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S&P 500, bitcoin ‘in the danger zone,’ analyst says

eToro U.S. Investment Analyst Callie Cox discusses the latest trends in markets, crypto, retail, and ESG investing.

Video Transcript

- Welcome back to "Yahoo Finance Live". We are seeing green arrows across all three major indices right now with the Dow leading the gains here up 75 points, the S&P 500 up 14, and the NASDAQ trading pretty flat. Well, there's still a lot of nervousness in the market with unprecedented inflation, a hawkish Fed, and a growing energy crisis across the globe. Here to break it down, how investors should approach these uncertain times, we've got eToro's US Investment Analyst, Callie Cox.

Callie, good to have you on tonight. You've always got a good pulse on where the retail investor mind is right now. What's the sentiment that you're seeing as we see more choppiness in the market?

CALLIE COX: Yeah, well. We're seeing a lot of nervousness out there. And it makes sense. I mean, we're going to have a busy fall and we have a lot of these unprecedented tensions really heating up right now. And we've seen, too, that the S&P and Bitcoin are both kind of in the danger zone right now. Bitcoin's hovering around 20k, slipping below it. And the S&P is down below all its major technicals.

And when there's a lot of uncertainty out there, those technicals are places where investors can pause. Unfortunately, there are more ceilings than floors at the moment.

- Yeah, there's certainly been a lot of attention on the energy market, especially after some of the moves we saw yesterday with the indefinite shutdown of the Nord Stream pipeline. Then you got OPEC Plus increasing its output. How do you think investors should be looking at this in terms of the impact they're likely to see in their portfolio?

CALLIE COX: Yeah, well if you're in the US, of course we're reading headlines about what's going on in Europe. And it's obviously unsettling. But you have to remember that the world is now more connected than ever. And the fact that Europe is going through this energy crisis and could struggle with such a tough obstacle this winter, could keep the US dollar strong and could keep things on balance across the globe. And that's a really tough spot for policymakers, think the Federal Reserve to be in right now.

It's really if you're a US investor, you're really not investing in isolation. And I think the fact that it's a tough to quantify situation has really thrown US investors really there.

- Yeah, on the energy front, we're coming off of a few years where we have seen huge inflows into ESG funds. There's certainly a lot of debate happening on what this all means. Should there be more in oil, should there more be more renewables? What are you seeing in terms of inflows?

CALLIE COX: Well, ESG is obviously becoming more popular. And it's interesting given this year has been like the anti-ESG year for a bunch of different reasons. We're seeing a lot of the headlines these days. ESG returns aren't so great.

But when you boil it down, ESG is all in the eye of the beholder, if you will. It's just more transparency into what you're investing in. And I think today's retail investors-- we know. We do research on this-- today's retail investors really value that transparency and control over their money. So you really have to understand ESG as it is.

You're not necessarily saving the world by investing in ESG. But you are being able to direct your money a little bit easier.

- Yeah, on the E part of that, the environment part of it, are we continuing to see investor or retail investor interest in EVs and some of these renewable names? What are you seeing on your platform?

CALLIE COX: Yeah, well, we keep a good pulse on retail investors, as you mentioned. And a lot of retail investors are looking more into clean technology as a longer term investing strategy. We've seen a lot of pickup and interest in clean technology and sustainability since the beginning of the year. And you can attribute that to oil prices rising.

Everybody's talking about getting that EV because prices are so high at the pump these days. But investors are turning to their own portfolios and implementing that same theme. And if you're thinking long term, it's probably not a bad shift.

- Yeah, talking broad strategy here, you say try to approach US markets with managed FOMO, taking on quality risk so you don't miss a quick rebound. What does that look like?

CALLIE COX: Yeah, well, right now nobody knows anything. Even the smartest Wall Street analysts are looking at this market and there's just so much unquantifiable risk out there. It's really intimidating as an investor.

But a good way to manage an intimidating environment is by looking at a barbell strategy and having that exposure on both sides of the spectrum. Thinking about the risks you can take, because markets are so far below their highs. But at the same time, staying defensive, because we don't know if the bottom has been reached here. So manage FOMO is exactly that, it's taking out a little bit of risk, admitting that you can't predict the future, but at the same time really staying guarded in case we see markets drop from here.

- We're now coming off of three straight weeks of decline. Certainly the economic print, whether that's inflation or jobs, that's going to be the big driver. As we look ahead to that Fed meeting later this month, is that going to continue to be in the driver's seat in terms of what's going to be moving the market?

CALLIE COX: Yeah, well the Fed will always be in the driver's seat. And especially these days, it seems like the Fed's every word is being broken down. I think that there's a little bit of a shift to what the Fed could do with hikes going forward. I mean, obviously, the Fed has hinted to possibly slowing hikes.

We've seen inflation turn in the right direction. The August jobs report also showed that the job market is weakening a little bit, which is what the Fed wants to see in concert with slowing inflation, that coming back into balance. So I think a little bit of what the Fed will do is expected.

Of course, the Fed is not happy with inflation at this point. But there's the chance of these shocks too. You know, another big rate hike as the Fed does get a little more serious about inflation and the fact that demand hasn't dropped off a little bit.

So we look at the Fed. We throw it into this basket of one of those unquantifiable risks. And we just tell investors that a higher for longer rate environment is a really tough one to invest in, especially if you're focused on more speculative stocks. So just understand the environment you're investing in.

- Yeah, brace for more volatility, especially in what is typically a choppier month. Callie Cox, as always, I appreciate your time. She's eToro's US Investment Analyst.