JACK: THE MARKETS ARE OFF THEIR
SUMMER LOWS BUT SOME INVESTORS
WONDER IF ANOTHER PULLBACK IS
COMING.
JOINING ME IS THE HEAD OF US
EQUITY STRATEGY LORI CALVASINA.
THANKS FOR COMING ON THE SHOW.
ONE OF THE BIG QUESTIONS IS WAS
JUNE THE LOW IN THE MARKET OR
ARE WE WAITING FOR THAT IN THE
SECOND HALF, WHAT INDICATORS DO
YOU LOOK AT?
>> JUNE WASN’T THE LOW BUT
THAT’S A 60%, THEY HAVE
ADDITIONAL VOLATILITY. I’VE BEEN TELLING INVESTORS,
I’VE BEEN TELLING INVESTORS,
THE EARNINGS OUTLOOK IS CLOUDY.
AND THEY ARE RELIEVING
INVESTORS, COMFORT ABOUT THE
OUTLOOK, WITH ADDITIONAL THINGS
TO WORRY ABOUT.
JACK: WHEN YOU HEAR PORTFOLIO
MANAGERS OUTPERFORMING THE
MARKET ONE THING YOU NEVER
HEAR, YOU LIKE TO BUY LOUSY
COMPANIES WITH NO EARNINGS, YOU
ARE FOLLOWING THE LOW-QUALITY
TRADE AND THAT IS WHERE THE
WINNERS HAVE BEEN.
>> THE RUSSELL 1000 IS A GOOD
GAUGE OF STOCKS, WE SEE
NEGATIVE EARNERS AND SMALLER
MARKET START TO OUTPERFORM OVER
THE PAST 4 OR 5 WEEKS.
WE SEE THAT IN THE RUSSELL 2000
SINCE JUNE, THE JUNK IS RUNNING
OFF THE BOTTOM, THIS IS
TYPICALLY WHAT WE SEE COMING
OFF OF THE BOTTOM IN THE MIDDLE
OF RECESSION AND INVESTORS HATE
IT AND THEY DON’T HAVE ENOUGH
EXPOSURE TO THE MARKET.
I’M NOT TELLING PEOPLE TO HAVE
A MASSIVE LOW-QUALITY
PORTFOLIO.
IT IS NORMAL IF WE DID SEE THE
LOW IN JUNE.
JACK: HOW SHOULD THEY INVEST IN
THAT?
>> IF YOU WANT TO PLAY IT OVER
THE SHORT TERM YOU CAN LOOK AT
THE SECTORS AND INDUSTRIES
WHERE EARNINGS BAND-AID HAS
BEEN RIPPED OFF SO TO SPEAK.
IF YOU LOOK AT SMALL-CAP OR
LARGE-CAP, SPECIALTY RETAILERS, THE RATE OF UPWARD REVISIONS,
THE RATE OF UPWARD REVISIONS,
BASICALLY AT HISTORICAL LOWS.
YOU CAN LOOK FOR POTENTIAL
REVERSIONS IN THAT SENSE.
JACK: SMALL-CAP HAS NOT BEEN A
GREAT TRADE.
WHAT ABOUT OPPORTUNITIES THERE?
>> SMALL-CAP HOLDING STEADY
RELATIVE TO LARGE CAPS.
SMALL CAPS OUTPERFORM COMING
OFF OF THE MID-RECESSION
BOTTOM.
THEY GOT DOWN TO TROUGH
VALUATIONS, TRADING LIKE ISM
PLUNGED AND FALL INTO TYPICAL
TROUGHS.
IF YOU ARE WORRIED ABOUT
RECESSION IT IS BAKED INTO THE
SMALL CAPS AND YOU CAN DO THAT
WHEN IT IS.
JACK: FROM AN ECONOMIC
PERSPECTIVE, ARE WE IN
RECESSION AND COULD THERE BE
WHEN IN OUR FUTURE?
THIS IS THE OUTER RECESSION
TRADE.
>> A LOT OF INVESTORS SAY IF WE
HAVE A RECESSION IT WILL BE
SHORT, SHALLOW, TECHNICAL AND
LARGELY PLAY OUT THIS YEAR.
THE MARKET FELL 24% AND THAT IS
VERY CLOSE TO MEDIAN RECESSION
OF DRAWDOWN AND THE TECHNICAL
RECESSION BASIS IS RIGHT YOU
PAY THE PRICE FOR IT ALREADY IN
JUNE.
JACK: ANOTHER FACTOR YOU ARE
TRACKING IS THE GAS PRICES
ELEVATED AND YOU SEE THAT IN
CONSUMER BEHAVIOR.
>> THE CONSUMER COMPANY AND
SMALL-CAP SPACE, THINGS WERE
KIND OF SLOWING DOWN IN JUNE
BUT WHEN GAS PRICES WERE HIGH
AND STARTED TO COME DOWN IN
JULY THINGS GOT BETTER.
THERE’S ATTORNMENT IS CONCERNED
ABOUT THE CONSUMER, WHAT THEY
ARE HEARING FROM A FEW
COMPANIES.
JACK: IT’S NOT A GOOD IDEA TO
INVEST BASED ON POLITICS.
IF YOU GET OUT OF THE MARKET,
YOU HATED OBAMA, YOU HATED
TRUMP, NOT A GOOD CALL IN
EITHER DIRECTION.
MIDTERMS COMING UP, LOOKS LIKE
A TOTAL RED WAVE, NOW MORE
QUESTIONS COMING IN.
HOW ARE YOU THINKING ABOUT THAT
AS AN INVESTOR?
>> AT THE END OF THE DAY
THERE’S A GOOD CHANCE THE
REPUBLICANS WILL TAKE BACK THE
HOUSE, THE SENATORS MORE
QUESTIONABLE.
THAT SHOULD BE GOOD FOR MARKETS
LONGER-TERM.
IF YOU LOOK AT DIFFERENT LOOK
ALL BACKDROPS OF HOW STOCKS
PERFORM, REPUBLICANS
CONTROLLING EVERYTHING, STRONG
BACKDROP BUT IF YOU HAVE A
DEMOCRATIC PRESIDENT AND SPLIT
A REPUBLICAN-LED CONGRESS, THAT
GIVES YOU SIMILAR RETURN.
EVEN IF REPUBLICANS TAKE ONE
CHAMBER IT IS GOOD ENOUGH BUT
THAT HAS BEEN A CONSENSUS PART
OF THE MARKET.
I HEARD PEOPLE TALKING ABOUT
THE RED WAVE BACK IN JUNE AS A
REASON TO BUY STOCKS.
WHAT YOU ARE SEEING IN THE
BETTING MARKETS AND DOUBTS
ABOUT THE SENATE, BIDEN’S
APPROVAL NUMBER STARTING TO
STABILIZE AS GAS PRICES HAVE
COME DOWN, THIS IS SOMETHING
MARKETS COULD WORRY ABOUT AND
SELLOFF A LITTLE BIT ON IN THE