Alright.
So let's turn back now to the major averages joining
us now is jay Hatfield chief investment officer at I Cap
and another rough day on Wall Street.
Despite good news on the jobs front,
what are your biggest takeaways from today's session?
Thanks ken for having me on the show.
The market really, in our opinion is range bound right now
In the 40 240 400 range. And the reason for that,
because we do think a lot of
of the bad news regarding Ukraine and the Fed is priced into the market,
but there's still obviously tremendous uncertainty.
We had the attack on the nuclear station last night.
We do think the mid March, the Fed meeting will be a positive inflection
because first of all, even if it's a hawkish, which we don't expect,
it creates certainty.
So we're pretty bullish about Fed policy, but don't think we're going to
launch out of this trading range until we have that Fed meeting.
Now we know uncertainty is the enemy of Wall Street,
but we did see the stock market rise a bit on the early onset of this invasion,
but now it has been trending lower.
What do you think specifically spooking investors?
Well, we, I think we made a bit of hopefully a long term bottom around the 41 50 range.
I saw volatility very high.
A lot of investors taking off selling their ports are taking off their hedges.
So I think there's a bottom that prices in a lot of the uncertainty, but it's,
it's impossible to predict
what's going to happen in war. So you do have these unexpected events,
Like a nuclear attack on a nuclear power plant.
So that could take us down to those lows or even worst case, maybe 4000
before we get some certainty, which unfortunately could just be,
um, Russia finalizing the war and taking over Ukraine.
So one sector investors are eyeing closely is oil. How is your firm dealing with it?
And are you bullish on it?
We are bullish on oil and have been bullish
really since the depths of the pandemic.
We think that fair economic value for oil
is really 80-100.
But now with the potential for Ukraine, I'm sorry, Russian oil to be restricted.
And they keep in mind they export six million barrels a day at 6% of total supply.
We think that if that was substantially cut off,
you could get to $150 per barrel and more.
The other energy fact,
that's probably the most dramatic thing that's happened in my career,
Is that natural gas has hit the oil equivalent of $400 a barrel today.
It did trade down a little bit after that. So that's a huge crisis for Europe.
I think that europe is likely to have a recession
Um, this year next because of that
keep in mind that 13 times as high
as it is, the United States. So it makes the United States very, very competitive.
You know, it's unfortunate, but it's positive for the US economy.
So we've gotten good news on the job front with 670,000 jobs added in February.
But it seems like investors are ignoring that data. Why is that?
Well, that's just, it's,
it's consistent with the Feds view that the economy is increasing
is improving and we're gonna have pretty substantial growth this year.
So that's kind of not new news.
The thing with the,
the element with the Fed that I would focus on is that they're
likely to raise the rate to what they think the neutral rate is,
which they're talking about more than 2%.
We think that the 10 years really captain 2%.
So the neutral rate review between 1 25 and 1 50.
But any strong near term
economic news is going to be viewed slightly
bearish because that reinforces the Fed being hawkish.
Now we've discussed the impact Treasury rates have on technology stocks.
I know you have opinions on that. So I was wondering, could share them with me.
We did. We think that's an urban myth.
The primary driver of tech stocks is, was liquidity
and I think it's pretty unambiguous despite some pundits claims to the contrary
that they were in particularly unprofitable tech was in a massive bubble.
So in other words,
there's no way that interest rates moving from 150-2% explains
peloton going from almost 180 to less than $30.
So clearly there was a liquidity bubble.
So liquidity when the Fed withdraws liquidity,
it does cause interest rates to rise, but that's not the key driver of text talks
with so many companies now repositioning their impact or
sales rather in Russia because of this conflict.
What should investors do now as they navigate new opportunities?
Should they be looking to see how
these companies are reacting to the conflict overseas?
Well, I think that the key takeaway is to avoid obviously avoid Russia, which,
which may have always been a good suggestion, but
to probably avoid europe, except for maybe energy companies
and focus on the United States, it's the safest market.
Always we have the best disclosure if you live in the United States,
easy to follow companies.
And we're recommending sticking to defensive dividend stocks
which have done extremely well
this year already, there roughly flat for the year.
And we have that's really been our calls since before all this started
the end of the year
because we think that with the Fed policy tightening,
it's going to be dicey trading.
So
you want to get paid to wait
and defensive dividend stocks, even if they're down,
you're not out because you're getting paid your dividends,
I wanted to say, other than defensive dividend stocks,
are there other industries or sectors that
you're eyeing now because of this conflict.
Well, sure, certainly, um, you know, we have,
in fact the conflict continues anything related to oil,
we would be more conservative if you're going to trade energy pipelines.
Super majors are a good way to play that.
And also people don't really appreciate it. But fertilizer companies,
the ones that are based in the US are spectacular in that
They get their natural gas at $5
and they're competing against other global players that have to pay,
um, you know, almost ridiculous price of $65 per M. Cf. Or as high as that.
So they have a massive advantage. You're going to have huge margins
while this energy crisis lasts in europe.
Now shifting back to the U. S.
A lot of mask mandates are being changed throughout the nation.
What stocks are you eyeing that may be affected by these new changes?
You know, we same thing.
We would, we'd like conservative ways to play these trends and reads, you know,
most of them have substantial dividend yields strong asset based,
not not over leopard.
So we'd pay play the cyclical portion of reed's
not the telecom portion that arguably became overvalued,
but the retailers,
office building holders,
entertainment companies that own real estate related to entertainment.
We think those cyclical sectors will do well
and same thing
even if they don't trade well in the short run and get paid to wait.
All right, jay. Hatfield, chief investment officer at Icap.
J always a pleasure have a great weekend.
I know it's cold in new york because I'm in new york to thank you, sir for being on.