DAGEN: FUTURES SEARCHING FOR
DIRECTION THIS MORNING, 60 POINT
GAY ON THEGAIN ON THE DOW FUTURE
CLOSE AT 1:00 P.M. EASTERN TIME
THIS AFTERNOON.
TAKE A LOOK AT THE DIFFERENCE
BETWEEN THE TWO YEAR AND 10 YEAR
TREASURY YIELD, THE TWO YEAR AT
ALMOST 4 AND-A-HALF PERCENT.
THE 10 YEAR AT 3.7.
THAT INVERSION IS THE WIDEST
IT’S BEEN IN 22 YEARS.
JOINING HE ME NOW, RAYMOND JAMES
INVESTMENT HEAD OF ADDS ADVISORY
SOLUTIONS AND MARKET STRATEGY,
MATT ORTON.
MATT, THAT SAYS RECESSION, DOES
IT NOT.
>> TYPICALLY WHEN YOU HAVE AN
INVERTED YIELD CURVE ESPECIALLY
THE AMOUNT OF TIME WE’VE BEEN
INVERTED GENERALLY MEANS THERE’S
GOING TO BE RECESSION AHEAD.
WHAT I TALK TO OUR CLIENTS ABOUT
IS WHAT DOES THAT RECESSION
ACTUALLY LOOK LIKE.
IS IT GOING TO BE SEVERE
RECESSION OR SOMETHING MORE
MILD?
IN MY OPINION, THE GOOD NEWS IS
IT’S GOING TO BE A LITTLE BIT
MORE MILD AND EQUITY MARKETS,
WHICH IS WHAT A LOT OF OUR
CLIENTS ARE FOCUSED ON, HOW DOES
THAT IMPACT THE EQUITY MARKETS,
LIKELY BAKED IN A LOT OF THE
WORST.
THERE’S A LOT OF OPPORTUNITIES
GOING FORWARD.
THAT’S WHY I LIKE TO REMIND OUR
CLIENTS TO REMAIN DEFENSIVE.
LEAN INTO HEALTHCARE.
LEAN INTO HIGHER QUALITY
COMPANIES THAT ARE PAYING
DIVIDENDS THAT ACTUALLY GENERATE
CASH.
DAGEN: THE NASDAQ’S DOWN ALMOST
28% YEAR-TO-DATE.
THE DOW IS NOT EVEN DOWN 6%.
HOW IS THAT BAKING IF A ---BAKEI
RECESSION, MATT?
>> WE’VE HAD A LOT OF GAINS
COMING OFF OF THE LOWS IN
SEPTEMBER, EARLY OCTOBER.
A RUN-OF-THE-MILL RECESSION
GENERALLY MEANS ON THE S&P 500
YOU’RE DOWN AROUND 24%, LOOKING
AT PAST HISTORY OVER THE LAST 50
OF YEARS.
SO WE’VE ALREADY BEEN THERE.
WE’VE BEEN DOWN MORE THAN 24% AT
THE LOWS.
AND SO PARTICULARLY IN CERTAIN TECHNOLOGY INDUSTRIES THAT HAVE
TECHNOLOGY INDUSTRIES THAT HAVE
-- THAT ARE DOWN 2 25, 30, 40 PL
PERCENT THIS YEAR, THEY’RE
BAKING IN HIGHER YIELDS, BAKEING
IN MORE DIFFICULT CONDITIONS TO
COME BUT THAT’S ALSO WHY AREAS
LIKE SMALL CAP EQUITIES, SMALLER
COMPANIES THAT ARE MORE
LEVERAGED IN THE U.S. ECONOMY,
THEY’RE BAKING IN MORE THAN A
RUN-OF-THE-MILL RECESSION.
THAT’S WHY I THINK IF YOU WANT
TO CATCH UP WITH THE MARKET AND
COMPLEMENT FOR DEFENSIVE
POSITIONING FOR YOUR PORTFOLIO,
SMALL CAP EQUITIES MAKE A LOT OF
SENSE BECAUSE I LIKE TO SAY
THEY’RE DISCOUNTED FOR DISCOUNT
DAGEN: DOES THE MARKET HAVE IT
WRONG?
DOES THE GDP OUT OF THE ATLANTA
FED HAVE IT WRONG?
YOU WERE TALKING TO HE ME ABOUT
THIS IN THE BREAK.
THEY’RE EXPECTING GROWTH OF
ALMOST 5% FOR THE GDP IN THE
FOURTH QUARTER, RIGHT?
>> THAT’S 5% FOR REAL CONSUMER
SPENDING, 4.8%.
I THINK THAT’S RIDICULOUSLY
HIGH. WHAT THEY’RE SUGGESTING, YOU
WHAT THEY’RE SUGGESTING, YOU
WILL HAVE AN EXTRAORDINARILY EXT
ROBUST HOLIDAY SHOPPING SEASON.
I DON’T THINK THAT’S RIGHT.
THEIR FORECAST IS 4.9%.
I THINK THAT’S OVER-THE-TOP.
I THINK THE MARKET MAY BE WRONG
IN THAT THEY’RE TOO DISMISSIVE
OF THE UNCERTAINTIES AND RISKS
THAT WILL SUDDENLY COME TO THE
SURFACE ONCE RECESSION STRIKES.
REMEMBER, RECESSION INVOLVES A
MATERIAL WEAKENING OF THE LABOR
MARKET.
WE’RE GOING TO BEGIN TO SEE
PAYROLLS SHRINK AND WE’LL SEE
THE UNEMPLOYMENT RATE PERHAPS
RISE BY AS MUCH AS 1 PERCENTAGE
POINT.
IT’S DURING THAT PHASE WHERE THE
ECONOMY BEGINS TO CONTRACT, THAT
INVESTORS GET WORRIED AND A WILL
OBSERVE A RENEWED DOWNTURN BY
EQUITY PRICES.
I DON’T THINK EQUITIES WILL FORM
A DEFINITIVE BOTTOM UNTIL WE’RE
ACTUALLY IN THE NEXT RECESSION.
DAGEN: MARTY?
>>?I MEAN MATT.
>> I DON’T DISAGREE WITH ANY OF
THAT.
THAT’S ONE OF THE REASONS WHY
I’VE BEEN SO VOCAL ABOUT KEEPING
A CORE DEFENSIVE BIAS.
THERE’S A LOT OF FOLKS OUT THERE
THAT WANT TO GET EXCITED THAT
THE BOTTOM HAS BEEN PUT INTO THE
MARKETS AND WE’RE GOING TO RALLY
THROUGH YEAR END.
WE CERTAINLY COULD RALLY INTO
THE END OF THE YEAR BECAUSE
THERE’S A LOT OF STRONG MOMENTUM
BEHIND THE RALLY WE’RE HAVING
BUT THAT DOESN’T HE NEGATE THE
FACT THAT THERE ARE GOING TO BE
MORE CHALLENGING TIMES AHEAD AND
THAT’S WHY LEANING INTO SECTORS
WHERE YOU’RE GETTING DIVIDEND
GROWTH OR YOU HAVE HIGHER
QUALITY COMPANIES WITH POSITIVE
FREE CASH FLOW, THOSE ARE THE
TYPES OF COMPANIES I WANT TO OWN
AND THAT’S WHY I THINK
HEALTHCARE, EVEN ENERGY TO SOME
DEGREES BECAUSE OIL PRICES ARE
FAIRLY WELL SUPPORTED, THESE
COMPANIES ARE THROWING OFF
INCREDIBLE MARGINS, PAYING
DIVIDENDS, RETURNING CASH TO
SHAREHOLDERS, THOSE ARE THE
TYPES OF COMPANIES THAT I WANT
TO OWN IN A MARKET GET WHERE
THERE IS A LOT OF UNCERTAINTY
GOING FORWARD.
BUT ALL ISN’T LOST AND THERE ARE
REASONS TO BE OPTIMISTIC AND
THERE ARE PARTS OF THE MARKET
THAT HAVE BEEN WORKING.
DAGEN: MATT, THANK YOU SO MUCH
FOR BEING HERE.
I’LL SAY ONE THING ABOUT
INVESTORS VERY EXCITED THAT THE
FEDERAL RESERVE LOOKS LIKE IT’S
GOING TO SLOW DOWN ON THE
INTEREST RATE INCREASES BUT WITH
JOE BIDEN SIGNING OFF ON AN
EXTENSION OF THE MORATORIUM ON
MAKING STUDENT LOAN PAYMENTS,
THAT IS WILDLY STIMULATIVE TO
INFLATION AND I DON’T THINK THAT
ANYBODY HAS REALLY STARTED
THINKING ABOUT THE TENS OF
BILLIONS OF DOLLARS THAT WILL
CONTINUE TO GO INTO THE ECONOMY,
IT’S LIKE $400 OR MORE PER MONTH
IN STIMULUS CHECKS THAT’S HANDED
OUT TO MILLIONS OF PEOPLE
INCLUDING RICH FOLKS, DOCTORS,
LAWYERS, INVESTMENT BANKERS AND
THE LIKE AND THAT MAKES THE