those kind of things. I can see people trying to sue their employer over something, the decision that they made.
COWIN: And they can’t. I mean, that’s a great point because Charles, they can sue under the Americans with Disabilities Act and say, I need to work for home. And for these following reasons, they can sue under the local anti-discrimination laws. There are so many laws already on the books that can regulate working from home. It’s not necessary to then clutter the courts again with other rules and regulations and encumbering corporations that either can self regulate because they want that talented candidate or too would be subject to to discrimination laws that are already exist if any of those decisions are being challenged in court. So I can’t imagine a universe that we would see these types of regulations coming to the United States. But then again, things have been so different in the last couple of years. Who knows what the future will hold?
PAYNE: You know, also these last couple of years, Scott, we saw where the stock market has sort of been a proxy for all of this. A year ago, all of those work from home stocks went through the roof, right? The peloton of the world, the zooms of the world to donkey sides of the world. All of a sudden they’re crashing big time. You know, is the stock market at least saying, hey, what everyone was saying was going to be the new normal, maybe won’t be the new normal?
MARTIN: Yeah, it was a little bit of a chase that was on Charles. But you’re right. I mean, people still are staying home, which is interesting, vis a vis those stocks and those stocks are still in the tank. So it’s an interesting aspect. I like what Mercedes said, though. It should be a self-regulating, like the free market will figure it out. But that’s one of the reasons, guys, that we have so much trouble filling these jobs. A lot of these folks out there that are they’re job seekers don’t want to do the things that the employers want them to do. With respect to coming to the office, I’m curious what Hunter Biden’s companies are going to do, though. Let’s see what their move is and then maybe we can follow that.
PAYNE: Of course, Mercedes in New York, you look at things like subway use is still under 50%. Meanwhile, I think everybody goes to the office down in Miami. Everyone’s moving down there. So I guess it might have something to do with where you are. Right. And listen, there’s some other issues that kind of influence whether we want to go to work or not. And New York City, I think it might be be crime and just the just the hassle of get to the office. Mercedes.
COWIN: Oh, I’m sorry. You’re talking to me, Joe. Yes. I mean, look, there is obviously a lot of challenges when it comes to certain jurisdictions around the country. But New York City, for one, has its own built in challenges. And I think commuting is one. Traffic is crazy, as you know. I’m sure all of us travel who travel into the city on a daily basis are dealing with overwhelming traffic. And the rising crime is a real issue. As an employer myself, we employ a lot of people in New York City. It’s a big, great point. It’s got these gas prices, $6 plus out here trying to get into the city. So all of that combined, there’s a lot of challenges.
PAYNE: I came back to the office early because I miss my colleagues. Thank you both very much.
MARTIN: And we missed you.
CIO Scott Martin Interviewed on Fox News 7.6.22
Program: Cavuto Coast to Coast
Date: 7/06/2022
Station: Fox Business News
Time: 12:00PM
NEIL CAVUTO: So the implications for this and for you if they come to pass. Let’s go to Scott Martin on all of this. Scott, what do you think?
SCOTT MARTIN: It doesn’t look too great, Neal, but the good news is, as we’ve talked about over the last several weeks and months, the sooner we get the admission that we’re in a recession by the administration or some of our favorite politicians, the sooner we’re going to be at the end of this thing. If it drags out, if it’s one of those things where we almost convince ourselves that we’re not in a recession than we are, then we’re not. The longer this drags on and therefore, the longer the impact is on the stock market. So you almost want to rip the Band-Aid off. You’ve got to get the Federal Reserve to at least be more accustomed to say, be more dovish again, which sounds crazy, considering they’re on this massive interest rate hiking cycle, if you talked about today. But the reality is the Fed is, well, we’ll come around to seeing that this recession is here. It’s probably softer than most recessions in the past, but it’s one we’ve got to go through to get the stock market economy back together.
CAVUTO: What if it’s happening at some feared it might that that the higher rates and the higher prices are coming down of their own accord because maybe at a higher rates and everything else but it’s not leading to a soft landing. It’s leading to a pretty hard one and maybe a recession.
MARTIN: Yes. And prices coming down are a good thing. You’re right. The market reacting to that, consumers reacting to higher prices with less demand is obviously good for the overall kind of cycle of things. But you don’t want them to crash too hard because the volatility of just the prices alone, Neil, will trouble a lot of the businesses that are selling the goods. The other problem, though, with respect to this kind of recession, with respect to the inflation component, is the job versus the labor market type of situation that we have setting up. Jobs are plentiful. We’ve seen the JOLTS numbers out recently. They’re very, very good. The labor market, though, however, is very stressed, very odd as far as not going out and really applying for those jobs. I mean, I hearken back to some of the advice Kim Kardashian gave everybody earlier in the spring about getting up and working. Let’s say, look that one up. It’s a great quote. But she’s actually kind of right. My inner Kim Kim Kardashian is coming out here because people are not going out and seeking those jobs. You know, they’re there. That would help the economy get back on its feet and get consumers back to work and actually increase wages and therefore combat some of the inflationary pressures that we have going on right now.
CAVUTO: You know, I’ve been arguing and, you know, maybe incorrectly, but I think I’m right that that this is certainly nothing like the seventies experience yet. And you and I have gotten into this a lot, Scott, that it could be that, but I don’t see that right now. I see a strong labor market not as strong. But again, another reminder that 11.3 million jobs are open versus 6 million unemployed in the US. So a lot of jobs go begging and that’s a strong environment that would take a lot to chip away at. It could still happen. I’m just wondering if that could be the economy and maybe the market’s saving grace.
MARTIN: I agree. And I think those two kind of factors or say measurements, Neil, need to narrow because jobs as we’ve seen with some of the big companies that had plentiful jobs out there now have started to cut those offerings. And so therefore, perhaps the consumer, the job seeker, goes out and finally finds the job they’re looking for. But to your point about the seventies, we are seeing that similar shock, though, that similar feel of how these rising prices, rising interest rates have really impacted us all as consumers. But it’s probably because, unlike the seventies, we had it probably too good for a few good years here. So the reality is where rates are up, they’re not going to stay this high probably, but they are going to be higher than they have been in the last ten years as our price is, because we frankly out of the financial crisis, we’re in a massive disinflationary or almost deflationary environment where the stock market was going up. The Fed was very accommodative and things were very affordable.
CAVUTO: Are you bullish now or cautious?
MARTIN: I’m getting there. I’m getting bullish. So kind of cautious, leaning bullish every day because the sooner or the faster that the market kind of falls and reacts or overreacts to a lot of this bad data that’s out there. Neil, I think the closer we get to a bottom and some of the stocks out of there, out there, the Apples, the Googles, the Microsofts, to name three, those are trading at really massive discounts to where they’ve traded in the last couple of decades. So they’re very tantalizing for investors that work with us with respect to 1 to 2 year time horizons, because those stocks will be higher after that period.
CAVUTO: Got it, my friend. Thank you very, very much, Scott Martin, following all of those developments.