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Is this inflation transitory or here to stay?

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Sunaina Sinha Haldea, founder and managing partner, Cebile Capital joins the Yahoo Finance Live panel to discuss the latest with the markets.

Video Transcript

- But first, want to take a look at the mini meltdown we're seeing play out in crypto right now, because as I said, Bitcoin there off by about 8%. But the moves that you can see there in the alt coins more pronounced, Ether off nearly 10%, and Cardano, we're seeing it lose by its value there, more than 10%. Of course, we chatted with Cardano's founder earlier in the week, but it doesn't bode well for a long week of trading for those cryptos. Some people pointing to remarks from a Bank of Japan governor warning again about cryptocurrency's volatility and speculative nature as a trigger this time around. But we'll keep our eyes on that and bring you the updates as we get them.

But want to kick off things in the back half of our show today with a look at the broader market discussion, as we got PCE inflation numbers from the Commerce Department. That measure, which is what the Fed prefers to use when it comes to inflation, rising 0.6% for the month of April, or 3.6% from a year earlier. The so-called core index, which strips out food and energy, rose 3.1% over the prior 12 months.

And for more on that and what it means at this stage in the recovery, let's bring in Sunaina Sinha Haldea, Cebile Capital founder and newly named managing director, global head of Private Capital Advisory at Raymond James Financial. And Sunaina, congrats on the deal to get that new Raymond James title. We're going to get into that in just a second. But first, I want to get your take on where we're at in this recovery and your reaction to those inflation numbers we got this morning.

SUNAINA SINHA HALDEA: Yeah, the inflation numbers are higher than anyone predicted, but the question is, is this transitory or is this here to stay? My advice for retail investors, and investors of all types, right now is that you don't want to take a chance that it is inflation that is above target and there's no Fed to come and cut it off before it runs away at this time around. The tail risk now is wider. The outcomes that investors can face in the market is wider now than it was at any point in the last 18 months. So really, it comes down to how do you protect your portfolio immunized against inflation.

There's a couple of ways you could do it. The first is focus on companies with near-term cash flows, i.e. that are cash flow generative. And number two, diversify. Diversify outside of the United States. Use the ADR market in the New York Stock Exchange to buy companies that are domiciled elsewhere, for example in Asia and elsewhere, where the inflation concerns are certainly less than they are here today.

- Any particular names or sectors that you're looking at outside of the US right now that could provide real opportunity?

SUNAINA SINHA HALDEA: You, know while tech has been played up all over the world, when you look on a relative value basis, Asia tech, some of these large Asian tech businesses that are ADR listed on the NYSE actually, on a relative basis, offer better value. So that a tech basket that is Asia-dominant, where inflationary concerns are less prevalent, these are cash flow generative businesses, where any nominal impact into nominal GDP from increased inflation will be a positive one makes a lot of sense today.

- When we look at maybe, you know, the risks from here, we were talking with Dan Niles not too long ago about kind of the risks about the Fed eventually tapering, and how that could lead to a 20% correction. Of course, you called for about a 20% to 25% correction back in February of last year, when we were seeing the jitters play out around the crisis as people were changing their models. And you kind of called that bottom perfectly there. So what are you seeing now when it comes to maybe jitters around how the Fed's going to come off its accommodative stance, and what the market can actually weather this time around?

SUNAINA SINHA HALDEA: Well, if you look at the markets, the markets aren't pricing in-- the bond markets are not pricing in that much tightening two years down the road. So one has to expect that there'll be more tightening just from the messaging, from the tapering of the QE programs, both in the US and Europe, and that that has to flow through into market sentiment. So there will be some correction, there's no doubt about it. Now, the question is, how much is that correction versus what we are all calling the liquidity paradigm? The markets are awash with liquidity.

Everything goes up and everything comes down together. That's the market we are seeing at the moment. It's sort of risk on, risk up. And the liquidity paradigm is not shifting anytime soon, despite any signals and messages the Fed may or may not want to send, unless they're actually going to go ahead and taper aggressively or put rates up, which no one expects them to do in the short to medium term. The liquidity paradigm is here to stay, which means this money needs to chase yields. And so while I expect there to be volatility, while I expect there to be a correction as the markets price in the tapering and potential increases, do I expect an Armageddon scenario again? No, absolutely not. And why? Because there's too much liquidity in the system.

- All right, I'll believe that there. That sounds like a well-argued thesis for what we could see. And of course, I'd be remiss if I didn't mention the reason why your title is longer than usual. And that would be because Raymond James, we got the news earlier this week that they would be acquiring the firm that you led and founded there. And talk to me about that deal and what it changes for Raymond James and what you guys are going to be working on there, because for a long time, you know, you guys were leading a private placement agency and secondary market advisor to PE firms. But what does that deal maybe do for Raymond James, and what should people take away from it?

SUNAINA SINHA HALDEA: Well, Raymond James has a prolific investment banking business that has been growing year on year significantly, and focuses on mid-market financial sponsors, mid-market private equity firms in the United States and Western Europe. That is our sweet spot. Our capabilities are going to now be on Raymond James' platform to offer to its hundreds of mid-market PE firms all across the United States and Europe and beyond. And we're really excited about that combination because mid-market firms, while they've started to adopt some of these New Deal paradigms via the secondaries market, they're still newer to it, which some of the larger firms have already been there and done that. And we feel there's a great opportunity to offer our services to Raymond James' clients and vice versa over the course of the coming years to come.

- Well, congrats on the deal. Sunaina Sinha Haldea, appreciate you coming on here to chat with us yet again. Be well.