‘There’s a lot to worry about despite the fact we’ve heard some good news’: RiverFront Investment Group Sr. Portfolio Manager

In this article:

RiverFront Investment Group Sr. Portfolio Manager Rebecca Felton joins The Final Round to give her thoughts on the Fed’s latest decision and how the U.S. economy will respond in the third quarter.

Video Transcript

SEANA SMITH: Rebecca Felton. She's Senior Portfolio Manager at Riverfront Investment Group. And Rebecca, just your reaction to what we saw today. Because we saw selling pressure and some rotation. Those mega cap tech names once again in the red. Facebook, Amazon, Google, Apple, Jared just had a bunch of those names on our heat map showing the declines that they've experienced so far this month. What do you think that that's saying, what is that telling us I guess more broadly about the market and how should we be reading the sell-off?

REBECCA FELTON: Thank you so much for having me, and in full disclosure, we're still leaning into tech from a sector standpoint. I don't think [AUDIO OUT] it's more of a expected sell-off when you do have a lot of uncertainties in the market. I thought Andy pointed earlier about the good news, bad news. We are conditioned as investors to think of it, wait a minute, is it really good news or is it bad news? And what Chairman Powell said yesterday was not really anything terribly new.

But the market is looking for reasons to sell off, given these valuation levels and given the uncertainty that we are facing, not just with the elections, but we're also heading into earnings season. And there's a lot of hope built into it. There are no sectors expected, including tech, to have a positive year over year number for Q3. So there's a lot to worry about, despite the fact that we've had some good news along the way economically.

SEANA SMITH: So Rebecca, does that mean that we could see more downside risk ahead? And I guess, how big of a pullback do you think we could see over the next couple of months given all that uncertainty?

REBECCA FELTON: Well, I think we're all watching the same levels. I know Jared mentioned that 3,330 level. I think, and I'm not a technician, but I know when we've had our meetings and our technical strategists have talked about the levels that they're watching, that's one of them. And so I think it's reasonable to expect that you'd see a rotation out of some of these high flying names. And there's always I think, a value part in many of us. So you would look to some of those sectors that haven't participated, particularly when you've got such strong home-building numbers and you've seen some pickup in China.

So that makes you think of some more the materials, industrials, those types of things. I think it's natural to see a rotation here into the things that haven't worked. For us again, we're still leaning into tech, because looking longer term, we still expect the resiliency of earnings and revenue streams to be there. And also the balance sheet strength. So we're willing to sit through this volatility here.

INES FERRE: Rebecca, Ines here. Are you concerned that some of the companies that had put off laying off people during the pandemic, we know that the banks had done that and some of them were resuming on some of the layoffs, that we may see like a second round of layoffs, and maybe layoffs of maybe higher paying jobs and some of these services jobs that were lost in the pandemic?

REBECCA FELTON: Well, certainly services have not rebounded. When you see what people are spending on, it's not services. And so you've seen some of the heavier data points coming in [AUDIO OUT]. We also know when we look at some of the CEO confidence, not just the large number, the large companies, but also some of that NFIB data when you look below the surface of what they were talking about in terms of three, six months out, the ability to expand.

They're questioning that. So a lot going to be riding on the stimulus in terms of whether or not, or the potential for a stimulus as to whether or not folks are able to continue to hire and what those decisions will look like if that doesn't happen.

SEANA SMITH: Rebecca Felton, Senior Portfolio Manager at Riverfront Investment Group, thanks so much for taking the time.