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Market Recap: Wednesday, June 30

Stocks were mixed on Wednesday, with the S&P 500 gaining for a fifth straight session to end the day at yet another record closing high. James Camp, Eagle Asset Management Managing Dir. of Strategic Income and Jimmy Lee CEO, The Wealth Consulting Group joined Yahoo Finance Live to discuss.

Video Transcript

ADAM SHAPIRO: All right. Two minutes to the closing bell. And helping us once we get there and after, let's welcome into the stream James Camp, Eagle Asset Management Managing Director of Strategic Income, as well as Jimmy Lee, the Wealth Consulting Group CEO.

And let me just go very quickly to you, James. You know, inflation has been a big discussion with a lot of people. Others are dismissing it. Very simply, where do you stand on this? Is it a real threat to investors right now?

JAMES CAMP: You know, it'd be hard for me to imagine it not being a threat. When we look at the amount of stimulus, the amount of what I call pure velocity in the economy, we have 30%, roughly, of personal income being supported by transfer payments. And we had an economy that really was shut down in a recession of choice, if you will. It's coming back quite nicely.

The issue that I have is when I look at things like supply chain and I look at delivery delays and I look at the data series, there's historic gap between order and delivery. And typically that gap is managed by price. But what I'm seeing now is a lot more conversation at the producer level and on earnings calls about CFOs and CEOs saying, we're going to move price. We didn't hear that for the last decade. So that's where I think there's more freedom now. And I think they're just chomping at the bit to be able to move the needle. So I do think this is going to be with us for a little bit longer than perhaps the Fed is signaling.

ADAM SHAPIRO: All right. That's a good lead up as we get ready for the closing bell. Let's see where we stand in these markets. Because one of the big leaders in the Dow today Boeing, up almost 2%. We were talking about the stock there with the big orders for the 737 Max, not only from United and Southwest but also Ryanair in Europe. And you can see, we're looking as if we will close on the Dow up about 220 points. The S&P 500 will close up about 7 points. NASDAQ, however, is going to be down about 19 points.

Some of the losers, by the way, in the Dow today, just to let you know, we're watching Intel, Nike, and Visa, all trading down, but only about a percent or less. And there it is, the closing bell.

SEANA SMITH: And that does it for today's action. To get the big picture when you look at today, the Dow closing up just over 200 points, S&P up about 2/10 of a percent, the NASDAQ, though, in the red. So far, though, closing out, I guess the first half of the year, the Dow and the NASDAQ both up just about 12%. We see the S&P up just around 14% here since the start of the year.

The outperformance that we've seen in sector action wise since January 1, energy up just around 40%, financials up 25%. We've seen a bounce back in some of those big tech names. Facebook, that stock up just around 27%, as well as Google up nearly 40%. And then to bring your attention to one of the movers today that we were paying very close attention to, DiDi went public, the ride hailing service out of China, shares closing up just around 1% after opening above $16 a share. So coming back just a bit, and we could see it closing up 1.5% at $14.20.

Well, we want to bring back in our panel. We have James Camp and Jimmy Lee joining the conversation. Jimmy, just wrapping up the first half of the year for us, I guess, what's your big takeaway, and then, of course, what we could expect here going forward for the second half?

JIMMY LEE: Good afternoon. First of all, what an amazing first half of the year. I think for most investors, the returns that you just quoted would be great for the entire year. But I think that we have more room to run for stocks. We've got the prospects of more stimulus. We've got an accommodative Fed. Interest rates are probably going to stay low.

Now as the previous guest said, I agree, are we going to have some inflation, I think we have it now. You know, there's a lot of places that I think you can look at where you're spending your dollars where we have inflation. But part of that is because of the supply chain issues that we've discussed that I think will resolve itself over the second half of the year.

But I'm bullish on the second half of the year for stocks. And I think that it makes sense to be constructive right now on equities. And I also believe that on helping the inflation front, because we're doing so much better with the vaccine and opening up the economy here in the US, but in other parts of the world they're still shut down, I think we have this laddering effect that might help with the immediate impact of demand not being as quite as great as it could be, and also the extension or maybe expansion of the length of time that we could have in this global growth kind of story that we'll have coming out of COVID.

ADAM SHAPIRO: James, I want to pick up more on this issue of more growth but also inflation. And one of the things, if you look at commodity prices, just recently copper fell a little bit, we saw lumber fall a little bit. But the Bloomberg Commodity Spot Index has actually been increasing and has not really dropped dramatically. So when we get a guest on yesterday who tells us, next year, 2022, looking at S&P earnings per share growth of about 8%, are we missing something here, if we're going to be paying a lot more at the input to the earnings side?

JAMES CAMP: Well, I mean, the linchpin to all of this is going to be CapEx and productivity growth. And I think the folks that are more dovish on long-term inflation are pointing to things that are happening in the real economy in terms of the CapEx cycle. But to us, these commodity price inputs, including, as you mentioned, copper, lumber, though coming off the ultra elevated levels are still high. I would also note that it is one of the most regressive taxes you can create on an economy to have energy, foodstuff, and the like, accelerate rents, [INAUDIBLE] equivalent rents are going to get a big spike here in the next few months.

And if I took it all in total and we separated away the events of the last year, we looked at Fed policy, I'd be very hard pressed to suggest that we need to be zero bound on short rates and continuing to quantitatively ease to elevate risk markets. That's where I think the Fed is going to be slightly out of phase and likely will have to begin the conversation of movement post Jackson Hole, probably August, September timeframe.

SEANA SMITH: Jimmy, when we take a look at one of the big events that we're expecting this week, we have the jobs report out on Friday, how is the market looking at that? Because we know the past two months, we have certainly seen job creation drop off quite a bit, just relative to what the Street was expecting. So what is the market anticipating that we'll see on Friday?

JIMMY LEE: Well, I think investors are ready for maybe a number that's not that great again and shrug it off. I don't think that the stock market sells off on a bad jobs number necessarily, primarily because investors know that while demand for jobs is really good in a lot of places, there are a lot of people still not working because of the subsidies given by the government.

And so while the subsidies will run out in the next few months, I think that situation balances itself out better. I don't think investors will get too jittery on a bad jobs number. If we get a surprise and we create a lot more jobs than expected, then I think, again, that's bullish for the equity markets. And so I think either way, I think stocks do OK, regardless of how the job report comes out, unless it's like completely horrible and something way off of what we would expect.

ADAM SHAPIRO: James, I know that you've pointed out you're keeping an eye on what we get from Jackson Hole when the Fed meets for their annual Kansas City gathering there. And it's a good time. They have a good party. We're sending our own Brian Cheung to this. But will we truly get anything out of that that would indicate-- I mean, they might start talking about tapering but they're not about to do it.

JAMES CAMP: Well, again, it goes back to what are the data going to tell us? And I think over the coming months, we're going to see a lot clarity of the bandwidth and the transitory nature of inflation. I think it's going to be more menacing. That's an opinion that we have reasonably good basis on.

But I also think there's pretty broad disagreement within the Fed. This is a sense that I'm getting. These conversations are lively, they're real. Chairman Powell is going to have to calm the markets enough that we don't run into a taper tantrum scenario, which could derail both the bond and the equity market, as mentioned.

Stocks have had a brilliant run year to date. And we've been, in our multi-asset class strategies, overweight that, particularly for income. But bonds have sold off and yet now found this sort of very narrow trading range. We suspect that range is going to get violated to the upside in yield, and we think that's going to be when we have an announcement of at least the plan of tapering, probably starts with mortgages, probably then moves into the Treasury market.

But again, the massive amount of liquidity and stimulus. We have literally no place to park cash in many parts of the capital markets. Not to get too technical, but the reverse repo market is just chock full of folks showing up to get the 5 basis points. This is a liquidity problem. We've overliquefied parts of the market and we're beginning to get real distortions. And I think the Fed needs to be mindful of that.

ADAM SHAPIRO: I've just got to say thank you to James Camp, Eagle Asset Management Managing Director of Strategic Income, and point out that the Huckleberry daiquiri at the resort where they do the Jackson Hole symposium, thumbs up on that one. Jimmy Lee, the Wealth Consulting Group CEO. Good to have you both here. Thank you, gentle--