Amazon (AMZN) is facing an antitrust lawsuit from the FTC over allegations of abusing its position in the digital market space to boost prices and promote its products over third-party sellers. Main Street Research CIO James Demmert joins Yahoo Finance to give insight into how investors should be eyeing Amazon shares after these recent developments.
Demmert explains that this isn't the first time regulators have gone after a large corporation and that these types of lawsuits can "take months, if not years to resolve themselves." Demmert also notes the buying opportunity this presents for investors "on the weakness of this stock, and the weakness of this market."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
JULIE HYMAN: Let's talk about one stock in particular that is declining. That's Amazon. It's down 4.25% after the Federal Trade Commission and 17 state attorneys general sued the company, alleging that its dominant online retail store amazon.com is illegally monopolizing two markets. Now investors want to know, is it the time to buy Amazon shares, or stay away?
Joining us to discuss is James Demmert. He's Main Street Research Chief Investment Officer. James, thanks for being here. How should we, as investors, be thinking about this regulatory action on the part of the government? And how worried should investors be?
JAMES DEMMERT: I think these kind of government regulations, any federal regulatory company-- institution coming in to a company like this, it always is going to cause some concern for investors. And in the case of Amazon, we think investors should take the weakness in the stock as a window of opportunity. This is not certainly the first time we've seen regulators go after what they would call a monopoly in a company like Amazon. As a three century investor, or a decade investor myself, I remember Walmart having regulators going after them in the '80s. And I think this is just part and parcel of the capitalism in the world that we live in. When companies start to dominate, there's always a concern by the regulators that it's becoming monopolistic.
We don't think the FTC is going to get very far with this. And I think investors should remember, these types of attacks, if you will, by the US government on any kind of company, these take months, if not years, to resolve themselves. And we think Amazon is healthy. We love the way they responded to the FTC. And so, we're on the side of Amazon. And we would suggest investors, on the weakness in this stock, and also the weakness of this market, use this as a window of opportunity to acquire shares.
JOSH LIPTON: And James, I want to pull back the lens on that point right now, because as Julie mentioned, we got red everywhere today. All three major indexes are declining. The S&P 500. I'm looking here, we've dipped below 4,300. In the near to intermediate term here, James, what is your outlook for the market?
JAMES DEMMERT: Thank you for that question. You've got here what I would consider to be a very overdue correction across the board in stocks. And something that we believe has been way overdue, and is another opportunity-- it's a very different pullback than what we've seen for the last, let's say, 18 months of the bear market. Every other pullback, or what we call a correction, and I think this one still is in the confines of that.
It's been less than 10%. The past ones have been in a world where the Fed had a lot of work to do. And inflation was a lot higher. Five, six, 8%. And I think investors here should look at this as maybe the last window of opportunity, that last pullback, before we start what we would consider a new business cycle and a new bull market.
So this is a correction that's coming down where inflation is at 3.5%. The Fed just wants to have a two in front of it. And I think they're going to be happy with that.
So we've gotten the Fed out of the way, mostly. I know they said they may need to raise rates one more time. But let's all keep in mind, the bond market's done most of that work in the last two weeks.
So that's why equities have sold off even further. And again, we would use this opportunity. With the VIX up, market very oversold at this point, investors should start acquiring stock, increasing their stock exposure for what we think is going to be an amazing fourth quarter rally and into 2024.