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Market strategist: Investors should ‘be more cautious’ amid elevated inflation

U.S. Bank SVP & Public Markets Group Head Lisa Erickson joins Yahoo Finance Live to discuss making investment decisions amid economic headwinds, U.S. retail sales, and consumer spending.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Our next guest says that with elevated price pressures, the ongoing impact on consumer spending remains to be seen. US Bank SVP in Public Markets Group head Lisa Erickson joins us now. Lisa, great to have you here with us this morning. What is the best way to perhaps position your portfolio, given the flurry of different kind of crosswinds that everyone has to consider when making an investment decision?

LISA ERICKSON: Right now, we are advising our clients to really be more cautious, as you point out. And the reason why is really, again, with inflation coming down but still elevated, it's placing increasing pressure on the Fed to, again, continue on its path of keeping monetary policy more tight, rather than really in the very near-term being able to pause or pivot.

So that really is causing us to advise clients to be more cautious on their US equity weights, all other things being equal to relatively de-emphasize the asset class. And in its place, we actually think high-quality fixed income is an attractive place to be, as well as global infrastructure because both of those areas provide higher levels of income that will help provide some buffer in more volatile macro and market environments.

BRIAN SOZZI: Lisa, look, the report we've been talking all morning long is Target. And it's just-- it's a terrifying report. Just a really bad read on the consumer. Do you just think that type of report, that type of tone suggests we are headed for a very bad place in this economy early next year?

LISA ERICKSON: Well, so far, consumers actually have been relatively resilient. But to your point, the numbers have been coming down. And we are getting reports of more cautious guidance across the board from both retail as well as company executives in general.

So as we look at it, you know, a lot of it we see depends, again, on-- again, how quickly those inflationary pressures can come down. And again, how quickly can we erase and look for some easing of that tightening monetary policy.

So you know, right now, our base case is we are cautious on where things will head. We aren't necessarily convinced that it will be a terrible base economic case. But we want to continue to watch the data as it comes in.

JULIE HYMAN: Lisa, I want to talk a little bit more about the places where you are looking right now. Global infrastructure, and you're looking at things like utilities, transport, communications. What's the best way for people to access that? Is it through public equities of those companies? Is it through the debt? Where do you think folks should be looking?

LISA ERICKSON: So our interest in global infrastructure is really on the list-- listed equity side, to your point. Again, you get broad exposure to a nice number of sectors that, again, should benefit from an environment where inflationary pressures are higher. And because these particular areas within that index have the opportunity to pass through some of those cost increases.

So these include sectors such as utilities, transport, also as they look through the price increases and able to pass those to their customers. As well as midstream energy, which again is benefiting from that increased energy demand and of that needing to go through its pipelines.

BRAD SMITH: Lisa, do you believe that consumers are healthy right now?

LISA ERICKSON: So overall, when we look at the consumers, they certainly came into this most recent round of more difficult economic conditions in a relatively strong position. As we know, they had a good amount of savings from the-- just after pandemic period. And as we look at it, they have been bringing down those savings but there still is some cushion. So that does put them in good stead.

Our concern really, though, is as we continue to go forward, to the extent that, again, it takes some time for those inflation pressures to come down. What we'll see is, again, that will make it more difficult for them to continue to spend at the rate they have and therefore, also impact corporate margins.

BRIAN SOZZI: Lisa Erickson, US Bank Senior Vice President in Public Markets Group. Hey, always good to see you. We'll talk to you soon.