Program:  Cavuto Coast to Coast
Date:  3/23/2022
Station:  Fox Business News
Time:  12:00PM

NEIL CAVUTO: Meanwhile on that situation where interest rates are going to likely back up some more and maybe a lot more, at least the Federal Reserve has anything to do about it. It’s already created over this course of roughly, you know, a month and a half or so, a global bond market route to the tune of about two and a half trillion dollars. We have not seen that sort of sinking and swooning since the global financial crisis. In fact, this is bigger than that was back in 2008, remember, carried into 2009. So it’s not necessarily a fair comparison, but it does show you how the effect of higher rates, lower bond prices reverberates throughout the economy. So so what does Scott Martin do when he advises clients with this phenomenon? They’ve been pouring their money into stocks of late, which is their hedge, I guess, which is weird. But what do you make of it?

SCOTT MARTIN: They have been doing that, Neal. The first thing we do is kind of stop freaking out a little bit because it’s scary. To your point. My goodness, let’s go back in recent history. My friend, you go back to August of last year, August of 2021, the ten year interest rate, which is kind of the benchmark for a lot of things like Gerri talked about with mortgage rates and so forth, lending rates. Neil that’s doubled since August. Now, that’s a funny way to say statistics because it wasn’t that high back then, you know, 1.2% and now we’re approaching 2.4. However, you made the key point about wealth management, what we do at Kingsview, I mean, managing assets, asset allocation for clients is challenging right now because stocks and bonds, at least for this first quarter of this year, have been correlating, my friend, meaning they’re both going down. So instead of one thing, doing one thing and the other doing the other, they’re both doing the same thing, which is negative. So you have to start doing some interesting things with portfolio strategy, which includes structured notes, secured loans, gold, things like that, and maybe a little crypto if you’ve got the appetite or the stomach for it and the Pepto-Bismol handy. But there’s things that are going on in the bond marketthat are scaring people to your point, because traditional asset class behavior is not holding true to what it’s been doing over the last several years.

CAVUTO: Yeah, I guess it depends on the the Treasury instrument or, you know, the bond, but the yield curve has been flattening and not, you know, reversing. When it comes to shorter term rates that are eclipsing rates on longer term assets now that that depends on on the rate. I get it. But but at the very least, it seems to be, you know, telegraphing a slowdown in the economy, some say a recession. Where are you on this?

MARTIN: It’s telegraphing some some bumpy times ahead for sure. And definitely a slowdown in economic growth, which could be as simple as growth. That’s maybe 0.5% or 2% versus the six plus that we’ve had recently. And you’re right about the inverted yield curve. It basically means that there’s a risk off mode on Wall Street, which means that folks don’t want to really own much of anything right now. And we’ve seen that in the performance in Q1 so far. Now, the only thing I would caution folks out there on is that the inverted yield curve or the flattening yield curve, as you put it, has predicted about ten of the last five recessions, if you know what I mean. So it tends to scare folks a lot, and that’s just fun with kind of numbers. But it does show there is a slow down coming forward, which is why, again, something Gerri mentioned that you and I have talked about before, Neil, I don’t think the Fed’s going to raise interest rates as much as much as people think. I think we’re only going to get a handful of rate hikes this year and they’re going to see what that does to the economy. They’re going to see how inflation kind of materializes here and then decide how they want to proceed forward but not do the six interest rate hikes it seems like everybody’s betting on.

CAVUTO: I’m just curious what you also make of the comeback and a lot of popular issues, particularly technology stocks. They’re not all the way back by any means, and we’re still selling off today. But it is noteworthy that technology stocks as a sector and a group are up 14% from their lows. Now, they’re still not where they were, but they’ve clawed their way back up measurably. I’m just wondering whether that is an opportunity for investors now to cash out or to to assume that this, you know, rally or whatever you want to call them, that what is clearly had been a bear market for technology stocks is over. What do you think

SCOTT MARTIN: Depends on your goals, obviously depends on the time horizon. But I particularly think and for a lot of our clients, we’re seeing this as a major opportunity. I think tech stocks just got thrown out with the bathwater, the baby and frankly, the bathtub, because of the fact that nobody wanted to own them. Everybody was afraid of interest rates going up. Yes, TECHLAND has guided down, meaning future earnings reports that we’re expecting receive in the next several quarters are likely to not be as robust as they have been the last couple of years. But let’s face it, the last couple of years, Neil, 21 and 20. My goodness. For tech, we’re pretty much in a word, awesome. So there has to be a little bit of a pullback in Techland and we’ve got that. And so therefore, I think tech stocks got to a level where they are very attractive now if you have that 1 to 2 year to three year time horizon.

CAVUTO: Got it, Scott. Great catching up. Thank you my friend Scott Martin on all of these developments.

MARTIN: See ya.