Market Recap: Friday, July 9

Stocks gained on Friday to set new all-time highs. David Nelson of Belpointe Wealth Management and Michael Jones, Caravel Concepts Chairman & CEO joined Yahoo Finance Live to discuss.

Video Transcript

JARED BLIKRE: As we march towards the bell, I want to invite our panel into the screen. And we have David Nelson. He's the chief strategist at Belpointe Wealth Management, as well as Michael Jones, Caravel Concepts chairman and CEO. Gentlemen, we're going to get to you in a second. But first, I want to go to the Y-Fi Interactive and see exactly where we are heading into the final close of this holiday shortened week. Guess what? In the Dow, we are up over 400 points. Pretty close to session highs right now. S&P 500 up over 1%. NASDAQ up just a little bit under 1%. And the Russell 2000 really the outperformer of the day. That is up 2%.

Also want to get a quick check on the 10 year yield. That's the Dow. We're going to do the 10 year. That closed settled at 1.36%, the 30 year settling just below 2% there. And now, we want to check out inside the market. Here we have the NASDAQ 100, Apple and Facebook each up more than 1%. And those China stocks that we've been talking about, those are bouncing back nicely as well.

And just checking in on the sector action as you head into the bell there. Financials and energy. They are the big leaders today.

SEANA SMITH: All right, let's take a look at where things end as we shake out the final trades of the day and also the week. Again, we're looking at gains across the board at least for today, the Dow closing up 447 points. That's good for a 1.3% gain. The S&P up just over 1%. The NASDAQ a bit of a climb here into the close, closing up just around 1% as well. But we want to bring in our panel. We have David Nelson and Michael Jones to help us break down the action that we're seeing today.

And Michael, first to you. Just overall I guess your takeaway from this week because it was a relatively volatile week, I guess not necessarily anything different than what we've become accustomed to over the last several months. But what's your big takeaway from the action that we saw this week?

MICHAEL JONES: My big takeaway is that your viewers could be forgiven if they thought that the market caught a bid of schizophrenia. Yesterday, oh, the sky's falling, COVID's back, the economy's going to fall apart. Today, never mind. I think what really is the explanation of this down then up pattern has been a more mature reflection about, yes, COVID is back. We've blown our vaccine rollout strategy and a lot of the global economy, most of the global economy. And so COVID's going to be an issue that we still deal with in the back half of the year. And that's different than what people were hoping.

But those headwinds to growth are not sufficient to put us in recession. And I think what the market recognized today is that the dovish tone from the fed minutes means that headwinds to growth is going to keep those printing presses rolling longer. The Fed will inject money into the markets longer. And the message of today's price action is investors will trade slower growth for more fed support all day long.

JARED BLIKRE: David, as we head into earnings season, we're going to start with a value sector called the financials. I want to get your bigger picture take on the growth versus value and cyclicals, where we stand right now. Because we've seen growth really resurge over the last five, six weeks. And value and cyclicals kind of take a backseat, today notwithstanding.

DAVID NELSON: I think that's in large part because of what's happened to yields that the cratering of the spread between 10 and two year paper really points to long duration equity. And that of course, is large cap cyclical growth, which really held up the markets for the last several weeks. And it kind of unwound the reflation trade. Yes, interest rates are higher today. But the conversation on trading desks for the last several weeks has been those falling yields. What is the harbinger of that? What does that actually mean for earnings?

For right now, we're OK. The estimate revisions are 5 to 1 to the positive side. But looking at the 2022, the fact that long duration equity, in particular the FANG trade, that to me is a largely defensive move. That's telling me that we're kind of concerned about growth possibly in 2022.

SEANA SMITH: Michael I'm curious just to get your thoughts on all of this, and of course, the action that we saw on the 10 year yield this week.

MICHAEL JONES: Yeah, well first I think that investors are taking that message away that if the fed keeps buying long debt, then the fact that we're running a big deficit, that there's a huge financing need in the economy because of the federal deficit, that's less of a worry for bond investors. And the big concern that fixed income investors have carried throughout most of this year is not inflation per se. Because if you look at the history of interest rates, or equity markets for that matter, investors don't care about inflation until the Federal Reserve cares about inflation.

And the message the bond market is taking is that the fed is not going to worry about inflation. They're going to keep the printing press going. As long as you've got that massive $120 billion purchase of the fed happening in bond markets every single solitary month, and if you extend the window by which those purchases are going to keep happening, then that is a huge buyer for bonds. And that's a depressant on interest rates. It has nothing to do, in my opinion, with a concern that we're going to lapse back into recession. It's more that we're going to keep the biggest buyer in the bond market in that market longer.

JARED BLIKRE: And David, switching gears for a second, President Biden signed a very sweeping order today to promote, punatively, to promote competition. And there's a ton to unpack in there. I'm just wondering what your initial thoughts are and how it's going to affect the economy going forward.

DAVID NELSON: I think to a large degree, I think what he's going to have to do is turn to Congress. It's great to pass executive orders. And you're sitting there at a desk and you've got your constituents behind you. And for many, they'll applaud that. And actually, he talked about some things that I applauded as well. But in the end, he's going to have to go back to the House, go back to the Senate. As far as the large-cap cycular trade and this attack on big cap tech, he's trying to rein them in and rein in how large they become.

That train has already left the station. I doubt that Apple, Microsoft, Google, or Facebook, or Amazon really need to do another merger at this point. I think he's going to have to look elsewhere. But again, the courts are going to decide this. The courts largely lean to a conservative bend. And they're going to follow the law. And right now, the law says that some of this isn't going to pass muster.

SEANA SMITH: Michael, some of the leadership we saw today was in those opening trades like we mentioned a few minutes ago, Delta, United, American, those airlines there leading the way. Are you seeing any investment opportunity in some of those names?

MICHAEL JONES: Absolutely. I think one of the things that people need to not worry quite so much that COVID is going to still be in the background of the global economy. And the reopening and global travel is going to come a little slower than we might have thought. And airlines after just leading the market higher earlier, they kind of suffered in recent weeks as people have recognized the COVID risk.

But the airlines have taken a huge amount of capacity and cost out of their income statement. And that means they don't need to return to 2019 levels of travel to have earnings greatly exceed 2019 levels. And I think what we're going to see is a slower return of volumes and a slower reopening of global travel. Yet, we're going to still see the airlines take out their all time highs in earnings in the next two to three quarters.

JARED BLIKRE: And we want to thank you gentlemen for joining us. And we'll see you again soon. David Nelson chief strategist at Belpointe Wealth Management, as well as Michael Jones, Caravel Concepts chairman and CEO.