CIO Scott Martin Interviewed on Fox News 6.3.22

Kingsview CIO Scott Martin discusses rate hikes beyond June 2022, cruide oil prices and what may happen with inflation. He also touches on buying during the next “dip”.

Click here to watch the video

Program:  Making Money with Charles Payne

Date:  6/3/2022

Station:  Fox Business News

Time:  2:00PM

 

CHARLES PAYNE: You know, it’s been a real interesting session. Obviously, it’s a very jittery market, probably doomed even before the economic data began to roll out this morning. And that’s because Elon Musk set the tone on reports that he’s feeling super bad about this economy. He’s got a super bad feeling about this economy. May have to lay off 10% of the workforce. I think that’s been amended to 10% of the salary workforce. Nevertheless, that came before the jobs report was stronger in the headlines than anticipated, but it was the second lowest in the past 12 months. Moreover, wage gains were less than anticipated. Now, initially, equity markets fed off that particular portion of the report, the wage part, we started to come back and then bond yields spiked on the headline and of course, stocks followed. Still, the market was exhibiting some resolve even after that, edging back, getting closer and closer to break, even when the ISM service report hit the wires. And here’s the thing, it also came in lower than expected and in fact, this lowest level since February of 2021. Still, though, it’s way above expansion, and that’s what the markets reacted to. Nevertheless, prices paid that didn’t come down enough, even though it’s at its lowest level since September of last year. You know, the bottom line is even news that came in the way we wanted, it wasn’t enough. So after snapping that seven week losing streak, the S&P 500 is in jeopardy, real jeopardy of going back to its losing ways. And yet there are some positive takeaways for this week, although it remains a very eclectic and certainly very nervous market. Joining me to discuss, Bell Points, chief strategist David Nelson, along with KingsviewWealth Management CIO Scott Martin. Scott, let me start with you. You know, I think the jobs market is exactly what Jay Powell and company wanted, right? They said they want steady job growth check, higher participation check, by the way, the best participation for women even before the pandemic and slower wages check. So why is the market reacting this way?

SCOTT MARTIN: Well, Charles, the market changed its mood often. And so I think today’s data, like you mentioned, the intro was good and bad in some senses. So I think the worry, though, now is that it still gives Powell that kind of lead block to do more rate hikes beyond, say, just what we’re expecting in June. So as you see, the data come in maybe a little bit firmer than expected, that puts obviously the Fed further in play here. And I think the market would rather see a dovish Fed than a hawkish one.

PAYNE: You know, to that point, David, it seems to me that the street needs to see the economy take a huge hit. Right. It’s not just little signs or small misses here and there. And of course, many think that’s what the Fed needs to see. Do you agree?

DAVID NELSON: I think the Fed doesn’t want to stop the bleeding just yet. They want they want this thing to come in. Let’s hope we don’t bleed out right in the meantime. But I think it’s more upside down at this point, 75 basis points. The rhetoric is very hawkish, but we’re only still at 75 basis points. We still have a lot of work to do. And if you think we’re going back to a 2% economy, I have a hard time with that. At best. We’re looking at 3 to 5% in the out years and that means tighter financial conditions for a while.

PAYNE: So Loretta mester has been doing a lot of talking over the last 24 hours. And just moments ago she spoke and she says that there’s no underlying change in demand destruction. I’m going to ask Chris and Ben’s about that. But trying to erase this notion that there’s only going to be 250 basis point hikes. All right. Because Bostic said that a week ago it got the market going and the Fed has worked really hard to say, hey, there’s going to be a lot more than just 250 basis points hike. So we getting now having to adjust to that as investors.

NELSON: I think they really do it a lot of damage with all this talk. It should really stop talking at this point. Keep the keep the markets off guard a little bit. Don’t take anything off the table. I think markets will have more resolve. We’ll get a handle on this and we’ll start to believe what they say.

PAYNE: Yeah, I think this communication thing has gone too far as well. Another problem for these markets, folks, crude oil spiking again. You know, you could really argue it’s the number one dark cloud because it’s over the economy and the stock market. Let me go back to you, Scott, on this. How how you know, it’s just you got to believe it’s going to go to 125 just just from technical factors. But what does it mean for the market? Can we really ever get this market back on track with crude gushing like this.

MARTIN: Gushing we can, Charles, but the market’s going to get used to crude oil prices being higher at the higher end. The question, though, to your point is how high do they go? So if they stay in the one teens, that’s something I think the market can get used to over time. But as you mentioned, crude oil prices factor into so much of what companies do besides shipping, I mean, fabrication processing. So there’s a deep impact beyond just see what’s at the surface here and the fact that the administration has no plan whatsoever to bring back crude oil prices back down. That is, there’s nothing as far as anything hopeful with regards to crude oil prices going down and therefore companies are going to have to adjust.

PAYNE: Scott Speaking of adjustments, one of the big beefs has been that earnings estimates were too high. We’re starting to see them come down, right? There’s certainly a lot lower than they were just three months ago. How important is it for that to happen that these earnings estimates have to come even much lower than this to be in line with the market?

MARTIN: Well, very. Because that’s what we’re basing our valuation on going forward for the S&P, I think one. You’re seeing, though, now, Charles, is it companies as they deliver those, say sadder than expected news? The market’s starting to take that a lot better than, say, it was about a month ago. So companies are now getting the opportunity to put that data out there. I think it’s reasonable. I think it’s the right thing to do. And look, if we get out of this fundamental, say, drawdown that we’re in right now and we come back a little bit quicker and stronger than we expect to say maybe in Q3 or Q4, you could see those estimates get raised again.

PAYNE: Yeah, I think, you know, listen, here’s the crazy thing. Even in a bad earnings season, about 75% of companies being on the top and bottom line. Right. That’s why I always wonder, like we’re going to go through the second quarter earnings season, 70 80% of the companies are going to be we’re going to say, well, wait till next time. I’ve heard this for years now. What are you doing right now? Are you buying anything on this in this atmosphere?

NELSON: Yeah, sure. I’m buying something right now. There’s a name that we’re buying a technology company. But beyond that point, what I have to do it is I can be in every sector, but I have to have valuation support because we have tighter financial conditions. I think as investors we have to unlearn a lot of what we took for granted over the last last decade. A lot of these companies are great companies. Some of them are just at the wrong prices. But we’ve had a lot of companies coming down 70, 80, 90%. That’s really the good news. What we need to buy is companies that can provide that growth but translates.

PAYNE: Can you share the name with us?

NELSON: Us. Yeah, I can. It’s one that we’re buying into the bell today. It’s Ameristar, ANET

PAYNE: ANET

NELSON: And we’re buying it into the close.

PAYNE: Scott I got 30 seconds. I think the part here, what David said was really appropriate with respect to unlearning, I don’t know. I think we got to learn because the Fed was on our side for a decade. They made it the accommodation, they made it easier and now they’re not on our side. So how does that change what you’re doing? Are you buying anything?

MARTIN: Yeah. Treasury Department, too, Charles. The Fed will be back, though, I promise you. As soon as the economy slows down enough, inflation starts to cool off. I think the Fed will be back because they can’t help themselves. I’ll tell you what, we’re waiting for the next dip to kind of buy in. I mean, when we had the last dip, say, in early May, we took a little bite or two of Amazon and Apple and Adobe. But we also are adding to pipelines here. We talked about pipelines on your show, Charles, about three weeks ago. That’s been a great way to play rising crude prices. So AMLP is what I suggest for folks out there looking for some crude exposure, but also a good dividend payer.

PAYNE: Great stuff, guys. Enjoy your weekend. David Scott. I always appreciate it.

 

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