Summit Global Investments CIO and SGI Dynamic Tactical ETF Portfolio Manager David Harden joins Yahoo Finance Live to discuss bank earnings, volatility, the banking crisis, consumer spending, and investor sentiment.
Video Transcript
- All right. Joining us here in studio for all things banks and portfolio planning, we welcome in David Harden, CIO of Summit Global Investments and portfolio manager of the SGI Dynamic Tactical ETF.
Good to see you here-- really some positive reactions to these bank earnings. Your take on the results, and is the market right?
DAVID HARDEN: Well, I think the results are very good and welcomed from the market. The fact is that volatility continues long after things actually get hit. So I do expect some more volatility in the future.
But these banks are down tremendously, especially the regionals. And so having some positive earnings by the big boys, if you will, that's a really good thing. I think it really helps the market gain some confidence.
And right now, let's face it. Everybody's future look ahead is pretty cloudy. And there's a lot of uncertainty. And so because of that, I think this is a very good sign for the market to probably grind higher over the next, you know, while.
- What type of scrutiny do you expect there to be from the investor community or even analysts who are peppering these CEOs and the executives with questions about their own holdings, what they're holding on their balance sheet, whether that be in the form of bonds or even the amount of loans that they have to continue to kind of raise the profile of the net interest loan margin or the loan kind of allowances as well that they're holding on to?
DAVID HARDEN: That's a good question, Brad. I think that when I look at it, I think we learn from our past mistakes. And letting that be-- I think that we're gonna demand more transparency.
We want to know what the risks are. We want to be able to price those risks in those stocks. And we want to be able to choose which ones we like.
So right now, or in the past, we weren't able to see that. It would come out late. We'd find out in the week and say, oh, my, we have to get out of this company or what have you.
So I think because of the banking crisis that happened in the end of the quarter, I think you're gonna see a lot more pressure to be a lot more transparent. And let's face it. Congress has to do more in the sense-- they always have to feel like they need to do more. And I think you're gonna see some more legislation come out around showing us more of the risks involved. So they have to. And I think they will.
- Is the banking crisis over?
DAVID HARDEN: No, no.
- What does it look like moving forward? Is it more blowups like we saw in March, or is this some form of rolling crisis?
DAVID HARDEN: I think it's more rolling. But if you go back to the great financial crisis that we had back in 2008 and 9, the reality was is that some of the other blowups came months later, right?
So Bear Stearns went under about spring. We didn't have the rest of the blowups till the fall. So I do think this is more maybe the canary in the coal mine here that's saying, hey, there's problems in the system. We need to take a look at this. This is what this transparency that we're talking about. We want to have more transparency and identify them now.
The good thing here for investors, even though there's a lot of bearish sentiment out there, the good thing is that we have learned a lot. Our management's better in these companies. They're helping each other out-- you know, an amazing consortium of different individuals that come to the rescue, if you will.
And thank heavens they did, because if they didn't, we'd be in a much worse situation than we are today. So I think we've learned from the past. I do think there's some good things on the horizon. But we're not through it.
- So what is the word, then, to consumers who are applying for a home loan, who are looking to get a loan for a vehicle, even, and are trying to go to the banks at a time where there is going to be a tightening of how much capital they're willing to put on the table for loans or any type of allowances for that relationship with consumers at the end of the day?
DAVID HARDEN: I think there's a problem gonn arise there. Just like inflation, we know, kind of comes into the economy about six to eight months after an interest rate hike, this is gonna reverberate into the economy. And you're gonna see some people not get the loans that they want or have to pay more.
And that really impacts consumer spending, which has been one of the bright spots of kind of coming through the pandemic and coming out is we've had this consumer spending. If that rolls over, man, we're gonna have some hard times. And that's what everybody's worried about is that big R, that recession.
And the reality is there's a lot of pressure right now on the consumer to continue to spend. And that would really impact them.
- Well, then, having said that, do you buy these stocks? Do you buy bank stocks off of results like this, given what might be coming in a few months?
DAVID HARDEN: I think you have to look for high-quality bank stocks. I'm not afraid of bank stocks. But I think that you got to be careful because one of the trends that we're having right now is that the babies are getting thrown out with the bath-- you know, with the bathwater.
And that means the ETFs are selling discriminately across all of the banks. So having something like the earnings today are good. Hopefully, that settles those ETFs so that money can come back in.
But if you're gonna hold banks, you need to hold things, I think, like the ones that are coming out today-- JPMorgan and others. I think you have to hold quality earnings and really strong transparency. That's what I would look for in banks.
- What if you say, banks, too volatile for my portfolio right now-- don't want to hold them-- not interested in the way down or on the way up?
DAVID HARDEN: Yep.
- Where else can you be looking?
DAVID HARDEN: Well, I think you need to go to some other areas. For example, we know the interest rates are coming to a peak here in the sense that the Fed is probably not gonna raise rates like they did in the last year.
- Not as aggressively.
DAVID HARDEN: Yeah and so where is that gonna lend? It's gonna probably land in more technology. We've had the Magnificent Seven, if you will, in tech do really, really well. I think that spreads to the rest of the sector. And those probably cool off a little bit.
And so if you're looking for another place that has less volatility, I think that tech might have some less volatility. And let's face it. They've kind of prepared for the recession really well compared to how they've done in the past.
We had layoffs starting in the fourth quarter. And so they have started to prepare for this a lot sooner. And they might do a lot better than what people are expecting into kind of the tough times ahead.
So short-term investing, I think you're right. I think volatility continues. We've lowered our exposure into banks as well. So I think that you have to be very picky in that space.
- You know, we've heard FAANG. We've heard FAANGMANT. We've heard several different iterations of that. I don't believe I've heard the Magnificent Seven yet. I thought we were going to get towards teremana at some point-- shoutout to--
- That's a tequila.
- --Brock there. Exactly.
- There we go.
- Thought we were gonna need that by this weekend. Thanks so much for joining us here, David Harden, who is the CEO of Summit Global Investments and portfolio manager of SGI Dynamic Tactical ETF.
DAVID HARDEN: Thanks for having me, Brad.
- Absolutely.
