Morgan Stanley Private Wealth Management Private Wealth Advisor and Senior Vice President Jacqueline Remmen and Keith Fitz-Gerald, Director of the Fitz-Gerald Group, discuss how to defend against this week’s market sell-off, investor fears and the Fed’s rate-hiking cycle.
DAVID BRIGGS: There’s your closing bell on Wall Street. Brutal, brutal, devastating Friday, markets have fallen for the fifth Friday in the last six weeks. It wasn’t a pretty way to end our weeks for the last six. And look, the Dow is below 30,000 for the first time this year and the NASDAQ is down more than 5% this week and down 1.8% on the day. It’s tough.
Now let’s try to put it into perspective with our panel, Jacqueline Remmen, Morgan Stanley Private Wealth Management, Private Wealth Advisor and Senior Vice President. Also with us, Keith Fitz-Gerald, Fitz-Gerald Group Principal. Nice to see you both.
Look, this is just a rough day, Jacqueline. It’s one of those days on Twitter when people share devastating memes about their 401(k). We’re not just talking about Wall Street. We’re talking, everyone on Main Street is talking about the markets. Are you telling them there’s more pain to come?
JACQUELINE REMMEN: Yes. you know thanks for having me When we see days like this where the market is retested, we talk to clients about portfolio repositioning. And that means positioning ourselves for the current reality we’re in, which is higher and more persistent structural inflation and rising interest rates, talking to clients about positioning portfolios for value rather than growth, and looking for dividend growth companies, not only by dividend payers, companies that will grow their dividends, and companies with operational efficiencies, strong balance sheets, and robust earnings.
RACHELLE AKUFFO: So, Keith, for those who might have longer horizons who aren’t just looking at their 401(k)s and are retiring in the next six months or so, how are they supposed to look at that? And in what context should they view this?
KEITH FITZ-GERALD: Well, number one, I think you should take a deep breath and maybe grab a stiff drink of your favorite beverage. You know, the bottom line on a day like today is, yeah, that’s terrible. Yes, it’s scary. But you also have to stay in the fight because if you have a long-term perspective, companies like Apple, for example, will return to the top of the class. The only question is when.
Companies like Costco, for example, are still posting fabulous numbers and will be the place to shop for a long time to come. So if you have the time horizon, patience and risk tolerance, I would argue that these are the types of days when you want to actually get exposure to the markets and you want to jump into the fray by picking up a few stocks cancel .
SEANA SMITH: Keith, some of the fears that are sure to play out in the market today, from what we’ve seen over the past few days of trading, are some of those fears exaggerated?
KEITH FITZ-GERALD: Oh, I think so, no question. You know, and that’s a very difficult point. It’s not much talked about, but what you’re seeing today where everything is red and there’s nowhere to hide is really the global equivalent of a margin call. That’s what happens, you have big traders who just step off the gas and walk away from the offer on a Friday afternoon because they know retail investors are going to be scared to death, they’re going to panic and so on makes it easier for them part with their money.
The easiest way to play this as a single investor is to not get involved in this fight. Don’t give them a chance. You know what the big companies are, as do I. Nobody gives up their iPhone. Nobody gives up their Microsoft Teams. You remain in the fight. These companies will post good numbers.
DAVID BRIGGS: Boy I’d like to know what you’re drinking to shake off a day like this. Jacqueline, what could be the trigger? Does Keith have a point that it might be oversold? And what could be the catalyst for a recovery in the coming weeks?
JACQUELINE REMMEN: Yes, for long-term investors, we’re looking for opportunities similar to what Keith said: companies that are among the staples that will be around, have strong balance sheets, have operational efficiencies, and are growing their dividends. In the tech space in particular, we’re looking for these types of tech staples, like toothpaste, from tech companies that are more defensive, especially with recurring revenue streams. And then look more broadly across sectors for opportunities for companies retesting their lows, similar to June, that offer secular growth opportunities.
RACHELLE AKUFFO: And, Keith, I want to ask you about the pace of the tightening because one of our guests earlier said he was very concerned that the Fed was acting too fast and too soon. And of course we had questions there from – to Jay Powell, who asked if he wasn’t really taking the time to see if what he was doing in terms of CPI and monitoring inflation was keeping up with what is actually happening in the real economy given the delay. How worried are you about the Fed’s pace right now?
KEITH FITZ-GERALD: Well, there are actually two answers to that, and I don’t mean to be disrespectful. But I think the Fed is as wrong about interest rates in the decisions it’s making today as it is about the passing narrative. It doesn’t understand the asymmetric effects it has on real money. So I think Jay Powell is paying lip service to the rest of us by saying he wants us to feel pain and that will be good for us and they need to slow down the economy.
Write it in plain English. The Fed wants you to lose your job and they want to shut down the economy because that’s how their models work. A sane person would say the oven is hot, don’t touch it again. So I don’t have a lot of respect for what Jay Powell is doing right now.
That doesn’t mean it isn’t important. But I’m going to reach out to the CEOs, I’m going to reach out to the companies that I know will be there, because that’s what consumers will decide. And the consumers here, whether they like it or not, control the real money.
SEANA SMITH: Well, Keith, if you look at CEOs, if you look at what companies have been doing, yes, we’ve certainly seen a slowdown in hiring at some of these larger companies that we’ve been watching closely, but the job market remains very strong even if you look at the number of claims we have received this week or the latest job reports we have received. Bank of America issued a note today saying claims are still running at levels that indicate a very tight job market with very little sign of slowing down. I’m guessing how much more do you see – or how much do you see the unemployment rate going up here before we see inflation cool down a bit?
KEITH FITZ-GERALD: I don’t think it’s possible. I find–
SEANA SMITH: At all?
KEITH FITZ-GERALD: –As long as the federal government keeps throwing money into the system, the Fed can’t fix it. The Fed has a fiscal problem, not an interest rate problem. I think employment is hugely misunderstood because these statistics are designed to measure an economy that existed 100, 120 years ago. The way we work, where we work and why we work is changing.
The gig economy, the increasing reliance on technology, these are all things that, in my humble opinion, are not properly reflected in how tight or how loose the economic market is, the job market is right now, in my humble opinion. I could be totally wrong. But the way I see it, I still see a lot of people who want to work. I see people who have to work. And I see a government that is with the people, not for the people and not by the people.
RACHELLE AKUFFO: Well, a big thank you. We have to leave it there. Our market panel, Jacqueline Remmen and Keith Fitz-Gerald, thank you both for joining us this afternoon.