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Bitcoin thriving is ‘not in the interest of any government:’ Horizon Investments CIO

Yahoo Finance's Alexis Christoforous and Scott Ladner, Horizon Investments Chief Investment Officer, discuss bitcoin outlook and what stumulus could mean for the markets.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to talk more about the markets now with Scott Ladner he is Chief Investment Officer at Horizon Investments. Scott, good to have you here. Before we delve into equities, we just like your take on what you are seeing in the cryptocurrency space, specifically with Bitcoin. Is it now a legitimate place for investors to turn to, perhaps even as a hedge?

SCOTT LADNER: You know, it's, I think it's a little bit unclear right now whether or not Bitcoin is going to be a good hedge either for equity markets or for something like inflation. It's just too volatile right now for it to be really considered a hedge for for much of anything. Bitcoin and the crypto is, broadly speaking, we don't really have a position in them at Horizon Investments. That's not really in our purview. But but we do think they may be challenged longer term. There's really not in the best interest of any government to let these things really thrive. So we think that we're going to have to get official government adoption before these things, before the crypto space, really gets, really catches hold. But, but in the meantime that does make for some wild rides.

ALEXIS CHRISTOFOROUS: Yeah, for sure. So you're thinking from, from what I'm hearing, you think regulation is in the offing. If and when it happens, would you give Bitcoin a second look?

SCOTT LADNER: Certainly. I mean, if it became something that that had a little bit longer price history, that it was easier to trade, if Futures Markets really, really took off. There are other instruments that you could use to get exposure to them and retail accounts or in some of our fund accounts. It's something that we would certainly look at. We're not could ignore it. It's just right now we think that space is a little bit too new and not really in line with what our investors need out of our products.

ALEXIS CHRISTOFOROUS: All right, let's get to equities now. And what's your outlook for the next three to six months and is this all going to be driven by stimulus and the virus, Scott?

SCOTT LADNER: You know, we think it is. I mean, you know, when you think about the last really nine months it has been a stimulus versus virus kind of market. And stimulus frankly has been kicking viruses butt. We think that's likely to kind of continue, especially given the dynamics of, the political dynamics around the new stimulus deal that's kind of, that's coming up. It's not really a matter of obviously if it's going to happen or even really when it's going to happen. We're just-- now we're arguing about whether it's going be 1.5 trillion or 1.9 trillion. That kind of stimulus, in the face of a waning virus, a virus that is going to be on the retreat over the next few months, is something that's really powering mortgage right now and likely going to be that at least the first half of this year.

ALEXIS CHRISTOFOROUS: Let's talk about what you like right now. I know small caps were having their moment in the sun. You actually called them in your note, you said they're the Lehman Brothers in the market today. That doesn't sound too good. What's your take on small caps? [LAUGHING]

SCOTT LADNER: Yeah. I guess I said in an affectionate way because, because small caps are they're very highly levered entities. So they're the most highly levered in the marketplace right now. And so when I was talking about the Lehman Brothers of the stock market, really what I was referring to is just the leverage that you can get in small caps. And so, obviously, in February and March, the reason why small caps got got hurt so badly, is because if you're a highly levered entity, the most dangerous thing you can have, firm characteristic wise, is leverage. If revenues go to zero, debt is a really dangerous thing on a balance sheet.

However, when you were going to get 7% to 9% nominal GDP growth in this country this year, you actually want to be geared towards, towards companies with leverage because they can drop more to the bottom line. Operating margins are getting better and with, with an economy that's going to be really booming in the first half of year based on stimulus, second half of the year based on the consumer. That is, you want as much exposure as you can get to high-growth types of companies.

ALEXIS CHRISTOFOROUS: And we're still in the midst of earnings season and earnings have been coming in pretty good. What's your outlook for for this quarter and are earnings going to be the next big catalyst for this market?

SCOTT LADNER: You know, I think we probably will be, Alexis. When we're thinking about earnings, we're mostly, we're most of the way through earnings season at least this quarter and the results have been nothing short of spectacular. Very, very strong top-line numbers. Very strong bottom line numbers. Like 80% of the S&P 500 companies that beat on the top line. That kind of thing, that, that kind of dynamic is what we're going to be expecting going forward. But what hasn't caught up yet is analysts' estimates. So analysts have been a little bit late to the game in terms of upgrading their year end forecast for the S&P 500 earnings. We think those thing-- we think those could top $180, $185 and that's going to provide some more room to the upside.

ALEXIS CHRISTOFOROUS: And what are you telling clients right now who may be very concerned about, about the virus, about the slow rollout of the vaccine? What are you what are you telling them?

SCOTT LADNER: I tell them to really stay the course right now. In terms of their finances, the consumers in the United States are in really outstanding shape. So we know that the headlines are going to be scary. They're probably not going to be good. The numbers are, in the United States virus-wise, aren't they're not particularly good although they're going the right direction. But over the next few months, with all the stimulus packages that are coming, that's going to really buoy markets. It's going to buoy the economy, broadly speaking. And so really we just have to get through these next few months until the weather gets warmer, until the vaccines take hold a little bit stronger, and not only are we going to have very, very strong markets but we're going to have a strong economy to go along with it.

ALEXIS CHRISTOFOROUS: All right. We can hope so. Scott Ladner, Horizon Investments Chief Investment Officer, good to have you with us today.

SCOTT LADNER: Thanks, Alexis.