turn back to the major indexes again, a down day on Wall Street, the stocks
and in about in the middle of their range,
but certainly right near their lows for the year
joining me now is Sylvia Jablonski co
founder and chief investment officer at defiance.
CTF.
Sylvia, thanks for coming on the show.
The S and P. 500 so far has been able to avoid
a bear market or 20% drop from its high.
Do you think that can continue?
Hi, Christine? Thanks so much for having me.
I I think, look, if if we actually dissected it's um on a broad basis,
it's in correction territory,
but about half of the names of the constituents of the S and P.
500 are actually in bear market territory. So you know, 2020% drop or more?
I think around 25% on half of the names down.
So, um you know, there is certainly a risk that the broader index goes there.
Um It's it's certainly something that can happen in the short term.
I don't expect that to be how we end the year.
But I think in the next couple of weeks we might see SMP hit
bear market territory at least more of the constituents within the S and P.
Hit bear market territory as well.
I think that's a big question that you hit on that a lot of investors have
Right now,
should they sell at these levels knowing that we are down
nearly 20% on the S&P from its own recent high.
Or should they hang on with the expectation,
the general expectation that I'm hearing as well
that we could be higher at least from this point toward the end of the year,
what would you recommend?
I would never recommend selling in a panic.
Um Historically that has actually never worked.
So, you know,
but you have to sort of be sympathetic to
the situation of of of the investor in question.
Right. If we're talking about investors that have
Fully invested in the market, but you know,
they essentially have the cash and the resources to live on day by day,
then I would say leave your money in the market
and and and let this ride out a little bit.
Right.
If you look historically,
um some of the rebounds from bear markets like these have been to the tune
of 20 Um 24 and and even 30% 6 months after the bear market hit.
So
It's it's not impossible to to see perhaps your account,
your portfolio up 20% from now, but I don't think that that plays out for um again,
like another 6, 6-9 months at the earliest.
But in terms of, you know, if you have to sell, then then you know,
then that's sort of a difficult situation.
You you always sympathize with those investors.
The third,
the third group of investors though are the investors that have a lot
of cash on the sidelines and they're not invested but they can invest.
Right?
So when you're sitting on cash and sort of porting cash,
you're locking in losses with inflation,
it's a very uncomfortable market. But markets like these provide opportunities.
I don't know if today is the bottom, I don't know if yesterday was the bottom,
but it feels like it's pretty close.
There's a lot of data suggesting that it's pretty close.
So you know, it is a good time to also deploy cash if you have the ability to do that,
interesting. A good time to deploy cash. If you have the opportunity
To do that
Sylvia, what's going to take us higher 69 months from now.
I know you are bullish on the stock market 6-9 months out. How do we get there?
Yeah, Well a lot of things have to go right. I certainly acknowledge that.
So I think we get there because inflation will start to come down.
You know, if it's not sort of this month's read, it will be next month read,
it will certainly be the summer read.
You know, we're seeing a little bit of loosening up in, in oil prices.
Um, we're seeing the jobs numbers sort of reduced a little bit.
I mean it's a, it's a hot labor market, but you do have, you know,
slightly fewer jobs available out there.
Perhaps we see some wage growth, um, pressure subsiding on the upside.
So if inflation cools off, you know, china reopen if that, if that happens in june um,
that's going to be, you know, a massive benefit to a lot of us companies that have,
you know, their plants and manufacturers and and sell products out there.
Um, Geopolitics is too unclear to really sort of call.
And I think the Fed, you know,
I think the Fed is seeing what's happening with the market.
We do have this issue where you know, you have to rise,
raise rates to fight inflation, but then the debt also has to be serviced.
So you know, if you have this situation where inflation looks like it's coming down,
markets are completely unstable, we have issues servicing debt.
Um, we're seeing, you know, a recession then
you know,
you'd have to think that perhaps the Fed would pause
and I know that that's not the message we're getting.
It's very much we're raising rates and playback inflation. But
um, you know, the numbers are sort of the numbers.
So I think really inflation reignited supply chain um,
and continued earnings growth would, would be positive too.
My last question Sylvia,
how big of a risk is china's zero tolerance policy when it comes to covid into the
overall outlook for stocks this year knowing that it
does have a significant impact on supply chains.
Yeah, it's a, it's a risk. It's a significant risk.
I think, you know, Apple put some numbers behind it.
So for Apple, it's about 99 billion in revenue right.
Um, these are significant numbers.
We know that it could impact Tesla and,
and some of their sales forecasts for the year.
You know, that was a company that's looking for 50 60% growth.
So, um, and then, you know, all of the, all of the sort of future secular,
secular trends that we're hoping, um,
to to see grow and develop whether it's ai augmented reality, you know, gaming,
electric vehicles, internet of things, data centers,
all of these things that rely on chips and so much of that.
Um, and those are manufactured in china.
So I think it's I think it's hugely important.
Alright, Sylvia Jablonski,
co founder and chief investment officer at defiance CTS.