Back to the major indexes, muted action, relatively light volume.
I see down here on the floor of the New York Stock Exchange.
Joining me now to break it down is Jay Hatfield,
chief Investment Officer at Infrastructure Capital Management.
Jay, thanks for joining.
Thanks
for having me on a lot for investors. Our viewers to digest these days.
What do you make of what's happening in the market right now?
We're in effect sandwiched between
two
sets of really big inflections. The last
week was super positive because you had the debt ceiling resolved.
The fed surprisingly came out and said they're going to be on pause
which
was
positive. And then next week
you've got C P and the actual FED action,
we're bullish about CPI and PPI particularly over the next two months,
the fed looks at backward data
and there's going to be one of the biggest roll
offs in the last 50 years of inflation because we had
12% annualized inflation in May and June.
So we're looking at next week being a positive catalyst,
but since we just had a big run up,
there's some resistance of 4300 kind of makes sense that
we stalled out today and might stall out this week.
Yes.
So that resistance at 4300 for our viewers following along,
take a look at the middle of your screen, the S and P today closing at 4200 73.
So just a few more points,
less than 30 points to reach that resistance after
what's been a very impressive rally of late.
So can the momentum continue even though we're hitting resistance?
I mean, it seems as if there is appetite to get back into this market,
we think there's going to be two major catalysts.
An ongoing catalyst is just the AI boom.
And I would highlight that
in video's report
was true. Boom.
That was the biggest raise of revenue guidance in history.
So this is not like the beginnings of the internet web van type situation.
There is tremendous demand for these
gps
that have excessive processing power, it's coming from the
providers.
And
so you're going to, I think you'll see in video stalled now,
but it will continue to run up
a
lot of strange,
a lot of people on the media and on Twitter are quoting last 12 months numbers.
But if you really make any reasonable projections,
you see that it's actually trading at a
reasonable multiple about 40 times next year,
we're actually carrying 12,
the estimates are coming up.
So we think A I led by NVIDIA will power the
market plus just good earnings and then better inflation data.
Ok.
So you think that companies can in this
environment report decent earnings even though the fed
has said that we might see a mild recession before the end of the year.
We don't think there is going to be a recession.
It's reasonable to assume that though
because normally when the fed raises rates, you have a housing crash,
then you have massive layoffs in construction. In fact,
in 78, we had 2.7 million construction workers laid off.
And then of course, they spend less money
here. We continue to have construction increase. Housing is very strong.
We have infrastructure spending.
So we don't think there will be a recession.
If there were to be a recession, that would be a problem.
And you would get sort of the Morgan Stanley scenario
where earnings collapse. But we're still seeing 242 for S and P earnings next year.
And so our targets, we're sticking to our 4500 targets 19 times. But
we do see upside from this
because it could,
a lot of these companies like even NVIDIA could become
really overvalued versus what we think fairly valued now.
So it seems like based on what you're telling me,
Jay that this might be an entry point for people to
get back into the market if they are on the sidelines,
definitely earning seasons are better.
So we're pretty close to earning season now in mid July.
So that's always a good catalyst because
normally good information comes from the companies
and scary information comes from the government. Now, we were lucky last
week we had three good things coming out of the government. But
so be a little bit less risky as we
get past the fed and into earning season. But
we do think that it's a great entry point.
A lot of super cheap stocks, not just in tech but in preferred stocks.
Dividend stocks, they already have been smashed
since the banking crisis started. They're way way down.
A lot of our funds are way down. We think they're big bargains interesting,
but the banks themselves do.
Those look attracted to you, not necessarily every bank,
but we think the super regionals have been smashed down
but yet are still benefiting and have good credit
quality can't have the bear raids on them.
So certain stocks, but it's not just banks.
A lot of other similar companies have been
come down with big dividends.
Some of the service providers like at and T and
the communications side really all dividend stocks got smashed down.
My last question, Jay is what about international stocks?
Right,
because a lot of these international markets are also dealing with inflation,
also dealing with rate rises that have been aggressive but may start
to be slowing and valuations are a factor there as well,
right?
We tend to
be a little bit biased towards the US.
It's 60% of the market cap of the world.
We have the technology. We have great capital markets where
it's actually good if A I companies
become overvalued because we're first to market.
So we would stick with the US.
Now, it's risky enough without going overseas given that
we're still coming out of this fed tightening cycle.
All right, Jay Hatfield,
Chief Investment Officer at Infrastructure Capital Management.
Jay, thank you.
Great. Thank you for having me.