Program:  Cavuto Coast to Coast
Date:  2/9/2022
Station:  Fox Business News
Time:  12:00PM

JACKIE DEANGELIS: Meantime, the Dow is now on pace for its third straight day of gains as strong earnings are driving the markets higher. Reaction now from Kingsview Asset Management CIO Scott Martin Scott. There are a lot of things to be worried about right now. Yet the stock market doesn’t seem to care. I’m not going to argue with three straight days of gains, but what’s driving the momentum?

SCOTT MARTIN: It’s probably the worry, Jackie, because that’s been one of the issues, I think. In January, there was a lot of worry, certainly, and rightfully so. I think the markets were overreacting, as we’ve talked about over the last month, data that was coming in that we kind of already expected. I mean, conditions that we were waiting for to happen and they finally happened in the market was like, Oh my God, I’m going to freak out. So the fact that there’s still a lot of worry out there, jacki, with some earnings stuff still going on with the Fed, maybe fiscal policy here at a D.C.. The fact is worry drives the market higher and when things feel too good, they probably are. And that’s why you see sell offs like we have for the last years. But buy on worry, we’ve talked about that. You’ve got to take lower prices to heart here and use those to load into your portfolio. Yeah.

DEANGELIS: You know, you look at these companies that are doing well, a lot of tech companies and you sort of think about inflation, how it impacts the average consumer. As we were just discussing, when you see Yum brands, their numbers going down instead of up, when they’re reporting, you start to say, OK, they’re paying more for things. Their costs are going up, labor costs are going up. When you start raising prices that much, it hits the consumer. The consumer is going to stop spending. It’s like musical chairs, right? At some point someone’s not going to have a seat.

MARTIN: Right. And depending on where that music stops kind of almost depends on where the restaurant is. That feels it. Because I’ll admit it. I mean, you were talking about the debate between Taco Bell and Chipotle. I mean, depending on what position I wake up in in the morning, sometimes fetal. Your words, not mine. I’ll buy Taco Bell. But other times I will go to Chipotle but feel the pain of the the pinch with the prices, you know? But you want to go to Taco Bell and get as much food for five dollars versus 10, depending on the mood. Same with Yum Brands as you saw where you’re kind of seeing that move around. So that’s a tough thing to kind of keep a needle on or at least pinpoint on because you’re right, it does move throughout the restaurant industry. That’s why, like, I think when you’re looking at your portfolio, you’ve got to really get the best of the best on retail hospitality services because those are the companies they’re going to emerge versus spreading it around a bunch of places. We’re going to have some winners and some losers.

DEANGELIS: Inflation is still a problem when we can agree on that and potentially might even get worse from here. But I think it was a Department of Labor and their report last Friday. We saw a nice increase in the addition of jobs, and I think that helped this market say, OK, maybe Omicron is over. Maybe we’re going to put COVID behind us and that recovery is going to happen in earnest without speed bumps.

MARTIN: Yes, and that’s a theory that’s probably two years in the making. It feels like maybe like 10 years in the making now. So we’re so eager to have some great news on the lack of a new variant, let’s say. So I think that that hopefulness is driving things to your point. And it’s also something to consider when a lot of people, I think, have really gotten through a lot of the issues that we had with the uncertainty on the variants and so forth. So there is still some good spending and some pent up demand there. I think the key point going forward, Jackie is fixing some of the issues with the labor market. This economy is creating jobs, but there aren’t people willing to fill them. So if we can do that and also maybe unlocking some of the supply chain issues, we’re going to be in good shape going forward here to get those prices to slow down because that’s the thing. You’re right, inflation is a problem. But the rate of inflation as far as the increases is slowing. And that’s the thing that you’re not going to hear a lot of places with respect to saying how bad inflation is. It’s bad, but it is slowing at a decreasing rate or going down at a decreasing rate. At least you have that to look forward to as we go through the summer.

DEANGELIS: And wage growth is good, but wage growth fuels the inflation, so you have to be able to find a balance there somehow. Scott, stay right there.

For me, just a moment. I want to bring in Shana Sissel now, the Wall Street Journal out with a piece today that really struck me. I like this one. Banks are unlikely to pay depositors more after the Fed lifts rates because the lenders don’t actually need the money. Shane, that’s amazing. To me, that means there is so much liquidity out there. They don’t need your savings account money to write loans, and they’re not going to give you more for it. The savers have been penalized for the last 12 years, and it’s not going to get any better.

SHANA SISSEL: Absolutely. If you look at how much American deposits are in U.S. banks, we’re up to 18 trillion dollars. That’s roughly five trillion dollars more than we were in 2020. All this stimulus money has forced all this excess cash and liquidity into the system, and people have put them in the bank. And so the banks don’t have a lot of demand for loans and lending, so they don’t really have a need for you to put more money in their deposits and thus they don’t have to pay you more in order to get your money.

DEANGELIS: It’s really staggering when you think about it, Scott, because you have people investing in the stock market right now, that’s where you’re going to get the most return, right? And that’s why we keep seeing this market march to new highs, even though it’s been a little volatile lately. But when it comes down to it, then you’ve got people who are living on a fixed income, for example, who are being. More conservative with their investments, they’d like to see that savings rate go up, especially if the Fed is going to start hiking here. It’s really almost torture when you think about it.

MARTIN: Yeah, I mean, it’s short term when you think about a lot of things, especially savings rates, and it’s a personal story. But like, you know, you’re right, if Shana is right in some sense, as demand for loans is OK, it’s going to start increasing once the economy maybe get some footing. Jack is we talk about a little bit earlier, but think about this social experiment. Banks are probably never going to pay anybody a decent interest rate again. I think just because they haven’t for so long, you mentioned 12 years. I mean, how long do you have to beat over the head and told you don’t deserve an interest rate on your deposits? Guess what? We get used to it and then people don’t ask for anything more. It’s gone in the wind. So therefore the banks are in a great shape here as they get deposits, not pay anybody. Duncan, you know, there’s nothing coming through there with respect to what they’re going to pay you going forward.

DEANGELIS: Yeah. Final thought to you, Sheena. As we do talk about loans picking up, for example, the economy reopening, businesses may be borrowing to restart or new businesses to start, people continuing to go out and buy homes. You know, a small interest rate hike isn’t going to have a crazy chilling effect on the economy. But if the Fed moves forward three or four times, it could be a little different.

SISSEL: Yes, it definitely could. And I think the Fed is somewhat aware of that. But keep in mind, mortgage rates are so incredibly low they could go all the way up to five percent on a 30 year, and it would make a substantial difference in the demand dynamics. So there is some room to grow there. There is some room to run and and I think that we should be cognizant of the fact that raising rates is not necessarily a bad thing. We’ve gotten so used to this environment at zero interest rates, right? I don’t think there’s a whole generation that doesn’t understand that that’s not normal. you know, you have an entire generation that never got paid on their savings accounts, so they have no expectation of ever getting paid on their savings accounts. And it’s created this whole behavioral change, which I think is going to be here for quite some time. And that’s to the benefit to the banks as we have rates rise.

DEANGELIS: Ignorance is bliss or not. Guys, thank you so much. We’ll see you a little bit later coming up on the show.