A FOX BUSINESS EXCLUSIVE.
>>> ALL RIGHT.
INVESTORS ALREADY UNDER PRESSURE
ON INFLATION AND THOSE FED IF
RATE HIKE WORRIES, BUT NOW
GEOPOLITICAL CONCERNS ARE PILING
ON.
IN A WHITE HOUSE BRIEFING THE
LAST HOUR, NATIONAL SECURITY
ADVISER JAKE SULLIVAN WARNING
THAT RUSSIA COULD POTENTIALLY
LAUNCH AN INVASION OF UKRAINE
ANY DAY NOW AND ADVISED ANY
AMERICANS STILL THERE TO LEAVE
IMMEDIATELY.
SULLIVAN ALSO SAID AN ATTACK
COULD POSSIBLY COME WHILE THE
OLYMPICS IN BEIJING ARE ONGOING.
LET’S START WITH THE 10-YEAR
TREASURY YIELD, LOSING GROUND AS
INVESTORS FLEE TO THE SAFETY OF
GOVERNMENT BONDS.
THE TREASURY YIELD IS NOW DOWN 8
BASIS POINTS, 1.95%.
WALL STREET’S FEAR GAUGE, THE
VIX INDEX, IS HITTING ITS
HIGHEST LEVEL SINCE JANUARY
31ST.
IT WAS AT 31, NOW IT’S BACKING
OFF TO 29 AND CHANGE.
OIL FUTURES RISING OVER 5%, NOW
93.60 A BARREL.
THE U.S. DOLLAR, THAT IS
STRENGTHENING ON THE INVASION
FEARS OF UKRAINE AS WELL.
AND DEFENSE NAMES ARE MOVING
HIGHER AT THIS HOUR.
LET’S PULL THEM UP AND TALK MORE
ABOUT.
THIS DEVELOPING GEOPOLITICAL
CRISIS WITH CHIEF GLOBAL
STRATEGIST IS AT JPMORGAN CHASE,
DAVID KELLY.
I’M JUST LOOKING AT THE PLAYS
THAT INVESTORS HAVE IN FRONT OF
THEM.
YOU’VE GOT INFLATION, NOW YOU
HAVE THE RUSSIAN TENSIONS.
DO WE STAND A CHANCE?
WHAT DO YOU DO?
>> I THINK THE MARKET WILL
CORRECT MORE SIGNIFICANTLY
BECAUSE OF THIS IF WE DO HAVE AN
ACTUAL RUSSIAN INVASION OF
UKRAINE BECAUSE THAT COULD
DISRUPT GLOBAL OIL MARKETS,
GLOBAL NATURAL GAS MARKETS,
COULD AFFECT THE EUROPEAN
ECONOMY.
BUT I THINK WHAT YOU DO IS LOOK
AT VALUATIONS.
THE WHOLE MARKET ISN’T AFFECTED.
LARGE CAP GROWTH STOCKS IN THE
U.S. ARE PRETTY EXPENSIVE, BUT
VALUE STOCKS AREN’T EXPENSIVE.
INTERNATIONAL STOCKS, IN
GENERAL, ARE NOT EXPENSIVE.
THERE ARE AREAS IN THE MARKET
YOU CAN INVEST IN AND NOT BE TOO
EXPOSED AS A LONG-TERM INVESTOR
EVEN IF THE MARKET TAKES A HIT
FROM THIS.
LA.
LAUREN: SO FAR THIS YEAR THE S&P
500 IS DOWN ABOUT 7%.
YOU SAY THE MARKET CAN INSTANTLY
CORRECT?
WHAT IS THE DECLINE THAT YOU’RE
LOOKING AT?
HOW BAD DOES IT GET?
>> YOU CAN’T PREDICT THAT IN ANY
EXACT WAY.
WHAT YOU KNOW IS IF YOU BUY
STOCKS FOR THE LONG RUN ARE,
THEY’RE GOING TO BE MORE
VOLATILE, BUT IN THE LONG RUN,
YOU GET MORE RETURNS.
SO, YES, YOU COULD SEE A
SIGNIFICANT CORRECTION, BUT
YOU’VE GOT TO THINK ABOUT WHAT
YOU OWN HERE.
LAUREN: DO YOU THINK INVESTORS
MIGHT JUST TAKE MONEY OFF THE
TABLE AND SAY LET THIS PLAY OUT
BEFORE WE JUMP BACK IN.
>> I THINK SOME MAY, AND A LOT
OF INVESTORS INVEST PASS ILY,
DON’T WANT TO REALIZE CAPITAL
GAINS, SO THERE ARE THINGS THAT
SUPPORT THE MARKET, BUT THERE
ARE PEOPLE WHO ARE GOING TO TIME
THIS AND TRY AND RIDE IT DOWN,
MAKE SOME MONEY BY SHORTING THE
MARKET AND THAT COULD, OF
COURSE, CAUSE A MORE SIGNIFICANT
CORRECTION.
LAUREN: WE GOT THE CONSUMER
CONFIDENCE NUMBER FOR FEBRUARY,
CURRENT NUMBER, EARLY THIS
MORNING.
IT’S AT A 10-YEAR LOW.
INVESTORS CONCERNED ABOUT THE
RISING COST OF LIFE, RIGHT?
INFLATION, THAT CONTINUES TO BE
A WORRY.
7.5% IS THE RUNNING RATE.
AND ALSO ECONOMIC POLICY THAT IS
CONTRIBUTING TO IT.
YOU KNOW, AND NOW WE’RE LOOKING
AT OIL PRICES POPPING BECAUSE OF
THIS IMMINENT POTENTIAL INVASION
INTO UKRAINE BY RUSSIA.
INFLATION’S EVERYWHERE.
IT SHOWS NO SIGN OF -- WHAT
SHOULD THE FED DOSOME.
>> THEY SHOULD TAKE IT EASY.
THIS BOUT OF INFLATION WAS
CAUSED BY BOTH THIS
ADMINISTRATION AND THE LAST
ADMINISTRATION POURING MORE
MONEY INTO THE ECONOMY THAN THE
ECONOMY NEEDED.
WE DIDN’T NEED THOSE ONE-TIME
CHECK, BUT A LOT OF PEOPLE SPENT
THE MONEY AT THE TIME WHEN THERE
REALLY WASN’T SUPPLY.
TOO MUCH DEMAND, NOT ENOUGH
SUPPLY, THAT’S WHAT HAPPENS.
THE FEDERAL RESERVE SHOULD
GRADUALLY INCREASE INTEREST
RATES BECAUSE THEY’RE TOO LOW.
LAUREN: DEFINE GRADUAL.
ARE YOU TALKING ABOUT SEVEN RATE
HIKES THIS YEAR?
>> NO, WHAT I THINK THEY SHOULD
DO IS RAISE 25 BASIS POINTS
EVERY QUARTER, 1% PER YEAR.
THAT’S WHAT HE SHOULD DO.
I AGREE THEY MAY GO FASTER THAN
THAT.
THE CLASSIC FEDERAL RESERVE
MISTAKE IS TO WAIT TOO LONG AND
DO TOO MUCH, AND THAT’S WHAT I’M
WORRIED ABOUT.
THEY SHOULD HAVE STARTED RAISING
INTEREST RATES A LONG TIME AGO,
REDUCING THEIR BALANCE SHEETS A
LONG TIME AGO, BUT YOU DON’T
WANT TO OVERREACT BECAUSE THIS
ECONOMY’S MORE FRAGILE AND
VULNERABLE BY THE END OF THIS
YEAR THAN IT WOULD HAVE BEEN,
SAY, SIX MONTHS AGO.
AND THE FED HAS TO THINK AHEAD
ABOUT WHETHER THE ECONOMY CAN
TAKE IT.
LAUREN: I THINK I HEARD YOU SAY
FOUR HIKES, IN YOUR VIEW.
>> THAT’S WHAT THEY SHOULD DO.
I I DO THINK THEY’RE MORE LIKELY
TO TO GO FIVE OR SIX.
LAUREN THEY EACH -- THEY KEEP
SAYING THEY’RE DATA-DEPENDENT,
BUT THERE COULD BE THE BIG BANG
THERE, THE HALF POINT HIKE, TWO
JOBS REPORTS AND ANOTHER CPI
PRINT.
>> WELL, THAT’S RIGHT.
AND THE DATA IS BEING AFFECTED,
AND I DO THINK INFLATION WILL
EASE DURING THE YEAR, BUT ALSO
YOU’VE GOT TO THINK ABOUT
UKRAINE.
IF YOU DO HAVE AN INVASION,
YOU’VE GOT A LOT OF UNCERTAINTY,
BIG FALL IN THE MARKET, THAT
ACTUALLY MIGHT CAUSE THEM TO
HOLD BACK.
LAUREN: SO THE FED’S GOING TO
HOLD BACK THEN MANY.
>> WE DON’T KNOW.
I THINK WE’LL KNOW MORE WHEN WE
SEE HOW FAR VLADIMIR PUTIN IS
WILLING TO PUSH THIS MURDEROUS
CAMPAIGN.
THERE’S NO REASON FOR THIS AT
ALL.
THIS IS A TERRIBLE, TERRIBLE
THINGS TOO TO THE POOR PEOPLE OF
UKRAINE.
LET’S SEE HOW FAR HE GOES, LET’S
SEE HOW FAR EUROPE AND THE
UNITED STATES REACT TO THAT AND
WHAT THAT DOES TO OIL AND
NATURAL GAS PRICES.
WHEN WE KNOW THAT, I THINK WE’LL
HAVE A BETTER IDEA OF WHAT THE
ECONOMY AND THE FED ARE GOING TO
DO.
LAUREN: REPORTS ARE THAT
RUSSIA’S ACTIONS COULD START AS
SOON AS TUESDAY.
SO IT SEEMS LIKE IT’S IMMINENT
NOW, AND INVESTORS ARE TRYING TO
RESPOND IN THE MEANTIME.
>> YEAH.
THE ADMINISTRATION’S BEEN KIND
OF WARNING US, BUT IT’S JUST
VERY TRAGIC FOR THE PEOPLE OF
UKRAINE.
LAUREN: ARE YOU WORRIED ABOUT
STAGFLATION?
>> NOT IN THE LONG RUN.
I THINK STAGFLATION DOESN’T
PERSIST FOR A LONG PERIOD OF
TIME.
YOU MAY HAVE A TIME WHERE THE
ECONOMY’S IN TROUBLE, BUT THE
ECONOMY GETTING IN TROUBLE WILL
KILL THE INFLATION.
SO IT LOOKS LIKE, YOU KNOW, THE
CURE OF ONE DISEASE CAUSES THE
OTHER, SO TO SPEAK.
I DO THINK INFLATION’S HIGH AND
THEN YOU COULD HAVE SLOW GROWTH
OR EVEN POTENTIALLY RECESSION
2023 IF EVERYTHING GOES WRONG,
BUT I DON’T THINK THAT
STAGFLATION IS SORT OF A
LONG-TERM PHENOMENON HERE.
LAUREN: WHAT ABOUT THE R-WORD,
RECESSION?
>> I THINK THE RISKS ARE RISING
IN ’23 --
LAUREN: DLE 23?
>> WE’VE GOT A LOT OF MOMENTUM
IN THE ECONOMY.
PEOPLE TRYING TO GET BACK ON
AIRLINES, RESTAURANTS, HOTELS,
WE’VE GOT PLENTY OF SAVINGS,
WE’VE GOT A CAPITAL SPEND CYCLE,
THERE’S SUCH A DEMAND FOR
WORKERS THAT BUSINESSES ARE
ANXIOUS TO TRY AND FIND TO A WAY
TO GET MORE EQUIPMENT IN PLACE,
THERE’S A LOT OF MOMENTUM.
IT’S VERY HARD TO GET AN ECONOMY
TO PETER OUT OR GO INTO
RECESSION RIGHT NOW, BUT BY THE
END OF THE YEAR IF YOU’VE GOT
HIGHER RATES, HIGHER OIL PRICES,
LESS CONSUMER CONFIDENCE, THEN
YOU COULD BE IN MORE TROUBLE.
LAUREN: SO WE SHOULD BE IN OKAY
THIS YEAR, NEXT YEAR YOU’RE
WORRIED --
>> YEAH, BUT THINK CAREFULLY
ABOUT WHAT YOU HAVE IN YOUR
PORTFOLIO.
HAVE STUFF THAT’S GOOD VALUE,
DON’T HAVE STUFF THAT’S
OVERPRICED.
LAUREN: QUICKLY, IF YOU WERE
MAKING RECOMMENDATIONS RIGHT
NOW, WHAT WOULD THEY BE?
>> OVERWEIGHT U.S. VALUE STOCKS,
INTERNATIONAL STOCKS IN GENERAL,
BE CAREFUL ABOUT THE MEGA CAPS,
THE BITCOINS AND, YOU KNOW, THE
SPACs AND MORE SPECULATIVE
STUFF.
THIS IS NOT A TIME TO SPECULATE.