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Stocks back at all-time highs as Senate passes infrastructure bill

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TD Ameritrade's JJ Kinahan on a market near all-time highs, the infrastructure bill, and what stocks TD clients are buying and selling this summer.

Video Transcript

- But we want to bring into the stream our next guest. And I got to let you know JJ Kinahan from TD Ameritrade happens to be the chief market strategist. If the President starts talking, he's going to interrupt us. But got to hear what you have to say-- especially, you've pointed out a lot of us as investors should pay attention to the fact that the VIX is now below 17. What does that signaling to you as we go forward?

JJ KINAHAN: Well, I think getting this done is a little bit-- you see by the S&P reaction today, it's up 5 points nothing special. So I think this getting passed in the Senate was a little bit taken for granted. That being said, I don't know that the next steps are going to be taken for granted, so to speak. But we are in kind of this period where we may not actually go real far in the VIX, Adam, but will you may see this a lot of intraday volatility. You saw the beginnings of that the last couple of weeks, where we'd be up significantly in the morning and sell back off. Or down significantly in the morning and rally back. I think you're going to see that pattern continue because besides this bill, the other thing that's still out there is clarity from the Fed. And even though this bill is exciting et cetera, but that clarity from the Fed I still think is the big cloud that everything else operates underneath right now as far as the market is concerned.

- JJ, when it comes to the infrastructure bill, and again we're waiting for President Biden to speak here any minute, but when it comes to the infrastructure legislation, and what's already been priced into the market, I guess, how big of a boost you potentially think this could provide here at least in the short term?

JJ KINAHAN: Well, as I said, I don't know that you're going to see-- I know it's easy to say, of course, some of the traditional industrial stocks, of course. And you guys just talk about the US Steels of the world, et cetera. And the GE's and maybe you see the Cleveland-Cliffs et cetera have a nice bump on this. But remember, this isn't something that's going to hit the economy for a while. So I think that if you're looking longer term as an investor and you want to own these stocks for a few years, that's probably where the bigger opportunity is. In the shorter term you'll see an initial bump, and I think you'll see a little bit of a flattening out as we sort of straighten this out. And it takes six or nine months before you actually start to see maybe some shovel ready or even-- even before the shovel ready-- some of the architectural and engineering firms to sort of lay all of this out. It is a huge undertaking. And long term, it should be really, really great for the country and for some of those companies. But again, it takes a while to get going.

- JJ, do you worry about the inflationary impact? We're going to have Kevin Brady, the ranking member from House Ways and Means, he's going to hit on inflation. But we're seeing some of the key metrics in inflation actually pull back a bit. Used car prices were up 10% at one point, now they're only rising at 1%. I realize they're up, but nearly not as fast as going forward. Will this infrastructure reinflate things?

JJ KINAHAN: Well, I think what it really does and is-- it's one more element that's confusing. [? Picture ?] [? element ?] as you've been reporting on all year long. You know, for a while it was all these commodities going higher. And, you know, including lumber, et cetera. They've come off quite a bit. But now the other element of that is wages going higher, having to pay people upfront to get them to come to work. You know, we're seeing it in a lot of the service industry, et cetera. So where this does have the inflationary capability will be these companies who are going to have to recruit more trained workers in order to work on these projects overall. Which would be one thing, and again, just more money in the economy.

I think the real picture then comes back to, as I said, the Fed. In terms of, well, does this mean they want to hold off a little bit on any of the tapering, or is it going to be one of those things where the Fed starts the taper a little bit sooner because we have another dose of money coming into the economy. Not from the Fed itself but through a different source. But certainly a lot of money hitting the economy at the same time. And that's the kind of thing that can cause inflationary pressure. The good thing is they have some time to think about it. And I actually don't think the Fed's going to make a decision one way or the other, barring something incredible before the end of the year. I think this pattern continues.