Stephanie Lang, CFA, Principal and CIO at Homrich Berg, joins Yahoo Finance Live to discuss outlook on the Fed, interest rate hikes, and crypto’s volatility.
- I want to continue this market conversation now. We're joined by Stephanie Lang. She's a principal and chief investment officer at Homrich Berg. Stephanie, so let's just start with a lot of the comments that we've been getting from the Fed. We saw that sell-off on Friday after we heard from the Fed's James Bullard. And then, of course, now a huge rally today. How are you reading today's market movements considering those comments that we had gotten from some Fed officials last week? Were some of those reactions, do you think in the markets, perhaps overblown?
STEPHANIE LANG: You know, I do think that's part of what's happening today. Last week it was a reality for the market to realize that we've really kind of hit that peak accommodative stance and now that the Fed is taking the pedal off the gas. So the market immediately reacted. You saw the front end of the curve move up, the longer end moved down.
And so what that's telling us is that the Fed's going to step in earlier, we're going to see less accommodative policy moving forward, and with the long end moving down, there's really the expectation is that pedal to the metal with the Fed, there's less so of that. So we're going to see less growth going forward by the Fed accommodative stance.
So I think investors were taking in that reality, there was that sell-off, but it was a little bit overdone and it was quick, so we really do think there's going to be more of this volatility looking forward as the Fed continues to drive the narrative of the market. And I do think, though, when there's those dips, investors are going to come in pretty quickly and buy on that news.
ALEXIS CHRISTOFOROUS: So Stephanie, now that we know the Fed is going to be pulling back a little bit on the stimulus, we are going to be starting to get those interest rates hikes in the next year or two, what does that mean for corporate earnings? Do you think that they've peaked right now and has all the good news sort of been baked into the market already?
STEPHANIE LANG: You know, I do think the peak growth is probably there in the market in terms of not only earnings but GDP growth. We're going to get a print in the second quarter probably close to 9%, 10%, and then it's going to moderate in the second half, but we do think there's going to be a lot of momentum for the economy. And really, we think there's good momentum for earnings as well.
I mean, you have housing, which has been strong but there's been a lack of building there so we think that's going to continue. We think that will create a wealth effect for consumers which we'll continue to spend. Plus there's $2 trillion on the sidelines for savings there, so that will continue to drive spending in the second half.
But as far as earnings go, I think there's been tremendous momentum which I think, even though we may see lower growth rates moving forward, I do think that the beats have been way above expectation-- it's the biggest beats in quite some time-- and we think that momentum will continue to draw forward for the second half of the year.
I do think some of the bigger high flyers are going to see some volatility going forward. And I do think, as we move from early cycle to mid cycle, you will see some change in the leadership under the surface and go from kind of these cyclical names to more defensive names in the second half.
- Now Stephanie, I was reading through your notes and you were talking about weakness as buying opportunities. Curious to know where is this a time to pile back into tech, for example? We'd seen rotation out of that sector and a bit of rotation back into some of those big growth, big tech names. Or are there other, perhaps, sectors, company stocks that you're really liking right now?
STEPHANIE LANG: You know, I do think at this point in the cycle when there's such strong economic growth-- and as I mentioned, it's going to continue in the second half and it's going to be above trend for next year-- I do think, for the time being, cyclicals are the place to be. I do think there's going to be a rotation as we move from the early stage to the mid stage of the cycle. And so while, when you move into the later stages or the mid stages of the cycle, I do think there's going to be a rotation into some of the defensive names.
And so I think it's good to have exposure to both at this point. I like on the cyclical side, if you can take the volatility, some of the energy names, since you have the reopening of any economy and also there's been some supply constraints. The number of rigs are not even to the point where we can break even in terms of demand. On the industrial side, I think earnings are going to be strong not only this quarter but going through the rest of the year and 2022.
So, but I also think as there's this change in leadership-- and it's hard to tell the timing exactly-- it's good to have some anchoring of your portfolio with more quality names that have strong early earnings and some downside protection. So that can be dividend growth names, that can include some of these technology stocks that have shown that they can raise their dividend over time, because I do think there's going to be some volatility, and have a good anchor in your portfolio to withstand some of the downside protection is going to be important in the second half of this year.
ALEXIS CHRISTOFOROUS: Now, I hear you're talking about making sure you've added some value names to the portfolio, but is there a place there for some crypto? I mean, we're seeing the crypto digital assets getting slammed again today. Bitcoin basically halved in the past couple of months. It was at $65,000. It's now hanging out at around $32,000. But, you know, to go along with your thesis of these dips could be buying opportunities, do you feel the same way when it comes to crypto?
STEPHANIE LANG: So, our stance on crypto is that there's going to be some winners and losers and it's very hard to place on what the value of whether it's Bitcoin or other cryptocurrencies. So it's very hard for us to take a definitive stance and say that you should own Bitcoin at this price.
And therefore, when clients come to us and say, hey, should we put some Bitcoin in our portfolio or should we buy on this dip, we really take the stance that we don't know the long-term play with crypto. Maybe the Fed comes in, maybe there's regulation that takes over, and there are going to be big losers in this space.
So if clients want to go in and take advantage of this dip, they have to be ready to size that appropriately in their portfolio and be ready to withstand volatility. Because as we've seen, it can move a 50% move in a very short period of time. So you have to be ready for whatever you're putting in the market to potentially lose.
If you do think this is a long-term play that has legs and is going to be the next currency for us to transact in, then you can take a piece of your portfolio and put it into the crypto space. But we're not big advocaters of the crypto space and have been quite cautious on Bitcoin and other cryptocurrencies.
- All right we'll have to leave that there. Stephanie Lang, chief investment officer at Homrich Burg, thanks so much for joining us to.