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Tech stocks to see ‘smoother sailing’ upwards: Opimas CEO

Octavio Marenzi, Opimas CEO, joins Yahoo Finance to discuss outlook on the overall market.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to stick with the markets now and bring in Octavio Marenzi. He is CEO of Opimas. Octavio, always good to see you. So here we are, kicking off the second half of the year on Wall Street, the start of the third quarter. We're coming off of a very strong second quarter. Who do you think are going to be the leaders this quarter? And what are your expectations for the market?

OCTAVIO MARENZI: Well, my expectations for the market are basically that we're going to see more of the same that we've seen so far. So I think tech stocks are going to get-- going to continue to do really very, very well indeed. We're all going to see homeowner stocks and homebuilder stocks do very, very well. Anything connected to home building and things of that sort is going to do well.

And this is all really tied back to the Fed's monetary policy. We're carrying on seeing the Fed pumping money into the markets. They're buying a lot of mortgage-backed securities, which is going to support homeowner prices. And any activity around that is going to do really well. So anything with long-term prospects, growth prospects, like tech stocks, are going to do well. Anything to do with the homeowner segment is going to do well. So those are the sectors I would really be watching. And as long as the Fed carries on doing this, they'll be fine. They'll do really, really well.

KRISTIN MYERS: So to that point then, Octavio, do you think the markets are prepared for if the Fed doesn't continue to carry on with what it's been doing with some of that easy money that the markets have seen?

OCTAVIO MARENZI: Well, I think everyone's counting on the Fed continuing really for the foreseeable future. So I don't see any big changes there coming before 2023. And even then, the Fed has hedged its bets very, very significantly. They've basically said, we might, in 2023, raise interest rates twice. But then again, we might not. So I think the smart money is betting things are going to carry on going. They're going to carry on with a very, very accommodative monetary policy. They'll carry on pumping these $120 billion every month into the markets. And that's going to continue for the foreseeable future.

And then basically, they're talking about talking about stopping their monetary easing. I don't think it's going to happen anytime soon. Maybe in 2023, but not before that. And I think as a result, we're seeing a whole bunch of IPOs. In the first half of this year, there was sort of concern that the Fed might do something. So there was a sense that I better rush to market as quickly as I can and get my IPO out there. Now I think there's a bit less urgency about that. It seems that the Fed is going to stay the course for the foreseeable future, the next couple of years, at least.

ALEXIS CHRISTOFOROUS: Yeah, I want to jump off of that, what you just talked about with the IPOs. I mean, we're on pace for a record year of new stock offerings, Octavio. Do you think, though, that we're at a certain level of saturation at this point? And might investors want to tread carefully here?

OCTAVIO MARENZI: Well, I definitely think investors should be treading carefully. Now the real question has become when does the monetary policy end? And when do you get out? So have we reached a level of saturation? You would have thought so. There's so many new things coming to market. There's been so many IPOs in the first half of the year. I mean, the first half of the year was really a bumper record year. We haven't seen anything like that before. And we are on track to have the best year ever in terms of IPOs.

So the saturation has not taken place. Even though you might think there might be some weariness in terms of investors saying, wow, we haven't got any more money to put in these new IPOs, they seem to be pulling up the cash from somewhere. So I don't think that's going to change. We're going to see a very, very good second half of the year in terms of IPOs, perhaps with less of a sense of an urgency. I mean, in the first half of the year, the major story in terms of IPOs was really all these companies coming to market through SPACs.

And part of the appeal of SPACs to these issuers was really that not only is the paperwork less burdensome and the regulatory hurdles lower, but they could also say, well, I can get to market much more quickly. And when people were afraid that the Fed was going to raise interest rates because they were making noises in that direction, they're basically saying, I need a vehicle that's going to allow me to do this as quickly as possible.

And SPACs played that role beautifully. So I could take my company public in a matter of weeks in a way that I really couldn't do through the traditional path. So that's really what we saw in the first half. And I think SPACs, as a result, will become less urgent and less important to people in the second half of the year.

ALEXIS CHRISTOFOROUS: Let's talk--

KRISTIN MYERS: Octavio, I want to go back to--

ALEXIS CHRISTOFOROUS: No, go right ahead, Kristin. Go ahead.

KRISTIN MYERS: Oh, I just wanted to ask you Octavio about what you were mentioning a little bit earlier when you were talking about what sectors you saw doing quite well, at least in the second half of the year, particularly your comments on tech. Because we saw throughout this first half of the year, this constant rotation in and out of tech into some other sectors. I'm wondering if you think that kind of back and forth push and pull is going to continue into the second half of the year. Or do you think there's clear places for opportunity out ahead?

OCTAVIO MARENZI: Well, I think that whole sort of dance in and out of tech and sort of these pirouettes we saw back and forth where people were saying, is tech going to do-- carry on doing well, is it going to do badly, is it going to sort of have a reversion to sort of [INAUDIBLE] and not grow as quickly, was all about, I think, the Fed's monetary policy more than anything else.

So as long as people thought, it looks like Jay Powell is going to increase interest rates, well, that was bad for tech stocks. As soon as he sort of backed off from that, it was good for the tech stocks again. And I think that's sort of the dance that we saw through the first half of the year, this kind of back and forth, is our interest rates going up or not? And of course, higher interest rates are very, very bad for tech stocks because they have these long-term earnings potentials into the future.

So I think that is basically off the table now. So I don't think we'll see that back and forth anymore in the second half of the year. I think the Fed has basically said, we're not going to touch interest rates until 2023. And even then, we're not sure. So I think we're not going to see this kind of back and forth with tech stocks anymore. It's going to be smoother sailing and smoother sailing upwards rather than anything else.

ALEXIS CHRISTOFOROUS: I wanted to get your thoughts on tomorrow's jobs report. Certainly, the data we've seen this week pointing to good things in that monthly jobs report tomorrow. Jobless claims hitting a new pandemic era low, private employers adding nearly 700,000 jobs last month. How important is this report going to be? And what are you going to be looking for in particular in tomorrow's report?

OCTAVIO MARENZI: Well, I think if we look back over the course of the past few months, the predictions were roughly the same as they are now for June. So the expectations are that we're going to see roughly 700 or just under 800,000 jobs added. But there were disappointments in May and in April before that. So I don't think anything's fundamentally changed since May. And bear in mind, a lot of these models that econometricians have in terms of forecasting where the jobs numbers are going to go were based on previous downturns, not on the pandemic like we've seen this time.

So I think this time is different. You can't apply the same models and the same sort of pace of recovery this time as we saw previously. There's things that are very, very different. The pandemic took on a different nature. Jobless support was much, much more generous. And so that's going to slow things down a bit as well. So I'm expecting it to be more in line with what we saw in May, around 500-- mid 500,000s rather than hitting and exceeding 700,000, the way most people are expecting to see.

So that's what I'm expecting. I don't think things changed very much. I still think there's a shortage of labor. I mean, everywhere you go now, people are trying to hire people and get people on board, even sort of for unskilled labor. It seems to not be happening as quickly as you would have expected in previous recoveries.

ALEXIS CHRISTOFOROUS: All right, Octavio Marenzi, CEO of Opimas, thanks so much for being with us.

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