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The Fed ‘boxed themselves into a corner’: Prosper Trading Academy CEO

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Scott Bauer, Prosper Trading Academy CEO, joins Yahoo Finance’s Alexis Christoforous and Kristin Myers to discuss market outlook amid a potential rise in interest rates.

Video Transcript

KRISTIN MYERS: I want to continue this market conversation. Now we're joined by Scott Bauer, CEO at Prosper Trading Academy. Scott, we've got a lot going on today between cryptocurrency, what Treasury Secretary Yellen said today. I actually want to start with some of her comments. She said that rates might have to rise, especially as we see the economy heating up. Now this is something that the Fed has repeatedly said is not going to happen, at least in the near term. Do you think that the calculations on the timing of that pivot might have to change?

SCOTT BAUER: Don't you just wonder if she had discussed her comments with Chairman Powell ahead of time? Because as of yesterday, as of yesterday, he's still pounding the table on, you know, we like where the economy is headed. There's still a lot of concerns. And we're not even thinking about raising rates yet. We're going to let it run hot. And then, she says that today. So I think that's why we're seeing so much volatility in the marketplace today. Because now all of a sudden, we are getting really conflicting viewpoints here.

I do think the Fed needs to change their stance. I really do. I think that they have kind of boxed themselves into a corner a little bit here. They at least have to open up the possibility of tapering a little bit and maybe raising sooner rather than later. That's not necessarily a bad thing. I know the market probably won't react real positively to that. That's not necessarily a bad thing in the long run, though.

ALEXIS CHRISTOFOROUS: And what do you think in terms of the volatility jump that we're seeing today? I mean, we haven't seen that now in quite some time. The VIX is up over 12%. Do you think this volatility is going to be here to stay, at least in the short term? And how do you take advantage of that? I mean, do you trade on this volatility? Where are you looking right now?

SCOTT BAUER: I do think you need to trade on it. You know, if you look at the volatility curve over the last year, it has really been coming down, down, down. Not just down to the bottom that we've seen trade in 15 months, but the highs and the lows have been getting-- lower lows and lower highs. We're now almost up to the higher end of the range here.

And I think this is a point where if people want to come in and sell a little volatility in the marketplace, I wouldn't go all in right now. I think this is a really good opportunity because I think in the next couple of weeks, we'd probably see things settle in a little bit. Even if the market just kind of hangs here, maybe even grinds a little lower, I think volatility starts to come in a little bit.

KRISTIN MYERS: Now, Scott, of course, we're seeing the NASDAQ getting hit right now, down about 2 and 1/2%, more and more rotation out of that tech sector. Wondering how you see that narrative, that growth versus value narrative that we've continuously talked about. How do you see that playing out throughout the rest of the year?

SCOTT BAUER: I think you have to be really selective in the NASDAQ space right now. So much concern about rising rates, which, obviously, hurts the big growth stocks. And that's why we're seeing some of the NASDAQ sell off here. But I think it's a little bit overdone. I really do. I think you have to be really selective in certain stocks that maybe from a technical standpoint have just gotten beaten up, especially since earnings, especially stocks that have reported earnings already. And that's behind us.

And I look at a stock like a Shopify, for instance, which, you know, people can say, listen, it's in the stratosphere. It's made a huge humongous run. All of a sudden, though, we're trading down to a 200-day moving average, significant support. So I think there are opportunities out there. I think you just have to be a little bit cautious.

ALEXIS CHRISTOFOROUS: And before we let you go, Scott, what's your outlook on oil right now? We know that the economic recovery has been boosting the price of crude. Some are now calling for crude oil, $75 a barrel in the next few months. Do you see opportunity in energy? And what's your call on the price of crude?

SCOTT BAUER: Overall, there's probably a bias to the upside. But I'm not seeing as big a rise as people are saying. And I know Goldman Sachs actually just upgraded the entire space. I think there's still issues out there. And yes, we're coming into the real busy driving season. Demand is picking up. We have openings here. Europe is reopening.

But there's still this overhang of pockets around the world where, unfortunately, COVID is running rampant. That's probably not going away any time soon. And then, oh, yeah, we also have, on the supply side, OPEC starting to ease production cuts a little bit. And that's going to be gradually coming into play over the next couple of months, putting more oil out into the marketplace. So I do think there are some tailwinds to the space. But I'm not looking for $75, $80 oil.

KRISTIN MYERS: All right, Scott Bauer, Prosper Trading Academy CEO, thanks so much for joining us today.