Adam Coons, chief portfolio manager of Winthrop Capital Management, joined Cheddar News to discuss Wednesday's market session amid weak job market data and what lies ahead in the near-term future.

Adam Coons, the chief portfolio manager of Winthrop Capital Management, joined Cheddar News to discuss Wednesday's market session amid weak job market data and what lies ahead in the near-term future.

Closing Bell

Breaking Down Wednesday's Market Session Amid Weak Jobs Data

Joining me now is Adam Coons, chief portfolio manager at Winthrop Capital Management. Adam, thank you so much for joining me this afternoon down here on the floor of the NYC. Thanks for having me. What do you make of the stock market? Well, I mean, honestly, it should be a big surprise to see growth, stocks kind of rolling over. We're seeing tech, the NASDAQ obviously off the worst today and that's really driven by the fact that this weaker jobs number is just showing proof that the FED is likely over shooting this with raising interest rates, reducing liquidity in markets. And ultimately, that's going to have a negative impact on the global economy and obviously the US economy with that, what does that mean then for the path forward for the stock market, do you anticipate continued out performance by the dow underperformance by these tech names? And ultimately can the market grind higher? Yes. So I think it can grind higher. It's going to really be based on what the narrative out of the FED is going forward. I think if we see the narrative continue to push interest rates higher, continue to focus on this inflationary issue. We'll continue to see growth stocks underperform. But as soon as we see that narrative shift towards a pause, a pivot in reducing interest rates, then you would likely see tech stocks growth stocks outperforming and probably a rally. And we see that kind of happening in the back half of this year. Even if rate cuts are on an incremental bit by bit basis. You still think technology can rip. I think so. I think they're so sensitive right now to what the fed is doing. And I think it's less about the interest rates. The interest rates play a role in that, but it's more about the liquidity that they provide to the market. And that's really what you're seeing is the high correlation of what's driving growth stocks is liquidity. So as soon as that changes, you'll see growth stocks take off. Let's talk about the future for some of these banks, both regional and big money center banks. Maybe it's two different realities and stories, maybe it's one of the saying, you're the experts. I'm going to rely on you. But we've seen a lot of these banks, big and small regional and big money center banks. Basically just trade in a range since the collapse of Silicon Valley banking concerns about First Republic several weeks ago. What's the future for these banks? So the first thing we're going to see is that valuations are going to be reset. Everyone's trying to kind of figure out what are banks worth now because net income going to be negatively impacted by a lot of the changes, borrowing rates and that kind of thing. So we think short term, it's going to be difficult for banks to outperform probably will muddle along trade choppy as people start to try to figure that out. And also trying to decide what banks are going to really thrive through this because some will thrive through this, there will be winners and losers. So what we see is that this will probably take quite a while to work its way out. Valuations will, like I said, reset and because of that, we won't see a lot of movement. But then eventually, once we figure this out, if the fed lowers interest rates and we start to see the credit markets open back up, then we actually think banks will perform the market. But the irony of that is the consensus is that the higher the interest rates, the more money banks can make sure that is the adage. But we've seen everything. I mean, everything in this market basically goes straight down since rates started rising. So I think one of the big problems is that the fed raised interest rates so aggressively so quickly, it didn't allow banks to just along with it. So that's why we're seeing this asset liability mismatch as they are owning longer dated securities making short term deposits. So I think that's part of this, it's not just the fact that interest rates, generally speaking, if they're higher would be better for banks. But you got to remember we have an inverted Y curve right now. So that is, that's a negative for banks. So I think there's a lot of things at play here that are really hurting banks and kind of the way that they can run their strategy. And until that changes, until the curve steepens again, it's just going to be too difficult. So for our viewers, let's walk through what an inverted yield curve means and why that would be bad for the banks. So an inverted yield curve simply means that the yield on short dated treasuries think of a six month or two year treasury is higher than it is out the curve. So basically two year treasury is yielding 4.5, 10 year treasury is yielding 3.5. So it's inverted by 100 basis points. The reason that that's negative is that banks are taking in deposits and to pay usually at the short term rate. So they get that 4.5, 4 and a quarter, but they're lending at a much lower rate. So there's no longer a spread. That's how banks money they take in money, they give depositors a very low amount and then they go and lend it at a much higher amount right now. That's difficult to do. And depositors don't really want to put their money in the bank because if a bank is paying you half a percent on your deposits, well, I can go and put it into a money market and make over 4%. So that's why you're seeing these outflows from banks is that there's just too many easy opportunities to make income yield out in the market where there's money markets, treasuries, corporate bonds. There's just too many, you know, opportunities. Frankly, Adam Coons, I wish we had more time to talk about some of these opportunities. So have to come back to me again here at the New York Stock Exchange that is Adam Coons, chief portfolio manager at Winthrop Capital Management. Adam, thank you.