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Meme trading is ‘an incremental positive’ to the S&P 500

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Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland break down today’s market action with Julian Emanuel, BTIG Managing Director.

Video Transcript


MYLES UDLAND: All right. Welcome back to Yahoo Finance Live on this Thursday morning. We're just two minutes away from the opening bell on a busy Thursday morning-- of course, markets higher after that inflation data. We see Dow futures up about one half of 1%. Joining us now to talk about this and everything else going on in the market is Julian Emanuel. He's the managing director over at BTIG.

So Julian, let's start with that inflation data. And let's start with what the bond market has done over the last couple of months. Really, this week, everyone seems to notice that the 10-year was at 150, even with the anticipation of today's data. How have you thought about that dynamic in the market?

JULIAN EMANUEL: So again, you know, the bond market, like the stock market, has done virtually absolutely nothing within-- in a reasonably narrow range over the last couple of months. And I think, you know, given the volatility in all of these things away from meme stocks is so low, people concentrated on this move down, say, from 1.65% in the yield down to below 1.50% for the time being.

We would attribute it to a couple of things. First of all, we have to remember that the virus is still a problem away from the United States. Europe is getting better, we know. But emerging markets-- obviously, there's news of renewed lockdowns, however small the scale, in China. And we have to remember that. And that kind of psychology has international investors, in particular, tilting towards fixed income.

The other thing, though, is I think what we found out over the last three or four days, which the bond market was discounting several weeks ago, is that the Biden administration's ambitious spending plans are not going to be nearly as easy to execute as the market believed to be the case, you know, when this trading range began.

JULIE HYMAN: And Julian, we're about to hear that opening bell, Zeta ringing the bell very enthusiastically here this morning. You know, the narrative that you're talking about here-- I mean, I guess there is some suspense in DC over the size of the spending package. But otherwise, it seems there is remarkably little suspense in the market right now on a macro basis, right?

We know inflation's running hot. We know the economy in the US, at least, is reopening and recovering. And, you know, where are the surprises going to come from? And therefore, where's the opportunities to make money going to come from in this market?

JULIAN EMANUEL: So long term, we think the market moves higher. The average bull market is 51 months in duration and rises over 150%. We're 14 months in. We're up 90-some percent off of the March-- the trough. We do think there's more to go. But frankly, what the markets are telling you right now is this whole idea of transitory or not with regard to inflation is the single-minded obsession.

And the fact that we're going sideways means the market does not know, really does not know, and may not know until later this summer when we see, number one, what the employment data looks like from the states in particular that have suspended or in process of suspending the supplementary unemployment insurance and then, really, going into September, when, essentially, the labor market logjam in general should clear, particularly as kids return to school and parents can go-- you know, leave their house and go back to work.

BRIAN SOZZI: Julian, despite all the uncertainties on the market, a hot inflation print today, a mixed to so-so jobs report last week, really, the bias for the S&P 500 broader markets were made to the upside. Do you think we are witnessing that excitement over these meme stocks and retail traders out there in force-- that is finally spilling over into the broader market?

JULIAN EMANUEL: I wouldn't go quite that far yet. But it is certainly, you know, if anything, an incremental positive and part of what is keeping the S&P at the upper end of the range. Again, it would not surprise us if, at some point, that kind of enthusiasm did spill over to the broader market because if you look at it, the combination of, you know, incredibly easy monetary policy, intense liquidity, margin debt levels at the high, and speculative fever and actual money making, if you look at the meme stocks over the last several weeks-- that kind of explosive upside price action could be and might well be part of the end game of this bull market. But we don't necessarily see that kind of activity broadly until perhaps 2022.

MYLES UDLAND: And, you know, Julian, as you know, I mean, things are so different this meme time around. Just looking at the VIX, it's basically at half the level it was back in January and February. But the meme trade makes me think also of what's happening with crypto. And that's at an interesting inflection point, where there's, obviously, always speculative enthusiasm around that.

But the story, allegedly, has been about big money institutions, the kind of folks that you work with and for, adopting crypto. What have your clients been saying on that front as, like the S&P and the bond market, Bitcoin's kind of gone nowhere over the last several months?

JULIAN EMANUEL: So the institutional clients continue to believe in the story long term, you know, it-- that it's all about the blockchain technology and its potential transformative power as it begins, you know, to be adopted. And again, I'd remind people that the adoption statistic-- basically, 2% of the world's population has interacted with cryptocurrencies in one form or another. That number in the internet, 2% adoption interaction-- was in 1996. So that tells you about the scope of the runway.

From our point of view, the institutions that we speak to have all been adding to their positions as Bitcoin in particular has drifted towards $30,000. Could we go a little lower when we finally get some US government edicts on regulation? Absolutely. But we think that'd be a buying opportunity. The long-term picture remains very interesting to us.

MYLES UDLAND: All right. Julian Emanuel, chief equity and derivatives strategist over at BTIG. Julian, always great to get some time with you. Hopefully, we'll talk soon. Hopefully, we'll see you in person in not too many months from now.