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Market Recap: Monday, November 22

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Stocks ended a choppy session mixed on Monday at the start of a holiday-shortened week. George Seay, Annandale Capital CEO and Jeremy Bryan, Gradient Investments Senior Portfolio Manager joined Yahoo Finance Live to discuss.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: All right, we are heading to the closing bell, and as we head into the closing bell. We have lost the gains on the S&P 500, as well as the Dow has pulled back from its high, NASDAQ has gone negative. Let's introduce the panel that's going to help us break down all of the action today. George Seay is Annandale Capital CEO, and Jeremy Bryan is Gradient Investments senior portfolio manager.

We're going to hit all of this in just a second. But when you check out some of the sector action today, I mean, you can see the Dow, it's well off of its highs, and the S&P 500, NASDAQ have gone negative. When you take a look at the sectors today, consumer discretionary last week was doing pretty well, right now it is flat, consumer staples a little bit higher, energy the big gainer today get ready to pay more at the pump. Here's the closing bell.

[BELL RINGING]

[GAVEL BANGING]

[CHEERING, APPLAUSE]

SEANA SMITH: And that does it for today's trading day. Again, giving up some gains here into the close, the Dow barely holding on, closing up just around 17 points. S&P slipping into negative territory closing off 0.3%. The NASDAQ was a big underperformer. That's been the case for the entire trading day but adding to those losses here in the final hour, closing off just over 1%.

In terms of some of the outperformers within the Dow, why we did see the Dow finish to the upside, Travelers, that stock up just almost 3%, also seeing some pretty big gains in Cisco, and Dow Inc. As well as Goldman Sachs, all of those stocks closing up just over 2%.

Let's bring in George Seay and Jeremy Bryan to help us break down the action. And Jeremy, first to you, we got the news out that President Biden will be or did renominate and Fed Chair Jay Powell for a second term. It looks like markets initially were excited about that. Yet, we saw some selling into the close. What do you make of today's action?

JEREMY BRYAN: Yeah, I think the initial reaction of them you know, kind of looking at it as a continuation of the same trend, right? And so that's actually a fairly positive move. Now, I think the retraction here, especially in the NASDAQ has been kind of that theme that we've seen going for the past few months is that when interest rates are rising, they tend to sell off the NASDAQ-oriented stocks.

Which you know, some of the businesses may be affected but I think overall, that's a bit of an overreaction. I mean, a lot of these large-cap NASDAQ stocks are going to be just fine whether interest rates are 1.5% or even 2.5%. So you know, we would look at opportunities within that space. But I think that's generally what's happening is the financials were working a bit today and they were selling off the bigger tech names.

-- And George, I want to ask you a question, you know, we saw the markets, they did go up on the news initially, S&P at an intraday high. How much longer does this bull market go on and how much do people sort of stay with it and ride into the end of the year or is now the time to start consolidating a little bit and taking a little bit off the table?

GEORGE SEAY: You know, that's a great question for any investor, and I think it's a very subjective question. There should be some investors who should be paring back and getting a little more defensive going into 2022. And there's probably some investors who missed a lot of this rally and should be adding because they're underexposed to the market. But most investors shouldn't think short term. They should be focused on the horizon and staying [INAUDIBLE].

I will say there's been a lot of very difficult crosscurrents in the markets lately. But I think that the trading programs and the professionals don't really know where the market's going to go right now. They're uncertain. And you see big moves in big growth stocks like [INAUDIBLE] and Microsoft [INAUDIBLE] last week. They just gave it back abruptly at the end of the trading day today. And then you seen a big rally in energy the last week too, and it's up decisively today. So I think the market's trying to find a direction right now. I think we will still get a Santa Claus rally though.

ADAM SHAPIRO: Hey, George, I want to follow up with something real quick but I'm going to ask you just to get a little closer to your computer because I think the ambient noise in your office, the mic on the computer is picking that up.

GEORGE SEAY: Sure.

ADAM SHAPIRO: Yeah, that's good.

GEORGE SEAY: You bet.

ADAM SHAPIRO: Just yell into that computer. I spent a year and a half doing it. We saw today stability, we saw the markets shoot up on stability, and then they sold off in the last 15 minutes, it sometimes happens. We've had guests on telling us that, look, we're still going to hit-- I mean, one call is for the S&P 500 to be over 4,800 and then 5,300 next year. When you advise, George, people to consider perhaps taking a few profits off the table now, is it premature to be pulling off the table?

GEORGE SEAY: Well, no one knows the answer to that question, Adam, as you know. Which makes it so difficult to do this effectively. And what we tell our clients and friends is that if you're a long-term investor, you should just stay the course and you shouldn't worry about the next three, six, 12 months. But I tell investors that need their money sooner rather than later, whether they're individuals, or families, or institutions for whatever reason, that you ought to take a hard look at your portfolio year-end here.

We've had 12 years of almost straight up market. We've got very high multiples, and it's very likely we'll get a correction sometime in the next 12 to 24 months. When? I have no idea but if you're overexposed or overaggressive, maybe you ought to reconsider a little bit but whether that happens six months from now or in 2023, I would never bet on that. I don't know.

SEANA SMITH: Jeremy, when it comes to the pandemic, we are seeing cases rise, and look at the cases over in Europe, we saw that clear reaction in the European markets today. Yet the US market, at least for right now seems to be looking past this, doesn't really seem to be too worried, why do you think that is?

JEREMY BRYAN: Yeah, I think the main reason is honestly because we are hesitant to make those moves to slow down or to restrict ourselves again. I don't think that there's a lot of political will I don't think that there's a lot of demand to do so. So in that regard, you know, being able to do that and being able to shut down as a result of the case growth, I don't think it's there yet. I think we would have to get severely worse from these levels.

You know, we're about 60% plus vaccinated, so you know, if the levels ebb and flow but the peaks are lower each time I think that's better. And I think that'll give people enough initiative to say, you know, there's a relative amount of safety, I can continue to do some of the things I was doing, and really kind of continue that open up process. I think that's why the biggest difference is that other countries, like Europe, are much more willing to shut down their economies than we are here in the US.

- And, Jeremy, I want to ask you, so earnings season is over, pretty good for the most part, right? We did see some big companies, you know, get punished for not passing on costs to consumers. What do you see going into the fourth quarter and beyond as far as the margin story, and how much longer does inflation keep rising or do you think we're at our peak right now?

JEREMY BRYAN: Yeah, the punishment thing, it was interesting in which companies were punished too to a certain extent, as some were given a little bit of forgiveness and some not absolutely at all. So you know, our perspective here is that if you look at-- I still think obviously the remainder of the year, I think honestly, we could see a seven number, that's not a stretch of the imagination to see a seven number by the end of the year. But I think we're much closer to the top than we are the bottom. And the reason why I say that is that I think supply chains, we're starting to see some data that things are opening up, the port data that came out recently that said, hey, they're starting to move things again.

If that happens and if oil just levels off here at these levels, I think we'll start to alleviate some of that supply-side inflation where demand is going to stay hot. So I think we're still going to have elevated inflation throughout 2022. I think the early part though will start to see some deceleration going forward and then it becomes who can pass those through, it's exactly what you said, is that in six and sevens, it's tough to pass that through immediately but in you know, if we're talking 3% and 4% inflation, then really good companies are able to do that going forward, and they'll be just fine as a result. And honestly, earnings might rise as a result of that.

ADAM SHAPIRO: George, if we're expecting a restocking as supply chains ease next year, is there a way to play that? I realize we're talking about several different industries, several different sectors, but is there a way an investor can prepare for that if that's what's about to happen?

GEORGE SEAY: I would play that overseas. And I would play that in areas that have not come out of this pandemic yet. I think you've got a lot of emerging markets and you've got some other industries, whether it's restaurants, whether it's hotels, things like that, that basically have not gotten back to normal yet. And I would look at sectors that still have a ways to go to get back to the new normal, whatever that looks like and international stocks are a big part of that.

You see the lockdowns in Europe, you see emerging markets really not generating a whole lot of strength. And I think you can buy things at very reasonable prices there. And when that restocking occurs and that economic momentum takes off, that you'll capture a lot more of the upside there than you will in your big mega-cap US stocks, which have priced a lot of that in already.

SEANA SMITH: George, when it comes to Fed policy, it looks like there's two rate hikes that are being priced into the second half of next year. When you take into account the recovery that you've been talking about, the outlook that you have right now, two rate hikes, does that make sense in your view?

GEORGE SEAY: I think it makes complete sense, Seana. I'm ready for them to start doing that. I think that this has been the most stimulative monetary policy and fiscal policy environment of our lives and really of the last century, all the modern era. And it's time to unwind some of this and get more realistic. It's unhealthy for the markets to be on a sugar high forever, you get really sick afterward. So I'd like to see us start weaning the markets off that.

-- And ask either of you or both of you, what does the Fed have to watch most closely right now, what is the biggest headwind?

JEREMY BRYAN: Yeah--

GEORGE SEAY: For stocks-- go ahead, Jeremy. You go first.

JEREMY BRYAN: OK, I'll go. It's inflation to me. At the end of the day you know, jobs are coming back. I think that mandate has you know, to my knowledge, you know, we're getting close to there already in that mandate but now, it's controlling inflation. So they have to understand what we need to do and how long this persists. If we start to see seven handles, especially, recurring sevens on inflation, they have to do something to slow that down.

Now, I think the Fed is better positioned to control inflation than they are to stimulate demand. Their tools are just better to do so. It's just a question of a willingness to do so. So we'll have to see what inflation looks like but I think that's the biggest driver in what the Fed has to do going forward.

-- And George quickly your thoughts as well?

GEORGE SEAY: I would just add to that, that I would bifurcate this question and say I really am for the little guy and for Main Street. And for the little guy on Main Street, it's definitely inflation, Jeremy's exactly right. But for the markets, it's interest rates. Markets, especially growth stocks are not going to take a big tumble unless the 10-year and the five-year, and the 30-year all skyrocket. And so far they've been highly resistant to that despite clearly big inflationary pressures in the economy. So you have to kind of look at it two ways.

ADAM SHAPIRO: Yeah, the 10-year hasn't been able to get back really above 1.7 and hold it. So we have to say thank you, George Seay, Annandale Capital CEO, thank you for being here. Jeremy Bryan, Gradient Investments senior portfolio manager. You both have a safe, healthy, happy Thanksgiving.

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