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'This is very much a stock-selecting market' not an 'index market': Strategist

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Loreen Gilbert, WealthWise Financial CEO, and Ross Mayfield, Baird Investment Strategy Analyst, join Yahoo Finance Live to discuss how markets closed Thursday, market catalysts, Fed policy, and energy.

Video Transcript

[BELL RINGING]

- And there you have it, your closing bell this March 24. Let's take a look at where the market settled at the end of this session-- all three major indices in the green, the Dow up just over 1% at 34,707 points, the S&P 500 also up 1.44%. And take a look at the tech-heavy NASDAQ, the biggest gainer of the day, up 1.93%. That's almost 270 points.

Well, let's break down what's been moving markets today with our market panel. Let's bring in Loreen Gilbert, WealthWise Financial CEO, and Ross Mayfield, Baird Investment strategy analyst. Thank you both for joining us. So Loreen, I want to start with you because in some of your notes, you were sort of signaling as to whether we might or not be too bearish at this point. What are you keeping an eye on here?

- Today was one of those days when the bulls were out. And it's a great day in the markets. And we do hope that that continues. There has been quite a bit of bear sentiment. We see money managers holding excess cash, more than normal, almost 6%, on average, in cash. And we've been holding some excess cash to take advantage of opportunities because I do not think the volatility is over.

So we're-- well, we're happy about some good market bounces on the upside. We're looking, also, to say what's going to happen going forward.

- Ross, I want to turn that-- a similar question over to you. Do you think the volatility is over? Are we going to continue seeing that? And if so, what do you think is going to be the catalyst for that next wave of choppiness, potentially, here in markets?

ROSS MAYFIELD: Yeah. I mean, we remain pretty bullish on the market overall. But I do think that volatility is here to stay. I mean, if anything, just because 2021 was such a calm year in the markets, 2022 is really kind of a return to normalcy.

As far as catalysts, there's a lot of stuff out there, right? So there's war in Ukraine. The market's not moving quite as much on the day-to-day headlines there. But it doesn't mean that there still couldn't be a major catalyst from that event either to the upside or the downside.

The Fed-- you know, we've got a pretty good picture of what they're planning on doing. But, you know, any hints as we get towards May, about 50 basis point rate hikes or balance sheet reduction, what that might look like, could be a catalyst. I think probably in the near term, you'll start to see a renewed focus on US company earnings, and especially forward guidance in this kind of choppy, uncertain environment.

- And Loreen, to that point, how do you expect a lot of these headwinds that we have seen from these various pressures-- interest rate hike expectations, the Ukraine-Russia fallout, still waiting for that to play out-- how do you see that potentially affecting earnings?

LOREEN GILBERT: Well, I think that what we're seeing is we're going to start seeing a slowdown in the overall growth in our economy. Now, Goldman Sachs is saying 1.9% GDP this year. And I think that that's all going to be reflected as we start looking at earnings.

And so investors need to keep that in mind. I think that this is very much a stock-selecting market, definitely not an index market. And today, you know, we heard in the semiconductor space that there is the expectation from NVIDIA that there is a trillion-dollar market there. So, you know, certainly, there are areas of the market that we do see quite a bit of growth potential-- and focusing on areas where we do see that growth potential.

- Just curious, Ross-- your thoughts on where the Fed is headed? You anticipate 50-point increase at the next meeting.

ROSS MAYFIELD: I think it's certainly in play. At this point, I would find it hard for the Fed to get more hawkish than they've already kind of laid out a path for. You've started to see sell-side estimates for 50-bip rate hikes at the next couple of meetings. And, you know, they do want to front-load this rate hike cycle, I think. You know, you've seen various, you know, voters and their kind of Fedspeak come out and talk about being really aggressive here at the front end to kind of curtail inflation as best they can.

I think it's live. I think it's a possibility. But at this point, you know, the market doing what it's doing, rallying a bit, with eight to nine rate hikes priced in for 2022 alone I think is a fairly optimistic sign that the market is comfortable with this pace and that fighting inflation remains kind of the top goal in markets right now.

- Loreen, speaking of Fedspeak, Fed Chair Jerome Powell, as well as the Fed's Daly and Mester, have each suggested recently that the Fed funds rate may need to exceed neutral. Do you think that potential has been fully priced into markets at this point?

LOREEN GILBERT: Yeah. I'd say that the seven rate hikes at 25 basis points has been priced in. But beyond that, I do not think a 50 basis point hike has been priced into the market. And I think that's where, in our minds, there's catalysts for downside pressure on prices. When and if we see the 50 basis point rate hike, I do think that it's probable. And I don't think the markets are quite ready for that.

- So then as we look at that then, I want to bring you back in, Doreen, in terms of how people should be bracing for this and sort of how to sort of brace for perhaps inflation or stagflation or recession, where should people be positioning themselves?

LOREEN GILBERT: Yeah. We're talking to investors about becoming more defensive, bringing down the beta, bringing it down below the benchmark. And that doesn't mean that you're out of equities. It just means being very careful with what you are in and becoming that more defensive play as you're looking at these opportunities.

- Ross, want to get your take on--

- How are you thinking about some of the-- oh. Go ahead, Dave.

- Just want to get your take, Ross, on something Larry Fink from BlackRock said today, that he believes the war in Ukraine will end globalization as we know it and facilitate further use of cryptocurrencies.

ROSS MAYFIELD: Look, I think the emphasis on deglobalization as a theme is warranted. And I think war in Ukraine is kind of one factor. There but you could go back a little bit further, you know, looking at some of the political rhetoric through the 2010s, looking at COVID-19 as a potential catalyst for that, you know, thinking about what the supply chain turmoil has meant for companies, you know, wanting to onshore, to beef up domestic production of key industries.

So, you know, what that means, you know-- the economy, the global economy, is so well-linked that there's not going to be, in my opinion, this return to kind of a Cold War state. But I do think that there's probably been a turn in the trend of globalization over the past, you know, call it 40 years. And there will be a continued emphasis on onshoring supply chains, beefing up domestic key industries, and probably, you know, beyond that, potentially, you know, trade wars, use of tariffs, things like that. But it's a long-term theme. I think it'll take a long time to play out. And we're kind of in the early days of it still.

- Loreen, how are you thinking about energy stocks, because we're seeing the S&P 500 energy sector up almost 40% so far for the year to date, far outperforming the broader market? Is there still more room to run here or have most of the gains already been put in?

LOREEN GILBERT: Yeah. I think we've seen the run-up in energy. And, you know, as now we look at oil coming back down to more realistic numbers, I would be careful about traditional energy in that way. But I do think that, as we know, the path forward is on renewables, looking for opportunities there that we know that, over the next 10 years-- we know within the United States and around the world that things are going to change. So looking for opportunities in renewables--

- All right. We do thank you both for joining us today. Loreen Gilbert there, WealthWise Financial CEO, and Ross Mayfield, Baird Investment strategy analyst, thank you both for your time today.