Dow falls 400+ points amid September slump
Shawn Snyder, Citi U.S. Wealth Management Head of Investment Strategy join the Yahoo Finance Live panel with the latest market action.
Video Transcript
ZACK GUZMAN: I want to turn to what this all means, though, for the market as we are watching September end in typical September fashion here, as the Dow, as we brought to you, seeing a loss of more than 300 points, extending those losses. Now off by 1.3%. Extends near the 4.50 mark. The NASDAQ also seeing a decline of about 1/3. This morning, we got unemployment claims, the initial jobless claims once again rising for the third week in a row beyond expectations. We've talked a lot about potential stumbles here in this recovery.
And for more on what it means for the market, I want to bring in Shawn Snyder, Citi US Wealth Management and Head of Investment Strategy here. Sean, when we talk about it, you know, we knew data was slowing down in terms of it showing a hot bounceback. You know, Delta, obviously, a lot to blame here, as we heard from Jerome Powell speaking this week.
But when you look at maybe what lies ahead, we knew September was also going to be rough. Just markets, that's what it is historically. When you look ahead to Q4, though, not the same picture, averaging about 5% gain when you look back historically. So what's the advice to investors who have weathered this September storm?
SHAWN SNYDER: Sure, I think you have to anticipate volatility in the market. It's not unusual. It just seems unusual because we had such a long stretch here with such a significant rally as we reemerge in the economy and reopen. But then the pace of gains are probably going to slow from here. And the economy is going to go through a process of normalization.
And that's essentially what Fed Chair Powell is alluding to as well when he talks about inflation. There are supply side issues that are holding back the economy. And I think the labor market is an excellent example of how it's being held back because you have record high job openings, 10.6 million jobs open, and yet you still have a weak jobs gain in August, 230 some thousand, I believe, it was.
So this is going to take a period of time to normalize. And, you know, I think the pace of gains are just going to be slower. You know, I think that's not that surprising, given that in the second quarter, we were thinking that COVID was very close to an end. And then delta put a dent in that. So that's really kind of throwing us off a little bit. Also, just a large confluence of events happening in September. We have now Fed tapering. We have the ongoing DC drama and all those things that are just kind of leading to some weakness in equity markets.
AKIKO FUJITA: Shawn, on the legislative side of things, what's the base case you're operating under?
SHAWN SNYDER: Well, we're looking at historical patterns. And when you talk about the budget reconciliation process, you know, I know there's a lot of political infighting and finger pointing. But this process has been used 25 different times. And it's went on to be signed by the president 21 times.
So 85% of the time that Congress has used this budget reconciliation process, it has went on to be approved by the president. So our base case is that they get it done, but again, probably a smaller price tag. But for Wall Street, I'm not sure that a smaller price tag is necessarily a bad thing if it's accompanied by smaller tax increases. So that's really what we're watching there.
The debt ceiling is definitely a tail risk. But again, you know, the White House and Congress has acted 98 different times to do debt ceiling modifications since the end of World War II. So history suggests they get it done.
ZACK GUZMAN: Yeah, and I mean, when we look at maybe what's happened here in September, just looking back, right, you know, we've talked so much about how tech stocks earlier this year had taken it on the chin when we saw interest rates rise. We moved north of 1.5 on the 10-year. And when you look at that and kind of put it into context for what we could see by year end, if that trend continues, I mean, is the advice there to maybe move, continue to shift towards maybe more of these cyclical names if you're expecting it to stay that high? And how should investors be playing that?
SHAWN SNYDER: So I don't think there's necessarily anything wrong with the technology sector per se. I think the long-term growth potential is still there. And I think it makes sense to hold it in portfolios. But if you have a significant concentration in technology in your portfolios, then you may want to turn some exposure if yields do happen to rise from here. So nothing necessarily wrong with the space, just the high valuations. And then there's some vulnerability around rising interest rates.
And any time you see a jump in rates, you see investors sort of rerate what technology is worth, and it kind of gaps down. The way to play it is you can add to financials or energy stocks. Those are two sectors that are actually positively correlated with Treasury yields. So if yields do continue to climb higher, then you'll see those sectors benefit. So it doesn't necessarily mean you have to dump tech shares. But if you're overly exposed, maybe trim and maybe add to some of these other ones that benefit from a rise in Treasury yields.
AKIKO FUJITA: Hard to imagine we already talking about the year end. Shawn, I was just thinking about how we just have, what, two more months left in the year. Always good to have you on, Shawn Snyder, Citi US Wealth Management Head of Investment Strategy.
