Will McDonough, founder and CEO of EMG Advisors, joined Cheddar News to discuss Wednesday's trading session after the Federal Reserve raised rates by 0.25% as tighter credit conditions continue to affect small- and medium-sized businesses.

Closing Bell

Analyst Breaks Down Market as Fed Raises Rates

Joining me now is Will mcdonough, a founder and CEO of EMG advisors. Will, thanks for joining me. Nice to see you again as a new shortage of news. Certainly today in the stock market, our viewers see how he performed on the index is fractional losses across the board. What do viewers need to know when it comes to investing in this market? Well, I think that the investors are now able to zoom out a little bit. We've been so driven by Fed. Everyone is clamoring for what's the FED going to do? What's the FED going to do? And then everybody reacts to that. Now that that FED activity is slowing down and seemingly coming to an end, people have to look under the hood and really look at the companies and their health and their staying power. And sadly, it's making us be a bit more granular with the health of these businesses. And are they going to be succeeding into the New Year? Which is troubling? Ok. So let's walk through that. Your word is troubling. Of course, the market is made up of very small cap companies and large cap companies by and large these S and P 500 companies exceeding expectations this quarter, but it doesn't necessarily mean that they're profitable by any means. An earnings recession is forecast. How do you break down? Which companies are winners and losers? And what specifically is troublesome to you? Well, I think what I'm seeing is that the rich are getting richer and it's harder for the smaller and medium companies to compete. It's harder for them to access debt markets. When we have less banks lending, when the big banks don't have to lend to make revenue, they're going to push less innovation into the market. So that's going to be harder for small and medium businesses to compete. When you break down the S and P 500 calendar year, there's only four or five companies that are really exceeding expectations and there's a lot of pain in there that's actually hidden by how good the top companies have done. So it's rich, getting richer and the bottom guys are really actually struggling. What are those top companies? Are they exclusively the technology names that make up the vast majority, the largest portion that is at the major index? Certainly. So the tech guys are leading us out of that because they have staying power and they're very well capitalized. And then they're going to also be in a powerful seat just like JP Morgan was this week to have some M and A activity and to gobble up some of the weaker players. And ironically that's bad and that's not what the FED intended is to consolidate power to the big dogs, but the big dogs are winning. Ok. So this new normal, tighter credit conditions, harder for small and medium sized businesses to access funds. How long do you foresee that lasting? You know, there's a lag to this stuff. You know, the parallel I draw all the time is when you just the temperature in your living room, there's a lag until that actually flows through. And so as the fed adjusts rates, we don't see that hit the markets until we see jobs, data quarter later until we see real hard tangible housing start numbers. And unfortunately, none of those numbers have really been good. And so that's why I think the fed has to keep doing what they're doing and keep this party going because they haven't seen the data show them that things are really working yet. I think they have signaled now that maybe at the next meeting, they're going to calm things down. If they hadn't done that today, they might have freaked out the market a little bit. So I think they did what they had to do. So it is interesting because Fed Chair Jerome Powell actually saying today that he thinks it's more likely we don't have a recession than we actually do have a recession. But we've started to see layoffs clearly pick up this year. Inflation is remaining elevated. As you've been saying here, credit conditions tightening, as we've been hearing across the board, do you think a recession is imminent? And what does that mean for a consumer? How do they prepare? Yeah, I mean, consumers are flight to quality flight to the big dogs, you know, flight to the well capitalized balance sheets. We're seeing investors go into gold, silver. Our largest position right now is in copper. We think copper is the most in demand metal of the next decade and it's the most undervalued metal. So investors are looking for things that they can feel and touch as opposed to, you know, pre earnings, businesses that are growth, growth, growth, but we haven't really seen the growth. What can I touch? What can I feel and what is the tangible demand that's coming from this market? No matter what you just mentioned, statis who announced today and traded poorly on the fact that they're launching a whole new fleet of s all that is is demand for copper, all that is demand for lithium. So that's great for those base no matter if Lantis Ford gm, no matter who wins all those commodities rise when that happens. So you don't necessarily think that copper is a defensive play, for instance, like we see as people rush into gold and silver during inflation area uncertain times, but rather that there is actual economic demand for this commodity. How about the fact that it's both, how about the fact that it has all the attributes of gold and silver for the flight to quality because it's physical tangible fixed supply. But it also has demand. Gold doesn't have demands. Nobody makes gold teeth anymore. It's all about copper now. Copper is a million. I'm sorry, a mile of copper in every electric vehicle and then plugging that electric vehicle into the charging station into the grid into the solar panel. That's all copper, maybe not gold teeth, but I think gold jewelry is still you got some nice gold jewelry on. I don't know if this is actually real, but thank you. It's probably discounted inflationary gold jewelry. You bought it here on Canal Street. He's somewhere close to that. Yes. Uh Will mcdonough, founder and CEO of E M G Advisors will. Thank you. See you.