Stocks fell on Wednesday in directionless trade, extending the previous day's declines. George Seay, Annandale Capital CEO and Sylvia Jablonski, Defiance ETFs Co-Founder & CIO
- All right. We've got roughly a minute and 20 seconds to the closing bell. So let's introduce you to the two people in the stream who are going to help us get there along with Seana and me. George Seay is Annandale Capital CEO. And then we've also got Sylvia Jablonski, Defiance ETFs co-founder and CIO, one of the hardest working moms and people in the business. Good to have both of you here. Let's take a look right now however at where these markets look like they're going to settle for the day. The Dow is going to be off about 75 points. Same with the S&P 500 only off about seven but still down.
NASDAQ is going to be down almost 100 points. And one of the things we're watching in regards to sector action is you can see that one of the sectors in the green today, utilities up almost 2%, you got real estate up about half a percent, consumer staples almost up a full percent. When you take a look at some of the players on the Dow, winners today include Coca-Cola, 3M, and Visa. But when you take a look at some of the laggards who's dragging things down, Boeing off by about 1% followed by United HealthCare at 1 and 1/2% off. And Dow Inc is off almost 2%.
So with roughly 20 seconds to go, will these markets be able to turn it around as the week goes forward? That's what we're going to talk about with our guests, as well as the things you need to pay attention to if you're looking to invest. But here's the closing bell.
SEANA SMITH: And that wraps up today's trading day. Again, all three of the major averages closing in the red. The Dow off 69 points, a third day in a row where we've seen a decline for the Dow. The S&P closing off just about a tenth of a percent. And then NASDAQ was the biggest loser today of the three major averages, closing off just over a half of a percent. We have George Seay and Sylvia Jablonski standing by to help us break down some of this action. And George, let me go to you first just in terms of the action that we saw today the momentum to the upside has seemed to cool just a bit over the last couple of trading days. What do you make of it?
GEORGE SEAY: I like it actually, Seana. I think the market needs a bit of a pause and potentially a bit of a correction, a small correction, on some of the market leaders that have been just so energetic for so long. I think it'd be really healthy for the market. And I wouldn't be surprised at all if we get a 3% to 7% or 8% correction between now and November 1. But I'm still very optimistic the market is strong. And Tina still rules. And we're going to get a Santa Claus rally and probably close higher for the year than we are right now, even after a 20% stellar year.
And I thought the comment earlier about the fact that the indices look very placid, but that there's some undercurrents in the market that are really enormously powerful was really well made. You look at just natural gas today. And it's trading just under five bucks, and at one point was up 7% on the day. So there's a lot of disparity in the movements in the market right now.
- Sylvia, I want to pick up on something we were talking about coming into the closing bell with our crypto guests. And it has to do with a lot of people very excited about investing in crypto. You remain bullish. Why?
SYLVIA JABLONSKI: Good question after the last couple of days. I sort of love to pullback. Similar to George's point, I think it's a good opportunity to look at the crypto market and potentially get in if you haven't gotten in. I like that institutions have adopted crypto. I like that you can use it for things. I looked up the other day the list of companies that actually allow you to use Bitcoin to pay for things. And you have college universities, you have airlines, you have Expedia, you have potentially all sorts of different companies that are going to start using it, El Salvador has adopted it.
I think a few retirement accounts are talking about letting people invest in crypto for the long term. And we have this overhanging filing of ETFs, which if those get approved, and I know that's a big if, but you're going to have a lot of market makers hedging with the actual underlying asset to give ETF issuers exposure to it. It's going to propel the price upward. So I just think that any time that crypto pulls back now, I'm getting in. And I think it's here to stay.
SEANA SMITH: And Sylvia, when you are getting into crypto, I guess what looks most attractive? Are you doing Bitcoin? Or are you seeing opportunity in Ether or one of the smaller coins that maybe we haven't been focusing on?
SYLVIA JABLONSKI: So I actually like Bitcoin and I like Ethereum. I like Ether. I like NFTs. Because I think that these are actually currencies and sort of tokens, nonfungible tokens, and blockchain technologies that we're actually using for things now. So they have a proper use case. There are so many different types of crypto assets out there. I don't know enough about every single one of them to invest. Dogecoin is an interesting one. It's something that was sort of made up that became a real thing. But in my mind, I like the idea of Bitcoin and Ether in particular just because it is getting that institutional adoption.
It is sort of on the table for consideration for fund inclusion. And it is currently used. So I read the other day that actually 57 million people have or own an NFT right now. Coinbase came out with their account metrics during their last earnings call. And they had a $60 million sign up increase in accounts. So it seems like more and more people are using this and investing in it. So I like the investment thesis there.
- George, I want to go back to something a little more old fashioned. And we actually de-teased you in the last hour talking about commodities. Because you're pointing out that people should look at commodity oriented stocks. I know you've got some picks there. But I wanted to ask you-- I used to live in Cleveland, Cleveland Cliffs. Would that be a potential play in what you're saying?
GEORGE SEAY: I think anything that's leveraged to commodities the next couple of years is going to be in a really strong position. And when I talk about these stocks, there's really not a more hated area of the market. Because a lot of them are fossil fuel based. And then you get into climate change, and green power, and people are fleeing from this. And many institutional investors are refusing to invest in it or liquidating their positions in it. So you've had one of the greatest exoduses discussed in history through the end of last year, and continuing somewhat into this year.
Energy fell to below 3% of the S&P, which is at an all time low. It used to be closer to 20%. And you can find upstream oil and gas producers that trade anywhere from a 10% plus free cash flow yield to North at 20%. And they're using all that money to clean up their balance sheets and buy back gobs of stock. So I think the math is heavily in your favor in these areas, not just for the next month or two, but at least the next six or seven months and probably maybe for a couple of years at least.
SEANA SMITH: Sylvia, in the last hour, we were talking to Mark Zandi about the JOLTS report that we got out this morning and comparing that, or more so what does that tell us about the labor market after the huge miss that we saw on Friday. But when we see that there are almost 11 million jobs open in the US economy, is that an encouraging sign to you? And I guess, what do you think that tells us just about the pace of this recovery and what to expect going forward?
SYLVIA JABLONSKI: Well, I think the last jobs number and seeing the employment rate fall from 5.2% to 5.4% slows us down a little bit. But in a way, that's good for-- I think it's sort of maybe slows us down in terms of overall growth. Maybe we get a little bit less growth than we expected, or it takes a little bit longer. But in terms of market performance, which has thus far seemed to be slightly divorced from that, I think it's a good thing because we have this situation where the fed will probably take some time to taper, not go as sort of fast and furiously as they may have wanted to go.
And so I think in a way, the market likes that story. And then if you think about rates, rates will probably stay lower for longer. Big corporations will remain flush with cash. They still have government stimulus on the books. So I think it's encouraging in that there are jobs out there. And when some of the aid sort of expires, hopefully we'll see those numbers go in the right direction. And it's also encouraging because I think fiscal and monetary policy will continue to support the economy and support the markets in the near term when we get past, hopefully get passed anyway, the different variants that are coming out and really see steady growth going forward.
- George, when you say watch out for 2022, and you point out about earnings growth dissipating, still going to have positive earnings growth fingers crossed, and economic growth dissipating but still positive economic growth, is there a chance that a lot of us, the volatility that we fear with the COVID and what we're witnessing in the back and forth and markets of the last week, that we're really on the verge of another breakout to the upside? Because with a trillion dollars in savings, at least of household savings, plus government spending come at us to replace the fed's pullback if they go there with tapering, how do you stop markets from going up with all that behind it?
GEORGE SEAY: Well I don't know. I think any humble person who deals in markets, and I've been doing it for over 30 years now, the market forces humbleness on you. Because you get it wrong an awful lot of the time. And I don't know what the market's going to do next year. But I do know that earnings comparisons are going to be a lot lower in the growth mode than they were this year. The comparisons are a lot harder. And the economy is going to slow down because the stimulus is going to sharply drop off. And you're not going to have all that juice from fiscal spending and the Fed to keep pushing the market to white hot kind of growth.
And then you look at the potential for what I've been talking about earlier, which is sustained inflation. All the monetary policy authorities are saying, oh inflation is going to go away. And it's not a problem. I think a lot of the commodities would tell you it's going to go on for a lot longer than they'd like it to. And eventually, you're probably going to get higher interest rates with that. And if you get higher interest rates, growth stocks are not going to look as attractive at these elevated multiples. If interest rates go higher, the discounted earnings are going to be worth a lot less.
And so I think next year's going to be harder. I don't mean it's going to be a bad year necessarily. But I think that the easy lift in terms of increase in stock prices and making money is over. And I think it's going to get a lot harder going forward.
SEANA SMITH: George Seay, Annandale Capital CEO, and Sylvia Jablonski, Defiance ETFs co-founder and chief investment officer. Thanks so much for joining us today.