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Market sell-off is the 'global equivalent of a margin call': Strategist

Morgan Stanley Private Wealth Management Private Wealth Advisor and Senior Vice President Jacqueline Remmen and Fitz-Gerald Group Principal Keith Fitz-Gerald discuss how to defend from this week's market sell-offs, investor fears, and the Fed's interest rate hike cycle.

Video Transcript

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DAVID BRIGGS: There's your closing bell on Wall Street. Brutal, brutal, devastating Friday, the markets down for the fifth Friday in the last six weeks. It has not been a nice way to end our weeks for the last six. And look at that, the Dow below 30,000, first time this year, and the NASDAQ down more than 5% for the week, losing 1.8% on this day. It is a difficult one.

Let's try to put it in perspective with our panel now, Jacqueline Remmen, Morgan Stanley Private Wealth Management, Private Wealth Advisor, and Senior Vice President. Also with us, Keith Fitz-Gerald, Fitz-Gerald Group Principal. Good to see you both.

Look, this is just a tough day, Jacqueline. It's one of those days you get on Twitter, and people are sharing devastating memes about their 401(k). We're not just talking Wall Street. We're talking everybody down Main Street is talking about the markets. Do you tell them there's more pain to come?

JACQUELINE REMMEN: Yeah. You know, thanks for having me. When we see days like this where the market's retesting, we're talking to clients about repositioning portfolios. And what that means is positioning for the current reality that we're in, which is higher and more sticky structural inflation and rising interest rates, talking to clients about positioning portfolios for value over growth, and looking for dividend growers, not just dividend payers, companies that are going to grow their dividends, and looking at companies with operational efficiency, strong balance sheets, and resiliency in their earnings.

RACHELLE AKUFFO: So, Keith, for those who perhaps have a longer horizon, who aren't just sort of looking at their 401(k)s and sort of retiring in the next six months or so, how should they be viewing this? And what sort of context should they look at this through?

KEITH FITZ-GERALD: Well, number one, I think they should take a deep breath and maybe grab a stiff drink of their favorite libation. You know, the bottom line on a day like today is, yes, this is terrible. Yes, it's scary. But you've also got to stay into the fight because if you've got a long-term perspective, companies like Apple, for example, are going to return to the head of the class. The only question is when.

Companies like Costco, for example, are still putting up fabulous numbers, are going to be the place to shop for a long time to come. So I would submit, if you have the time horizon, the patience, and the risk tolerance, these are the kind of days where you actually do want to engage the markets, and you want to run into the fight by picking up a few shares.

SEANA SMITH: Keith, some of the fear that we're certainly seeing play out in the market today, what we've seen play out in the last couple of trading days, is some of that fear overdone?

KEITH FITZ-GERALD: Oh, I think so, there's no question. You know, and this is a very tough point. This doesn't get talked a lot about, but what you're seeing today, where everything is red and there's no place to hide, this is really the global equivalent of a margin call. That's what's happening is you've got big traders simply getting off the gas, walking away from the bid on a Friday afternoon because they know that retail investors are going to get scared out of their minds, they're going to panic, and it makes it easier to separate them from their money.

The easiest way to play this as an individual investor is to not engage in that battle. Don't give them a chance to do that. You know what the great companies are, just like I do. Nobody's giving up their iPhones. Nobody's giving up their Microsoft Teams. They're continuing to stay in the fight. Those companies are going to put up good numbers.

DAVID BRIGGS: Boy, I'd love to know what you're drinking to shake off a day like this. Jacqueline, what can be the catalyst? Does Keith have a point that it's maybe oversold? And what could be the catalyst to recover in the weeks ahead?

JACQUELINE REMMEN: Yeah, for long-term investors, we're looking for opportunities similar to what Keith said, companies that are staples, that are going to be around, have strong balance sheets, operational efficiency, increasing their dividends. Within the tech space specifically, we're looking for that kind of tech staple, like the toothpaste of technology companies that are more defensive, especially with recurring revenue streams. And then more broadly across the different sectors, looking for opportunities for companies that are retesting their lows, similarly to where they were in June, that present long-term opportunity for growth.

RACHELLE AKUFFO: And, Keith, I want to ask you about the pace of tightening because one of our guests earlier said that they were very concerned that the Fed was moving too fast, too soon. And, obviously, we had questions there from-- to Jay Powell, asking if he was not really taking enough time to see if what he was doing in terms of CPI and watching inflation was keeping up with what was actually happening in the real economy given the lag. How concerned are you about the Fed's pace right now?

KEITH FITZ-GERALD: Well, there's really two answers to that, and I don't mean to be disrespectful. But I think the Fed is as wrong about rates in the decisions it's making today as it was about the transitory narrative. It doesn't understand the asymmetrical impact that it's having on real money. So I think Jay Powell is doing lip service to the rest of us by saying he wants us to feel pain, and this will be good for us, and they've got to slow the economy down.

Put it in plain English. The Fed wants you to lose your job, and they want to crater the economy because that's how their models work. A rational person would say the stove's hot, don't touch it again. So I don't have a lot of respect for what Jay Powell is doing right now.

That's not to say it's not important. But I'm going to look to the CEOs, I'm going to look to the companies that I know are going to be there because that's what consumers are going to decide. And consumers, like it or not, control the real money here.

SEANA SMITH: Well, Keith, when you look at the CEOs, when you look what companies have been doing, yes, we have certainly seen a slowdown in hiring in some of those bigger companies that we've been closely tracking, but the labor market remains very strong, even looking at the claims number that we got this week or the past couple of jobs reports that we're getting. Bank of America was out with a note today saying that the fact of the matter is that claims are still running at levels indicative of a very tight labor market, showing very little signs of cooling off. I guess, how much more do you see-- or how significantly do you see the unemployment rate rising here before we start seeing inflation cool a bit?

KEITH FITZ-GERALD: I don't think it's going to. I think--

SEANA SMITH: At all?

KEITH FITZ-GERALD: --as long as the federal government continues to throw money into the system, the Fed can't fix this. The Fed has a fiscal problem, not a rates problem. Employment, I think, is tremendously misunderstood because what's happening is those statistics are set up to measure an economy that existed 100, 120 years ago. The nature of how we work, where we work, and why we work is changing.

The gig economy, the increasing reliance on tech, those are all things that are not being properly reflected in how tight or how loose the economic market is, the job market is right now, in my humble opinion. I may be completely wrong. But the way I look at it, I still see plenty of people who want to work. I see people who need to work. And I see a government that is at the people, not for the people and not by the people.

RACHELLE AKUFFO: Well, a big thank you. We'll have to leave it there. Our market panel, Jacqueline Remmen and Keith Fitz-Gerald, thank you both for joining us this afternoon.