Nolte Notes 3.22.21

March 22, 2021

The days are longer than the nights and the weather is beginning to warm up. Baseball starts in 10 days! Summer is just around the corner. The economic “issue” is that inflation is beginning to heat up as well. Getting lumber or copper for homebuilding or gas for your car is costing a whole lot more than a year ago. As a result, interest rates are rising and pushing the Fed to recognize that an ill wind that blows does nobody good. Inflation, in the words of the Fed, may be transitory, but for how long? Expectations are for an economy to be blowing hot during the summer as economies open around the world. With all the stimulus and people going back to work with extra money in their wallets, inflation may be around for something more than a transitory period. To be fair, the Fed has pulled the punch bowl from the party well ahead of things getting out of hand, but this time wants to wait until they start seeing the party really rolling before raising rates.

Last week’s economic data was less than stellar, but the key report will not be showing up until April’s jobs report. The weekly jobless data is stuck in low gear, without much change since Halloween. However, the continuing claims are about double that of early 2019 and about two-thirds of the peak in 2008/09. Other data points are indicating the economy is healing, albeit very slowly. The coming jobs report will be informative as to the type of jobs coming back. In early March, the jobs report showed a large pick-up in hospitality jobs, restaurant, hotel, and bars. The trend is expected to continue as various states are loosening the restrictions of the past six months or so. Commodity prices are beginning to roll over a bit, energy prices have dropped from their recent highs and agriculture prices are down for March. So, while inflation indices could continue to rise in the months ahead, some prices are beginning to decline. As vaccinations increase and economies open, the main debate is how much pent-up demand is out there. Many are hungry to get out, others remain cautious. Trying to guess human behavior after this year is a fool’s errand. We will watch how things unfold rather than trying to guess.

The direction of interest rates has been the focus of investors over the past month as rates on the 10-year bond is now at the highest level in over a year. However, looking back at the 10-year yield, rates have been in a range between 1.50% and 3% since mid-2011. Before collapsing to under 0.60% last summer, the yield on 10-year bonds was near 2%. The concern today is that inflation is going to spike, and the Fed will have to step in to raise rates. The Fed has stepped in early, anticipating the inflation that never came. Today, they want to see inflation before beginning to tighten rates. They should be on the sidelines until sometime in 2022.

The battle between growth and value continues to rage during March and has been dependent upon the direction of interest rates. When rates rise, growth stocks falter. When rates ease, growth races higher. Growth stocks are all about future expectations for earnings that get discounted back to a price today. As rates increase, that discount rate also increases, pushing today’s value lower. More cyclical stocks that are tied to economic growth benefit from a better economy. They tend to be very leveraged to economic growth, doing very well as the economy recovers and booms, and collapsing when the economy hits a recession. We have been concerned that growth stocks have “discounted” every possible bit of good news in their price, so any change could mean much lower prices if those expectations are not met. While not necessarily as egregiously priced as the tech bubble in 2000, many growth stocks are still priced for perfection and could fall dramatically if those expectations are not met. Meanwhile, little is expected of the consumer related stocks in the face of the pandemic. As the economy opens, many will do very well as consumers return and spend money. That rotation from growth to value is likely to continue in the weeks/months ahead as people start to feel better about mingling with others.

Interest rates are likely to continue to rise as economic growth should also rise dramatically over the summer months. While that growth may be temporary, investors will still fret about potentially higher inflation and a Fed that may begin to tighten monetary policy and push interest rates higher still.

The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.

2:30

CIO Scott Martin Interviewed on Fox Business News 3.19.21

Kingsview CIO Scott Martin discusses increased taxes and the Treasury Department’s record revenues.

Program: Cavuto Coast to Coast
Date: 3/19/2021
Station: Fox Business News
Time: 12:00PM

NEIL CAVUTO: All right, what is fair share for those of a certain age, I’ll probably be just leaving you out on this one, but it does remind me of a Luke Costello skit with Bud Abbott where he’s trying to explain something or understand something. So, for that audience, I’m just saying, you said FairShare was thirty-nine-point six percent and then we got it. Then you said it had to go up another few percentage points to forty two percent to pay a Medicare surtax. So, forty two percent was a fair share. Then it had to go up another three percent to pay for the Affordable Care Act. That brought it up to forty five percent. Then a number of states like New Jersey, they said, I’m going in and out of this, but they all of a sudden, we’re adding it to bring it over 50 percent and it’s still not a fair share. So, what is it? What is it? Let’s go back to two people who cannot remember Abbott and Costello, but they’re smart, nevertheless. Danielle DiMartino, both Scott Martin. Scott, what is i. I really don’t know. I mean, we can kid aside and do the you know, the whole Lou Costello thing about what is fair share, but it keeps changing. I don’t know if it’s going to go over 40 percent. And with all these other things over forty five percent where it stops, where it goes, what do you think?

SCOTT MARTIN: Yeah, maybe it has to do with the fact that the Treasury Department is receiving record revenues in taxes from the American people, so that may be something. Look, as far as the rich folks go, they don’t pay their fair share. Neil, they actually pay more than their fair share. And that’s really what worries me about how we treat the folks that are productive in society and create jobs and do the spending. I’m sitting here thinking about how to answer this question. I’m looking at this one point nine trillion exorbitant stimulus package we just passed a couple of weeks ago, the American Recovery Act or something like that plan. You know, that’s the amount of money that the Treasury Department gets in either income taxes just about to the dime, either in income taxes or payroll taxes. So why don’t we take that spending money? And why don’t we give people like a tax holiday and one of those two buckets? Because that’s where money is going to go. Best spent or best treated, not by taking it away from people to pay for some stimulus package that we didn’t need. That doesn’t go to good places. And I may be way off. I’m glad Daniels here because I might be missing something, but that seems to make a lot of sense to me.

CAVUTO: Well, I do know this much, Daniel. They’re very creative coming up with ways to get more money into Washington, not not to go to, you know, slowing down the amount of money leaving Washington. And that’s what worries me. I mean, we can talk about the rich and many of them can afford these higher taxes and all. But what is a fair share for them to make it right to stop saying that they’re not doing enough, that they’re hosing the system or whatever else is being argued on the part of those who say that they’re not doing enough when in fact, they’re paying the lion’s share of the taxes.

DANIELLE DIMARTINO BOOTH: You know, it’s hard to say, Neal, I don’t know that they think that there is necessarily a limit, but I can say this much. You know, the CPAs of across America are licking their chops right now because they’re like, oh, goody, they’re going to make the thousands and thousands and thousands of pages of US tax code even more complicated than they are by putting little things here and there, as you were saying, two percent, three percent. Look, I’ve got this great idea that would actually make it to where the IRS didn’t have to have as many people on their payroll so that we didn’t have to replenish it. Why don’t we simplify the tax code and make things a lot easier than they were then rather than just try and nickel, dime, nickel, dime, nickel, dime. If you are wealthy and you make the tax code that much more complicated, you’re just going to pay your CPA a little bit more money so that he can get you out of it. And if you really, really, really try and soak the rich, that’d be a that’d be great for other countries. For other countries. Neil.

CAVUTO: Yeah, everybody’s got a skin in the game, obviously, the rich should be paying more of that skin that I understand that’s the nature of our progressive tax code. But this is all out of whack here. I just have no idea what this moving target means and where it goes. But I have a good sense that neither of you are paying your fair share. So, you’re gonna have to pony up. Guys, I want to thank you both very, very much. Is the IRS, which, of course, is watching. We have a lot more coming up.

4:55

CIO Scott Martin Interviewed on Fox Business News 3.19.21

Kingsview CIO Scott Martin discusses pullback and the bond yield story.

Program: Making Money with Charles Payne
Date: 3/19/2021
Station: Fox Business News
Time: 2:00PM

CHARLES PAYNE: And then there are US taxes. Yes, they are going up, but more than likely they’ll be held in check by some of the same forces that curb the more egregious proposals that could have really slipped into that last rescue package. I know the progressive wish list is frightening, but moderates are now flexing their muscle and pushing back. But the changes and who could see higher taxes from individuals earning four hundred thousand to households? That’s a tough one, folks. It’s a hard bombshell to swallow. Now, maybe overall I’m being too sanguine. So, let’s get the read from Laffer Tengler Investments Chief Investment Officer, Nancy Tengler, Kingsview Wealth Management CIO, Fox Business contributor Scott Martin and Wealth Enhancement Group Senior Vice President Nicole Webb. Nancy, you know, listen, I know the market buys right now still to the downside, but I don’t see where the big risk are. I’m feeling like now’s the time. You know, we always talk about buying the dip. Now’s the time to start looking to buy that dip. What do you think?

NANCY TENGLER: Yeah, Charles. I mean, we’ve been waiting for a correction. We may have gotten it in the Nasdaq, but if you look at what’s going to drive this market forward from here, it is going to be continued strong economic data and earnings. So, we think you buy the dips for a while. It’s not a forever strategy, but we’re pretty bullish and we sort of see this market is more analogous to the 1990s productivity driven growth than most recent years.

PAYNE: You know, Scott, I know buy the dip is not forever, but it’s worked pretty good since March of 2009. Now, of course, I’m not one of those guys who wants anytime everyone comes on and we’re down one percent, I’m asking if you’re buying a dip. But to Nancy’s point, the Nasdaq certainly looks like it’s run its course. What do you think?

SCOTT MARTIN: Yeah, fifty percent of the time, Charles. It works every time. And I think in this environment, like Nancy said, that’s what you need to do. I mean, that’s the weird thing, right? It’s like, you know, as investors, a lot of us were chasing these crazy stocks from last year. And I’m talking about the Zoom’s, the PayPal’s, the Squares, the Docusigns, the Invidia is the Teladoc, the Pelton’s. I mean, that could go on and on. And they weren’t pulling back, but everybody kept piling in. And so finally, we’re getting some pullbacks, not we’re getting what in our estimation is an overreaction to the 10-year Treasury note going up in yield. As you said, Charles, and I quote, the yields will go up. I mean, they do that in times when we’re going to have better economic recovery ahead. So when you get the gift, Mr. and Mrs. Investor of a pullback of twenty five, thirty five, maybe even 40 percent in some of the names I mentioned already, those are times when you’ve got to go in and hold these things for the next six to 12 months.

PAYNE: You know Nicole, it’s so interesting because for the for the last half of last year, there were a lot of skeptics out there who pushed back on the notion that we were in a V shaped recovery. Those same voices are now saying the recovery is too strong, it’s too strong. So, help me out. Are we going from here?

NICOLE WEBB: Yeah. You know, to piggyback on what Scott and Nancy just said, I think the rest of the year has a rosy outlook, a lot of optimism, a lot of money. We keep hearing the narrative about all the cash on the sidelines. There are a couple of risks that will create buying opportunities in the short term. And I think one of those is the lockdown’s that we’re seeing in France and Italy right now. And so that might create a little bit of uneasiness in the U.S. markets in the weeks to come. You know, additionally, I think one of the concerns that we’re going to hear brought forward is we really have great consumption numbers. So even if we go back to full employment, where does the growth come from? And so, you know, well, I do think that this year is going to be a buy those little dips you just heard. It is great advice; I think continued uneasiness until we do normalize interest rates. But at some point, they will. And so investors have to be quickly

PAYNE: Nicole let me jump in for one second. What about things we just absolutely could not do over the last year? I mean, certainly airline tickets or airline sales will go up, concert sales will go up. I mean, there are some unique things we could spend money on that we couldn’t spend money on for a whole year.

WEBB: Absolutely, and I think we’re all chomping at the bit to get back out there. We’re just waiting for the A. OK, let’s get going. And I do think there’s still value there. You know, I do also think there was a simple pause this week in the oil markets. And as we talk about that, get out of the house, return to travel, you can return to that normal consumption. You know, those fun days ahead are going to be profitable for this economy.

PAYNE: Put me down for every concert, if you know a show. Let me know I’m going, by the way, today

MARTIN: I’m playing.

PAYNE: FedEx is the big winner — Let me know– anyone, And Scott, I’m with you. Buy an extra ticket. Buy two. I’m telling you. Now, today we were reminded that earnings do matter. FedEx has some strong numbers, strong guidance. And Scott, I want to go back to you on this because Nancy just referenced it. What about earnings? Right. There was a time when earnings were the main thing, particularly guidance. The mother’s milk of stock markets, I think, is going to matter more than bond yields going forward.

MARTIN: It might I have this concern, though, Charles, because it’s just a better headline right now, that the bond yield story is going to overshadow maybe the next quarter of earnings reports, which frankly, is so funny. I mean, it’s right around the corner. I mean, April’s knocking on the door here. So, April, May, I still believe the headlines are going to be dominated by, oh, my gosh, the ten years at two percent like everybody used to freak out. So, we’re going to lose a quarter, I think, Charles, of that earnings potential, the earnings attention that it deserves. But what’s going to happen is. If you’re an at home investor and you’re missing some of those great indicators, you’re going to be left holding the bag of these interest rate scares and not paying attention to some of these great earnings out there, which by the time they actually do show up in the market, does turn its attention there. It may be too late to get into some of those stocks that have shown up so well in next couple of months.

PAYNE: Nancy, That’s a really interesting aspect about today’s session. First of all, the VIX is getting hammered, the VIX is down. We’re near the lowest point we’ve been in a year, the so-called fear index. So, bond yields have rocketed higher. That means value stocks should be up. No growth is rocking today. What is what is the message of this market for you, Nancy?

TENGLER: Well, day to day, it’s kind of head snapping. But for us, like Scott just said, we’re using the opportunity. The weakness is an opportunity to add to techs. We don’t think the tech story’s over. And I’ve said that on your show many times. We’re not buying growth at any price. We’re buying growth at a reasonable price. And our favorite investment theme is where consumer, which Nicole was mentioning, and it will be robust, where consumer meets digital and that those are some of the names that that we really look forward to add and weakness.

PAYNE: Well, today, Etsy is the number one performer in the market would that qualify?

TENGLER: That’s not one we’re watching. Unfortunately, it’s a little too lofty for us still. But other names like some of the traditional restaurants, Starbucks is.

PAYNE: I got you, I understand. That’s Williams-Sonoma. They reported in the digital. The e-commerce was 70 percent of overall revenue. And that stock is taking off like a rocket. Nicole same question to you… Do you find it intriguing? For the last five weeks, investors were told yields up growth down. Today, yields have rocketed higher and growth names, {INAUDIBLE} communications services through the roof.

WEBB: No, I, I, I think that growth is here to stay. And that story continues and the ecosystems are so sticky. You know, I think it’s going to be this conversational shift from work from home to cloud technologies. You know, I also think it’ll be really interesting and again, create buying opportunities when you’re sitting there watching these shifts, knowing very well that technology isn’t going anywhere, that this is disruption caused by changes in interest rates that will normalize. In addition to that, we’re going to we’re going to hit the one-year anniversary of the market lows in March. And I do get curious if we’re going to see some of that some of these momentum investments starting to pick up a lot of value as they rebalance and so picking up a simple value ETF may have a lot of tailwind in it in the weeks ahead. And I think that could be interesting. But again, it may also trigger that that buying opportunity.

PAYNE: I like what you said. The tech isn’t going anywhere. Imagine if we didn’t have tech. I could be doing this show from the house. All four of us would have a string and a cup and we’d be trying to get this thing done. Scott, Nicole, Nancy, thank you all very much. Appreciate it.

8:33

CIO Scott Martin Interviewed on Fox Business News 3.16.21

Kingsview CIO Scott Martin discusses new taxes and regulations, and how small business may be impacted.

Program: Cavuto Coast to Coast
Date: 3/16/2021
Station: Fox Business News
Time: 12:00PM

DAVID ASMAN: President Biden reportedly planning the first major tax hike in almost thirty years. There was one under Obama. I guess they don’t consider that to be major, but the market doesn’t seem to be responding. Why not? Let’s bring in Scott Martin and Brian Wesbury. Scott, first to you. I think so far, the market is more happy about all of the ends of the lockdowns we just talked about. Even California is now ending a lot of its lockdowns. They’re more focused on that than they are the rising costs of doing business because of tax hikes. What do you think?

SCOTT MARTIN: Yeah, I agree, David. And let’s face it, some of the high, lets say, from some of the spending needs to wear off, too. But you’re right, I think eventually the market will come to grips with tax hikes. Now, maybe there’s one thing too going on, David, where maybe they think some of this stuff is just, say, pomp and circumstance and won’t get all the way through. But the reality is this. If you look at companies going forward-facing higher taxes, that’s definitely going to hurt jobs, but also maybe make companies more efficient, obviously drive up productivity, drive up revenue per employee. So there’s maybe some good things that could come of this. But by and large, when they set in, if they are draconian, as they seem, that could definitely impact stock price.

ASMAN: Now, Brian, I’m not too worried about the wealth tax, honestly, because I think that despite all the problems it could cause, it’s unconstitutional. It would go to the Supreme Court, take years to deal with and also Americans, It’s just un-American. People don’t want tax police digging up their backyard, looking for buried gold and and jewelry and pictures and so forth. So it’s just it’s just a nasty tax that I don’t think will pass the muster. But when I look at the fact that they’re thinking of paring back and I’m quoting from an article here, they’re thinking of paring back tax preferences for so-called pass-through businesses. Most businesses in America are passed

through businesses. There’s a lot of people who are small business owners who who pour their income back into their — they pay their profit in terms of income tax and they pour their money back in from their profits back into their business. They’re not millionaires, even though it may appear so on paper.

BRIAN WESBURY: Right. Right. I mean, this is absolutely correct. And I want to, you know, ditto Scott for what he said. Except for one thing, I do not believe tax hikes have any positive impact on the economy or productivity or job creation. None, zero, nada. And so then to go to this pass-through tax, you know, you either pay taxes at the business level or you pay them at the individual level. And so if there is pass-through income, individuals pay the tax. And so if you start, you tax it in both places, you’re now double taxing. And that really harms growth over time. One of the things that I think the market is looking at today is, look, we just spent one point nine trillion on top of about four trillion last year. We’re talking about spending two to four trillion more and hiking taxes. The tax hikes won’t go into effect until next year. The initial phase of borrowing on our credit card to spend actually boost economic growth and profits. So that helps the market. And so what we have is kind of a medium to long term problem, while in the short term, short term, we get to live with a sugar with the sugar high.

ASMAN: Let me let Scott back in here. Hold on a second. Because Scott, the fact is, it looks like this administration is thinking of making the same mistake made by the Obama-Biden administration, just when the the economy’s getting back on its feet. That’s when we get new taxes, new regulations. Of course, we’ve already had regulations in the energy field, but we could be suppressing take-off of the economy in twenty, twenty-two. We’ll see that initial phase this year because the whole all of the end of the lockdown is going to create a boom. But just as we’re getting back on our feet again, we could come down with the cost of doing business because of regs and taxes.

MARTIN: Yeah, it’s back to the “you didn’t build that days” from Obama. And that’s the scary thing, too. I think you have these small businesses that have actually made it through the government shutdown and the government force of closing them down because they knew better. And now these businesses that have made it through by the skin of their teeth, which is very, very small, by the way, they actually say now you’ve got to pay more because you actually made it. You know, you have to pay for all this malaise in this excess creation of spending that we’ve done, the American rescue plan that we didn’t need, that we needed, because the government shut everybody down, took away everybody’s liberty and told them what to do with their business, with their personal lives, because the government knew better. That’s the scary part. Brian’s right. He’s smarter than I am in the sense that you’re right, taxes are bad. Maybe it does make businesses more efficient in some way. But tax money, when the government says we know what to do with your money better than you do, that’s where I get worried and saying it’s tax money. It’s just a euphemism for them saying they’re gonna take it from ya.

ASMAN: There’s not a lot of skin on anybody’s teeth these days. That’s the bottom line. Brian, I wish we had more time, but we’ve run out, you guys are really terrific. Thanks very much for being here. Appreciate it.

***

5:14

SVP Paul Nolte Interviewed on TD Ameritrade 3.12.21

SVP and Portfolio Manager Paul Nolte discusses futures movers, like crude oil and the major indices as well as expectations for the FOMC meeting scheduled for next week.

Click here to watch the video

2:30

Nolte Notes 3.15.21

May 15, 2021

As we “celebrate” the first anniversary of the “just two-week lockdown” to bend the curve, the economy remains a mess even though Wall Street is doing fine. Another $1.9 trillion will be doled out over the coming weeks and months to help the economy and those impacted by job loss recover. Until the economy opens fully, it will be hard to restore jobs, especially in the service sector. Market psychology has shifted from benefiting companies helped by working/staying at home to a hopeful reopening of the economy. The bond market is sniffing inflationary pressures and concerns about the time when the population is unleashed from a restricted lifestyle. Interest rates have increased significantly and this week we will hear from Fed Chair Powell regarding their position on keeping rates low for longer and when it will begin to shift. As the weather warms and vaccines find arms, the summer is expected to be “more normal”. Anything less will be a huge disappointment after the past year.

The economic damage of the past year is still very evident in the weekly jobless claims figures. The average of the past year is roughly 50% higher than the average during the financial crisis. The response from the government has been multiples more than during 2008-’09. Unlike that period, this one is completely health related and will take broader vaccination and local governments to relax restrictions on the service economy to realize a stronger recovery. The inflationary worries have not yet shown up in the “official” data, as both consumer and producer prices were as expected and are still well below the Fed’s 2% target. That will change in the coming months as commodity prices have jumped by over 20% since the end of last March. Even pulling out the usually volatile food and energy, prices are expected to soon be above that 2% level. If consumers have money to pay the higher prices, inflation can linger. The extension of various programs into fall may allow many to have money in their pockets and keep the pressure on prices. Once the economy fully recovers, wage growth will be the key driver for “durable” inflation. This dynamic will be under the microscope at the Fed meeting and the press conference that will follow. The markets are sure to react.

The bond market has been at the center of investor’s focus as longer-term bond yields have been rising in response to expectations for higher economic growth and inflation. The impact has been felt more in the treasury market and to a lesser extent the corporate bond. Corporate bond (and to a lesser extent) municipal bonds are dependent upon the health of the specific issuer. Better economic growth and higher local tax revenue will benefit these parts of the bond market. The huge issuance of treasury bonds to pay for the various pandemic programs will have a tougher time to be absorbed within the market, pushing rates up on government bonds.

After being neglected for the better part of 10 years, other parts of the markets are indeed waking up. Small stocks are up better than 20% just this year. Energy, the black gold variety, is up over 40%. While much of the attention has gone toward technology, this shift toward “everything else” has been picking up steam over the past six months. Some of this is due to expectations for better economic growth. Energy has been pushed down so far that it was impossible to find storage a year ago and you could get paid to hold it (assuming you had a few tankers in the backyard!). Today, pump prices are at or over $3/gal. Smaller stocks tend to be more domestic and do not have as much international exposure as their larger cousins. Many of these companies suffered in the early days of the pandemic and for those surviving, they are likely to thrive as growth picks up.

Interest rates and investor ebullience may be the only things to derail the markets over the long-term. Over the short-term, stocks may take a rest especially in front of the Fed meeting this week. Volatility has not subsided, but few notice it when stocks rise!

The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions

2:30

CIO Scott Martin Interviewed on Fox Business News 3.12.21

Kingsview CIO Scott Martin discusses gold and the hedge against inflation, plus what’s happening with tech, restaurants and airlines.

Program: Making Money with Charles Payne
Date: 3/12/2021
Station: Fox Business News
Time: 2:00PM

CHARLES PAYNE: I’m going to bring in Gibbs Wealth Management’s Erin Gibbs, the Delancey Strategies president, Jared Levy and Kingsview Wealth Management CIO, also Fox Business contributor Scott Martin. Let me start with you, Erin, because I got to admit, you’ve been ahead of the crowd. You were on cyclical names. You talked about them a lot. And of course, now they are benefiting from an improving economy. But you can almost argue that some of them look like they’re getting expensive, and growth may be getting oversold. So are you making any adjustments yet?

ERIN GIBBS: No, I don’t see them as really turning or having any change in trend while they are getting more expensive and growth. I wouldn’t call it quite oversold just yet when you look at some of those valuations. But just taking example, one of my favorites, financials, the financial sector is still trading at a thirty percent discount to the S&P. Five hundred. And that historically is an extreme discount even in a low yield environment. We’re normally talking about a twenty percent discount, not thirty to forty. So I still don’t see this as overbought by any means. And there’s still room for it to grow.

PAYNE: All right Scott, a gusher of money coming in, it’s got to go somewhere, how do we get positioned for it?

SCOTT MARTIN: I think it goes to stocks, Charles, into Erin’s point, just to dovetail that we actually took some money from, say, weaken tech to the beaten up tech last week. And what that means, Charles, is looking at things like Square, looking at things like Invidia, DocuSign, Teladoc, things that got way blasted down, down a linear regression support lines, as well as things that just got, frankly, oversold on say, the RF side and the Mac D’s to get technical on you. And so those are areas, too, to your lead in there, Charles, where you I think you can start picking up some positions, and that’s what’s

going to make a good stock picker this year is waiting for those stocks, those high flyers from last year. Yes. To come back to you at a price level where you can take another bite.

PAYNE: You know, I’m inclined to agree with you that the – that the stay at home, the tech side of that probably way oversold. Someone, in fact, a third-tier firm, put a sell on Square today. So to your point, there on my watch list as well, Jared, how are you playing this?

JARED LEVY: You know, I like everything that Scottie said. You know, I think that the way I’m kind of spinning it is I’m looking for two things. A, I’m looking for sort of there’s transformational names, the maybe haven’t gotten all the love. You know, I’m liking Best Buy right here. They’re transforming into digital. We’ve got all this sort of pent-up potential in Consumers are now getting back to the streets. They’ve got savings. They’ve got cash in hand. They’ve got optimism on trying to play that. Also looking at Johnson and Johnson, a little defensive, but I don’t think people are taking the efficacy and convenience of their shot plus their every day, you know, sort of play to the consumer as seriously as they should. So I like those two names, you know, and that’s that’s what I’m kind of moving into here watching for some of the high flyers in Leisure. There has been a lot of big buying in like PEJ, which is an ETF to buy a lot of leisure, watch out on those names. I don’t know if I would be gobbling up here, I’d wait for a pullback.

PAYNE: It’s so weird too with Staples, right? I mean, they had a flash at the very beginning as a defensive place and then they have been totally under water. Let’s stick with this theme, though. The consumer we had sentiment numbers out this morning came in stronger than expected. It was powered by an almost ten percent spike in expectations. So we’re feeling more confident about six months down the road, in fact, the second-highest level since last March. In addition to that, L brands posted a strong financial result. They up their first-quarter guidance, almost doubled it to sixty-five cents from thirty-five. They’ve reinstated the dividend for the year. It’s going to be sixty cents. This company following Gap saying it’s going to be a huge year. Jared, I’ll go back to you. First, I’m going to take a victory lap because last year I was pounding the table. I told people to buy brick-and-mortar retail, and they have gone through the roof. In fact, I still own some Gap stores at thirteen. What about some of these other names? Because, again, it’s so crazy when Wall Street seems to be warming up.

A lot of these names have taken off to the point. You wonder if you missed it.

LEVY: Yeah, I think there is some room there. By the way, kudos on that call. I know you’ve made I know you’ve stuck with this one, and sometimes it’s hard to do right. I think what we’ve got to remember is this remember pent-up consumer demand. We just had a year of pretty rough times for a lot of retailers, a lot of brick and mortar guys that had to kind of reinvent themselves. So right now, you’ve got these lean, mean fighting machines that when the consumer returns to the normal buying levels or normal activity, a lot of them will flourish. I think you’ve got to look at a name by name basis. I think you need to be sort of, again, careful just going out and buying a retail ETF, you know, get the Macy’s of the world. I would watch a little bit some of the smaller plays that you were talking about. You know, Gap could be interesting. I think you just got to be a definite stock picker there. Just don’t go by brick-and-mortar retail. But I like the sector. I think it’s going to continue to perform generally well.

PAYNE: Erin, you know, a lot of people are gonna have alot of money burning a hole in their pockets. I mean, how how do you positioning for that?

GIBBS: So I’m still hesitant about a lot of the apparel retailers. I mean, I think Elle Brands is different because they had the bath and body which really helped them. But aside from that, when you get all your new clothes, you want to go out. So my idea more is looking at restaurants, look at Leisure, right? You get these new clothes. Darden Restaurants, a little more upscale. It’s not your fast food that we’ve been living off of. And so I think Darden Restaurants and those types of slow, fast food, family eating could really take off over the next six months.

PAYNE: Oh, I agree. I was trying to figure out a way to take this equipment out of this room and to the front lawn. That’s how beautiful it is outside and how eager it is. I want to get out there. Hey, Scott, let me ask you about Gold. There was a report out earlier this week. It’s not living up to the hype in terms of being a hedge against inflation. Is it time to reconsider some other hedge against this inflation story that won’t go away?

MARTIN: Yes, I believe it is, Charles, and, you know, I’ve been a Gold lover on Gold was great last year. I mean, Gold really helped out our portfolios as far as reducing volatility. So it did serve its purpose and now it’s just not doing

much. So there’s two things. One, I think that love is kind of going to Bitcoin, which obviously we’ve seen take off for Gold is kind of slumped. But I’ll tell you, man, if there’s real inflation out there and this is true, do inflation that’s coming down the pike here, stocks, stocks are going to be that hedge because you’re going to see the inflation pace pick up in stock prices. And so I think stocks here are good hedge against any inflation expectations that we have.

PAYNE: I got to ask all of you about this report out saying that stock pickers underperformed the market yet again, eleven straight years of lagging the S&P 500. I’ll go back to you on this first, Scott. I mean, what’s the argument for professional stock pickers?

MARTIN: Well, at least for ones like me, I hate to say it, but we actually did beat the market. So I don’t know who we are talking about. But you can go back on the tape, Charles. You know, I like something that Erin talked about because we talked about stuff like Darden Restaurants. We talked about stuff like Bloomin last year –we talked about Southwest Airlines. I said, I love Southwest Airlines. LUV is the ticker. So I don’t know how these stock pickers missed it. But you’ve got to stay with good themes and you have to be able to deal with volatility. I think on some of the stock pickers I’ve seen and looked into, they sell too early or they sell too late and they don’t hang on.

PAYNE: Jared, I got to tell you, I do find the data to be very suspicious, particularly last year, because the winners won big and the losers lost big. And I don’t see how some of these general funds could have beaten people who really just saw things like we talk about on this show every day. But what do you tell someone who says, well, maybe I should just buy a regular old ETF?

LEVY: There’s two bits of this, right, I mean, Scott, he’s right, you know, I look at my numbers, I look at a lot of my my colleagues numbers they’re doing great. Here’s the thing you got to remember, right, when markets are sort of straight up parabolic in one direction over a long period of time, everybody is a genius. All of my friends, all of my doctor buddies are out there like, dude, I’m killing in the markets. Yeah, you are because stocks did nothing but go up. Now, remember, as pros were diversifying, were buying insurance, we’re spending money on the just in cases and we’re also protecting ourselves for when the term does come, so some of that money, some of that upside might

be spent on protective measures. So I would think that’s the general theme, that as an investor, you got to think about. You know, if you put your money just in an ETF and let it sit there, be prepared, like Scotty said, for some volatility to wild ride, whereas the is going to massage that a little bit. And usually when markets are volatile, they will return that volatility then than the average.

PAYNE: That that reminds me of our old colleague here, John Stossel. He did a show once where he put a bunch of symbols on a dartboard and threw darts. And then at the end of the year, he said he outperformed the market, but he didn’t deal, Erin, with the emotions of it. You know, you buy Boeing, for instance. How many people have sold Boeing at a loss in the last year and now it’s through the roof again, the emotional part of this, I think a lot of people have to understand in hindsight, it looks easy.

GIBBS: It does, and I think part of it is is really sticking to our convictions and an understanding of the thematic changes, and certainly with the advent of ETFs, it is harder for managers to beat. And we’ve known that. The more ETF there are, the harder it is for active managers to beat. But when you look at the big changes years like two thousand nine, twenty ten, those are the years where active managers actually beat. Same with two thousand three, four and five. So when you see big thematic changes, those are the years where managers can really help and you look ahead and stick to their themes and beat the market.

PAYNE: And then last year and a half has been all about things, I’m telling you, I think I think only what less than sixty percent of the stocks in the S&P were winners last year. You really have to be spot on, Erin, Jared and Scott, thank you very much. And that’s why I had this conversation with you, because you all have amazing, impeccable track records.

9:51

Nolte Notes 3.8.21

March 8, 2021

“To everything there is a season… a time to gain and a time to lose.” Using a synonym for turn, Wall Street prefers “rotate, rotate, rotate”. Since the most recent “bottom” in the market just ahead of the election, there has been a rotation in the markets from technology toward more cyclical issues. Due in large part to the decline in COVID cases around the country and opening states like Texas and Mississippi, there is hope that summer will be full of concerts, ballgames, and movies. While maybe not at capacity, the expectations for “normal” has pushed investors toward companies that benefit from fully opening the economy. Inflationary worries have also crept back into investors’ minds, although Fed Chair Powell gave no indication of adjusting their low rates for a long-time policy. Commodity prices have picked up very noticeably as many indices tracking them are up over 15% from this point a year ago. If the economic expectations are indeed correct, it will be a time to build up and dance, rather than to mourn.

Expectations were high for the last chat by Fed Chair Powell before the Fed enters their “quiet” period ahead of their next meeting in mid-March to address the rise in rates. He basically said that there remains plenty of “slack” in the economy and any inflationary pressures are like to be “transitory”. To translate, with employment where it is today and the gains reported last Friday, were it to continue, it would take until late 2023 before the economy made it back to employment levels last seen just before the pandemic started. He (and the Fed) also believes that the rise in commodity prices will flatten out in the months ahead as supply and demand begin to balance out. There have been so many disruptions due to the virus, that getting goods into the economy has been tough, so what is available can be had at a high price. That should moderate as businesses open, and money begins to flow around the economy. The employment report on Friday showed the impact of businesses opening as many of the “new” jobs were in leisure and hospitality. As weather warms and (maybe?) restrictions eased, employment gains should be quite large in the months ahead. The bigger questions will be whether prices begin to moderate or will the Fed have to deal with rising inflationary pressures.

The excitement was not in stocks, but in the bond market last week and seemingly for the past month as investors wring their hands about incipient inflation. We have been down this road more than a few times over the past couple of decades. Commodity prices are up over 20% vs. a year ago, their fastest rate in 10 years. The steepening yield curve, or long rates rising fast than (the nailed down) short rates is a typical response. These bouts do not last long, a few months or so, before commodity prices begin to decline. What is normal too, is a steep yield curve. We have had more than 2 percentage point differences between short and long-term rates for years. Starting with 9/11/01, the next three years saw a very steep yield curve. Again, starting a year ahead of the stock market bottom in March of 2009 and for the next eight years the yield curve was steeper than today. What is less typical is the flat curve that we have had up until a year ago. During those periods, stock investors did just fine.

The death of technology has been called for quite often over the past few years. The rotation toward value and away from growth has had its moments before investors headed back to technology. Even international, where technology is a small portion of their economies is seeing investor interest pick up recently. The top stocks within the various popular averages are down an average of 10-13%, with the top 5 averaging a better than 20% drop. As we have highlighted often over the past few years, technology companies are selling at very high multiples given their recent earnings and sales. If the economy does indeed begin to re-open, people will be wanting to have “experiences” once again rather than be tied to a technology device. Just maybe this time we see the move toward other parts of the market as a lasting “thing”. Markets usually shift leadership coming out of recessions. This one has just taken longer than most.

We will be watching the yield curve and commodity prices to judge the staying power of any inflationary pressures. Bond investors are likely to suffer additional declines in value as yields rise. Finally, full passage of the stimulus package could be a signal to “sell the news” as investors have been buying the rumor for months.

The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions

2:30

CIO Scott Martin Interviewed on Fox Business News 3.5.21

Kingsview CIO Scott Martin discusses interest rates, “good” inflation and reinflating stocks after the stimulus.

Program: Making Money with Charles Payne
Date: 3/5/2021
Station: Fox Business News
Time: 2:00PM

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.

6:57

CIO Scott Martin Interviewed on Fox Business News 3.5.21

Kingsview CIO Scott Martin talks about the transitory phase that is pushing around markets, inflation rates and great buying opportunities.

Program: Your World with Neil Cavuto
Date: 3/5/2021
Station: Fox Business News
Time: 4:00PM

NEIL CAVUTO: All right, sometimes good news is just good news, it can sometimes rattle the markets. It means higher interest rates today when all the dust settles because of that strong employment report that saw three hundred seventy-nine thousand jobs added to the economy, the unemployment rate dipping down to six-point two percent. It was enough to propel stocks up about 600 points. Interest rates have been back it up a little bit. But again, all of that has been in response to this strong economy and investors are juggling. Is that good or bad, especially if it means now we don’t need as generous stimulus and markets like stimulus. It’s a mess. It’s confusing. But right now, Scott Martin, an uncanny read of these markets and their manic ways can help explain what’s going on at the end of the day, the end of the week. Scott, it sounds like they were OK with the strong economy. They could live with that. They in fact, they welcome that pretty much. Right.

SCOTT MARTIN: It also looks like at the end of the week, Neil, I picked the wrong week to quit drinking because we needed it this week. I mean, the markets were all over the place. That’s a Lloyd Bridges reference, by the way, from airplane, not mine, so everybody just calm down

CAVUTO: But very good, very good, before you were born.

MARTIN: And there’s there’s more behind that where they came from. But, Neil, you’re right. I mean, the markets have been very schizophrenic this week because they’re dealing with higher interest rates because of all the debt we’re issuing to pay for all these stimulus plans. They’re dealing with the fact that, yes, I mean, my goodness, the economy is going to start breathing on its own for once in the last couple of years. And so, we’re excited about that, at least since covid started. And we are going to get some inflation as a result. Boys and girls, because of the growth. And so, we have to come to grips with kind of this transitory phase that is pushing around markets, scaring investors for sure. I mean, some of my clients were pretty freaked out yesterday. And as

we talked yesterday, great buying opportunity on the FBN show Cavuto Coast to Coast because of the fact that things were overdone yesterday, Neil. Today they got back to where they should be, I believe.

CAVUTO: Yeah, you pointed that out, but a lot of people don’t get FBN, I say they should demand it, but they miss that

MARTIN: But Demand it.

CAVUTO: Real quickly, Scott. Yeah, there we go. This notion that interests rates go higher when the economy starts humming like it has been, I guess the worry is that those rates could go a lot higher. Where are you on this?

MARTIN: They could go a little higher. I think they’re going to top out here maybe on the ten-year note, around two percent, a really good friend of mine and his wife in the late seventies. I think you know who this is Neil, bought a house where the mortgage rate on it for, I don’t know, twenty percent, what was it, seventeen I think — we could ask him right now. Your rates on your home, on your home mortgages aren’t bad. You’re saving rates were terrible. It’s not a lot to worry about.

CAVUTO: Thirteen and a half percent, I was a Nostradamus long before…

MARTIN: You thought you were a wiz… and we’re complaining about three percent rates maybe.

CAVUTO: Exactly. But it’s what you’re used to, right? The trend is what rattles folks. But Scott, well explained. I appreciate that, these kids today, Scott Martin, on all of that. In the meantime.

2:53