Shawn Snyder, Citi U.S. Wealth Management Head of Investment Strategy joins the Yahoo Finance Live panel to discuss the latest market action.
- But first, let's get more on the market action. We're joined for that by Shawn Snyder, Citi US Wealth Management head of investment strategy. And Sean, as I mentioned, kind of not too much going on in markets today. But still plenty to talk about when it comes to the macro picture. Obviously, the Delta variant raising concerns about whether or not we have hit peak growth. But not only just that, whether or not we should expect a more accelerated slowdown than initially expected with those case counts going up. How do you think that is kind of factoring into market pricing right now?
SHAWN SNYDER: I think it's lowering conviction about the market. But I do think in some ways the Delta variant kind of gets blamed for everything. And I think we shouldn't forget that it's normal to see the economy normalize. And I think we're also seeing that as well. So let's look at the consumer sentiment data that surprised the downside last Friday. If you look at what consumers are saying about the housing market, about 70% of them said that now's a bad time to buy a house because home prices are too high. Just 7% said it's actually a bad time to buy a house because they're expecting bad times ahead.
So that's not reflecting the Delta variant. And I also think there's other elements that aren't as well. Retail sales. I know we say, OK, people are shopping less. But it's still up 15.8% year on year. E-commerce sales still up about 30% year on year. And we shouldn't forget that some of these enhanced unemployment benefits are starting to expire in certain states. And they'll fully expire in September. So, it's hard to decipher how much is this a normalization of the economy. People weren't going to flee to the suburbs forever. They weren't going to get enhanced unemployment benefits forever. Or if it's really the Delta variant.
So I think we're going to have to see how it plays out. It's going to take some time to decipher that. But I think they're also experiencing just a normalization of economic growth.
- Shawn, I'm glad you mentioned the Delta variant. Because it does seem like on some days we're trying to connect everything to that. One thing we haven't talked a lot about is the infrastructure bill. And what we're seeing being debated over in Congress. Obviously we don't know, ultimately, what's going to be signed. But how much of that you think has already been baked into the market? Can we expect a bit of a pop once it does go through, given the bumps in the road getting to this point?
SHAWN SNYDER: Well, I hate to say it, but the answer is it depends. And what it depends upon is not really the hard infrastructure bill, which is the $550 billion in new federal spending. Up to $1 trillion when you use some of the unspent Coronavirus relief funds. That's not really a big concern for the market. The breast is the social spending component. And the reason that's maybe more of a concern is that's going to include the tax changes. So it really depends on what happens to the corporate tax rate. And that could potentially lower earnings forecasts if we do see a sharp rise in the corporate tax rate. 28% has been leveled, but if you look at betting markets, predictit.org. They actually have a chance that it stays at 21% or lower. A higher chance.
And it could be we get a global minimum tax. We don't really know. But I think what moves the needle is what happens to the tax rates. That's probably the most important thing. And the last thing I'd say about the infrastructure bill is I wouldn't necessarily view it as a massive fiscal stimulus, because that social spending bill will be accompanied by tax increases. So it's not deficit financed. So I know people tend to think, OK, all this spending is going to lead to massive inflation. Or it's going to lead to massive GDP growth. But when you look at the scoring models, it actually doesn't really move the needle on GDP that much. Doesn't really move the needle on interest rates that much. And it doesn't really move the needle on inflation much.
- We talk a little bit more about interest rates. I'm not going to ask you to give me your prediction on where the 10 year yield is going to go. But just broadly speaking, are you-- because it seems like there are two camps. There are people that are concerned about the bond market maybe not being priced where they thought it would be, given the run up in equities markets. People who had originally called for a 2% on the 10 year around now. But then there's the other camp that says low rates on the 10 year is a validation of the Fed's framework. And also that there is plenty of demand for government debt. At least for the American side of things. Do you read it one way or another when it comes to the way that the 10 year has teetered since the spring?
SHAWN SNYDER: I think everybody was surprised that it declined for four months consecutively. I think people expected it to go the opposite direction. Particularly with the economy being still relatively strong. And then also you have potential for Fed tapering. But you have to keep in mind that yields overseas are extremely low. So the US Treasury yield looks appealing compared relative to that. But I do think we're starting to see some stabilization in the 10 year treasury yield. I think the market is kind of firming up its view that we will get the tapering announcement in September, or shortly thereafter. And then I also think that people are a little bit less concerned about inflation as a whole.
And I simply think that we're seeing a stabilization after a period of decline.
- All right, Shawn Snyder. Citi US Wealth Management head of investment strategy. Thanks for stopping by Yahoo Finance this afternoon.