Sylvia Jablonski, Defiance ETFs Co- founder & CIO joins the Yahoo Finance Live panel to discuss the latest market action.
KRISTIN MYERS: I want to bring in Sylvia Jablonski now for our continued market conversation. She's the co-founder and chief investment officer over at Defiance ETFs. Sylvia, great to have you here with us.
So I just want to start first on earnings. Earnings have been crushing it so far, at least when we're looking at that beat rate. And this is even after some of those estimates ahead of earnings had actually been revised upwards.
But we've continuously heard how so many folks say that we right now are at the peak earnings growth. I'm questioning if you also agree with that. And if so, what do you think the narrative is going to be for the second half of the year? What are you expecting from company growth going forward?
SYLVIA JABLONSKI: Hi, Kristin. Thanks for having me today. So if we look at earnings so far, you know, Q2 is shaping up to be one of the best earnings quarters since 2009. You know, you've had over 100 names report about 88% of them have beaten. And I think that-- and what's really interesting is that the market is also moving along with some of those names. You know, we saw the names, and we saw the moves in Snap, for example, Facebook, Twitter last week. So in the last quarter, the market really didn't reward earnings at all.
My stance on this is that the FANGs and some of the big names that are reporting this week-- I feel like it's sort of like the Super Bowl of earnings this week-- are poised to beat earnings. I think we'll keep up that number of that 88% of names beating earnings estimates and surprising to the upside. The fundamentals are strong. These companies all have great balance sheets. They're focused on growth and the Fourth Industrial Revolution. So these companies, for example Google, Microsoft, even Amazon, have cloud types of research and business coming in, which will bode well for the big push into big data and 5G. Apple's on the 5G supercycle with the phone.
So I just think that these companies are so much more than they were even a year ago, and they're poised to continue to grow. In terms of, is this the peak? I mean, we have this weird scenario, right? Where we're still sort of comparing base case from year-over-year, which was in the heart of COVID.
So it's thought that this quarter will have growth of 8% to 9%. Next quarter will cool down to 8%. We'll probably finish off the year at 7% to 7.5% GDP. I still personally like that number. I think that these tech names, the names that are reporting this week, have a good 10% left to go for the rest of the year. And you know, they've really been slow movers up until now, so I think it's still a good opportunity to be in these names.
ZACK GUZMAN: Yeah. They were the leaders and we saw their rotation into value, and they're back in favor. And really, earnings season so far, I mean, we've got about a quarter of companies reporting Q2 results. And so far, 88% have topped estimates. And when you think about this being the distraction, right? We saw some of the jitters last Monday when investors were kind of focusing in on the Delta variant. It sounds like if we are to track what happened in the UK, you could see US cases hopefully peak in maybe two to three weeks, and then we're back into focusing in on the technicals here.
But there is one, maybe, storyline that I think could throw that off, and that would be what we get from the Fed on Wednesday. What are the expectations around maybe how they navigate the potential concerns here around not just the Delta variant but also, as they look to unwind that accommodative stance, the tone they might have to seek here?
SYLVIA JABLONSKI: So I think, you know-- and you make a great point, right? S&P lost 2.2% last Monday because of the variant, but, lo and behold, that $4.5 trillion of savings that's sitting in a bank account somewhere came back into the market and gave us that 2% rally on Friday. So it seems to be balancing out. In terms of the Fed, I just don't expect much. I think that the Fed, Jay Powell, has been very, very specific about his views on jobs and the number that he wants to be at are not there. Inflation remains to be thought to be transient, and we're going to keep seeing how that goes. So far, it is sitting in those areas like the travel reopened trade, used cars, things like that.
So we have to see where that all sort of shakes out. But I don't expect to hear much until maybe Jackson Hole. That's sort of the popular view. I think it'll be more of stay on course. Look what happened last Monday and how the market pulled back. Like, if we had taken our foot off the gas pedal now and started halting repurchases and raising rates, while the situation on Monday could have spiraled out of control. So I think that we'll probably just slow and steady, as has been the plan, 2022 types of outlook. We'll probably get more information in August though.
KRISTIN MYERS: Sylvia, I want to ask, because we have that chart up there on the screen and right now we can see markets trading fairly sideways right now. If you want to jump in and put some fresh money to work, where are you seeing some opportunity?
SYLVIA JABLONSKI: So I definitely think that some of the names that are going to announce this week, like I said, they're quality, they're cash-heavy, they're just poised to do well and really haven't been, in terms of P/Es, as overvalued as they were before because the earnings dollars are catching up with their pricing. But I really like the 5G trade. I like thinking about the future and innovation. So that means names like Nokia, which everybody talked about as a meme stock. It's actually one of the 5G superstars that we're seeing pop up.
Semiconductors are going to be huge. You literally can't do anything in AI, augmented reality, driverless cars-- Tesla doesn't exist without semiconductors, neither does our coffee in the morning for most of us using these high-tech machines. And I like the reopen trade. If you look at the names like United, Delta, Royal Caribbean, Carnival Cruise-- some of these hotel airline and travel names, they are 20% to 30% off of 52-week highs. It's really hard to find a similar story in the market there.
So even though they popped and did quite well in March, they've pulled back since. They've recovered a little bit, when we saw better than expected earnings, but I just think that a dollar placed there for a long period of time is going to pay off for investors.