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Market recap: Monday, Nov. 8

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Kristina Hooper, Invesco Chief Global Market Strategist and Jay Hatfield, InfraCap Founder, CEO and Portfolio Manager, join Yahoo Finance to discuss the day of market action.

Video Transcript

SEANA SMITH: And a final-- last minute of trading, I should say. We're looking at a record-setting day-- Dow, S&P, and NASDAQ all moving to the upside. Dow up 100 points, S&P up just around a tenth of a percent as the NASDAQ holds on to gains. We have Kristina Hooper, Invesco's Chief Global Market Strategist and Jay Hatfield, he is InfraCap's Founder, CEO, and Portfolio Manager here to help us break down today's action.

But let's take a look inside of some of the gains that we are seeing today, because we got that infrastructure bill passed late Friday night. As a result, we are seeing a number of materials and industrials names lead to the upside. Caterpillar is the outperformer in the Dow today, that stock up just over almost 4%. We're also looking at gains from American Express, Visa, Merck, and UnitedHealth.


ADAM SHAPIRO: All right, there you see them ringing the closing bell. Come on, give us the gavel, the CEO of Marriott Vacations Worldwide. We had him on the program in the 3 o'clock hour-- the return to vacations and travel is now underway. Let's see where the indexes are going to finish the day, because they are not on vacation.

Dow is going to settle up 100-plus points, S&P 500 still, look at that, above 4,700. It's up 4 points. And NASDAQ is going to be up 10 points. Let's get back to our panel and talk about what's coming down the pike, because we keep seeing metrics about how up, up, and away through the end of the year.

Kristina, let's start with you, though. It seems as if people are eager for a more normal, pre-pandemic world, but how can it be more normal? There have been shifts in the way companies are fulfilling their supply chain needs that won't go back. So could this race or melt up, as they're calling it, persist well into 2022?

KRISTINA HOOPER: Well, we certainly expect to see supply chain disruptions persist into 2022, but that doesn't mean that we're not on the path to normal. What we are seeing just looking at the United States is a more normalized job market. Certainly, we need to see better labor force participation, but we've seen very nice job growth in the October jobs report.

We've got kids back in school, so that's alleviating some of the childcare issues. We've got enhanced unemployment benefits that rolled off in September. So we're probably as normal as we have been since the pandemic started. And of course, the future looks even brighter, given that vaccination levels increase, we now have approval for younger people ages 5 through 11 to get vaccinated by at least one vaccine maker, and of course, now we have the announcements about a pill that would dramatically reduce hospitalizations and deaths. So we're moving in the right direction, but it's not going to be without hiccups.

SEANA SMITH: Jay, what do you think? Is there enough to keep this momentum going to the upside?

JAY HATFIELD: We think that just in the very short-term, that we may be a little stalled here. Last time I was on, I talked about getting long into earnings. Earnings are almost over now. And your prior guest is talking about that seasonality. Well, that seasonality is really driven by the fact that earnings end. And so we think the market may be in the 4,600, 4,800 to the end of the year. And we continue to be nervous about these inflation reports-- CPI tomorrow, which is likely to print hot, the BLS is better at measuring PPI, and then you have CPI on Thursday. So those could be negative inflections. So we're in a neutral camp right now.

ADAM SHAPIRO: Jay, and you do raise and have raised the caution flag regarding inflation and the monetary policy at the Fed that has driven up, for instance, housing prices. What are others missing, though? Because everything still seems-- I don't want to use the word bubble, but there's this almost euphoria-- equities are going higher, real estate is going higher. I mean, what's going to stop it?

JAY HATFIELD: Well, I think it's also important to note that the across the board corporate tax increase was taken off the table and the total tax increase was halved. So I think that's very bullish as well. So by no means are we negative on the market.

But the thing that I think people are missing about inflation is that the normal transmission mechanism is growth in the base, then increase in both housing and durables, and then that translates into wages and into service inflation. And we're about halfway through there. You saw CPI final goods was 13% last month. So we think that's going to get reflected into CPI and that the Fed will have to raise rates at least three times next year.

SEANA SMITH: Kristina, when it comes to inflation and then, of course, the supply chain concerns that we've been talking so much about, how long do you expect these challenges to persist?

KRISTINA HOOPER: So I would expect inflation to peak by mid-year 2022. It should remain elevated, but it should move lower in the back half of 2022. So while this is certainly an issue, it is part of what we should expect coming out of the pandemic.

If we think about where we were more than a year ago, we were in a very bad place. So we have gotten out of a burning building, but we should expect that there is a little smoke and water damage as a result. And that's really what we're experiencing with elevated inflation and all these supply chain disruptions.

ADAM SHAPIRO: But, Kristina, I know that Jay has raised some issues with how the stimulus is now not going to be there to propel spending. Do you have a concern, Kristina, that the efforts that the government took to make sure people could still put food on the table, that those will no longer be in place, that we could see a pause, perhaps, not only in spending, but eventually in GDP and the things that come with all of that kind of slow down?

KRISTINA HOOPER: Well, I have to say I think fiscal policy has been so different this time around than it was during the Global Financial Crisis. We were far more proactive. We provided far more in the way of fiscal stimulus this time around as a percentage of GDP. So my expectation is that if there continues to be a need or a need arises, that we will see the government act.

It's learned its lessons from the Global Financial Crisis. So personally, I think the economy is going to continue to improve. And I don't think we're going to need that level of fiscal stimulus. I also expect that the elevated household savings levels will be deployed. So I don't think we're going to feel a very significant hit, although I do expect economic growth to moderate in 2022.

SEANA SMITH: Jay, with all this in mind, where are you seeing pockets of opportunity? How should investors be positioned?

JAY HATFIELD: Well, we think that next year will be sort of a normal year for stocks-- maybe 10%. So that argues for being more conservative, defensive dividend type stocks, preferred stock, and less focus on hyper-growth stocks. We've seen just in the last couple of weeks companies like Peloton that were hyper-growth stocks can blow up.

And when you have less liquidity, even assets like Bitcoin could do very poorly. So we think it's a better market to be conservative, focus on dividends, and you know, like I said, preferred stocks that are senior to common.

SEANA SMITH: Jay Hatfield, Kristina Hooper, thanks so much for joining us today.