Head of Macro Strategy at Academy Securities Peter Tchir joins The Final Round panel to discuss the latest Fed news from Wednesday’s FOMC meeting and what to make of the Fed’s inflation policy.
MYLES UDLAND: For a bit more on reaction to the market reaction to Powell, what we heard from Powell, Powell's tone overall, we're joined now by Peter Tchir. He's the head of Macro Strategy over at Academy Securities.
So Peter, you know, you kind of flagged for us his tone maybe a little bit different than in recent meetings. And maybe a sense that it's more difficult, perhaps, for Powell at this stage to articulate exactly where he sees the Fed going over the coming years. And Peter, you're going to have to unmute yourself. [SIGHS]
PETER TCHIR: Sorry about that. Is that better?
MYLES UDLAND: You are [? gone. ?]
PETER TCHIR: Sorry about that. So I think we've learned a couple of things. One is the Fed is going to support markets. We already knew that. That was a little bit of a yawner. I think what I found here was he talked a lot about the economy, projections, models, when interest rates would go up, how inflation's going to behave. And I think both the markets and even the audience were going to like, he has more knowledge about that future path than we do.
So I think people are taking that with a grain of salt. With that in place. I think we have to say that yields are going to head higher. We're going to see long-end yields go a little bit higher, not dramatically. But they're going to drift higher. And you're going to want to trade your portfolio around that.
MYLES UDLAND: And then I guess, Peter, just overall, as you think about where the Fed sits in the conversation right now, is it still as important as it ever was? I mean, how are you to think about the Fed's action? You mentioned it's not that interesting. They said they're going to be accommodative. But, you know, they've been the main driver markets now for almost 15 years.
PETER TCHIR: They've certainly been one of the main drivers. I don't think the only one. But I think what we know is they will offer some sort of support, right? If we see anything go wrong in commercial real estate, residential real estate, mortgage-backed markets, they will intervene. They will up their purchases, and they will do something.
But I think right now at these kind of levels that we're currently at across the board, we're at the limits of what they can do. I think even Powell is saying over and over, right, to get true growth, true stimulus, it's got to come out of DC. That's what we're waiting for I think for that next real growth leg.
MYLES UDLAND: And then, Peter, just broadly, as you think about markets right now, where we stand in the cycle, maybe even backing the Fed out if that's possible, you know, what do you make of as we head towards the end of the third quarter? What trades are attractive to you? And what are the main themes that you kind of see as driving the conversation there?
PETER TCHIR: You know, I'm continue to look a little bit at this reversion trade. We seem to get it some days, and it gives up. Yesterday was a very bad day for the reversion trade where financials did poorly. I ultimately think we are going to see ourselves emerge from the COVID experience. We are going to get growth. We are going to get fiscal stimulus from DC.
Again, I talk about three types of fiscal stimulus from DC. The first is Band-Aid stuff. That's really what we're getting right now where they're attempting to make people whole. That doesn't do that much good. We either need to see infrastructure spending or some sort of supply chain or manufacturing rebuild. Spending, that probably doesn't come till next year.
I think that's what we need. And as we get that, I think banking, real estate, energy. A lot of the beaten down sectors could do pretty well. And I also do like commercial real estate, ex the big cities.
MYLES UDLAND: All right, Peter Tchir, head of Macro Strategy at Academy Securities. Peter, always great to get your thoughts. Thanks so much for joining the show today.
PETER TCHIR: Thanks a lot for having me.