DFD Partners CEO Devon Drew on the State of U.S. Economy

Devon Drew, CEO and chief investment officer at DFD Partners, joined Cheddar News to discuss the state of the economy as the major indexes continue their positive trends. He also had a few suggestions for investors who are weighing risks. "On that same note with the banking crisis, you've seen money flow out of the banks and into money market mutual funds," Drew said. "From a sector perspective, looking at financials and looking at all the mid and smaller tier banks that could potentially be under similar stresses as we've seen from Credit Suisse and SVB and First Republic."

Closing Bell

DFD Partners CEO Devon Drew on the State of US Economy

Joining me now is Devon Drew and Chief investment Officer at D F Partners. Devon. Thanks so much for joining me down here on the floor of the Stock Exchange. Welcome. Thank you so much for having me a lot of green on the screen today. Of course, our viewers, I'm sure like to see that for their 41 K and other savings. What do you make of the path forward for this market? I really think it's the best of both worlds situation. I think the financial markets are pricing in recession but allowing rates to cool off also allowing inflation to tame all while not negatively affecting corporate earnings. So where do we go from here? That's the big question, right? Inflation of course, does remain high but seems to be coming down a bit. It does. And I think we'll get some good, some good job numbers. Next week, we already saw unemployment tick up the most. In three weeks, we saw, we saw some good inflation numbers here today with a milder number, right? So for goods and services to be a 30.3% is a good sign, right? So I think that's telling investors that, you know what we could, what the fed has been doing is actually working, right. Might be a little more slow than what we, what we wanted, but it is actually working. So I think that's why we've seen this rally on risk on assets like tech stocks. Are there certain sectors, maybe technology or even stocks that you find attractive at these levels? Right. So just given the recent banking crisis, I really like Bank of America, you know, you're looking at a looking at a stock that is just up from its 52 week lows, but was indiscriminately sold off during the banking crisis. And you look at what is going to be a catalyst for that. So, you know, they just reached up to $55 billion in assets on their financial planning app, right? So wealth management is going to be a precursor for a bull run for the stock. And in terms of risks that persist, of course, there are always risks out there. What are the risks to the downside for investors that they should be aware of? Well, on that same, not with the banking crisis, you've seen money flow out of out of the banks and into money market mutual funds, right? You've seen billions of dollars flow into that. So if you look at from a sector perspective, looking at financials and looking at all the mid and smaller tier banks that could potentially be under similar stresses as we see from credit suisse and, and First Republic the quarter to the numbers. So the S and P up 7% the Dow did eke out a gain just 4/10 of a percent. We had seen that the Dow was a little bit lower before today's gains and it looks like the NASDAQ up a whopping 17%. So some very healthy growth that we see in these growth names. The fed is saying that rate cuts are not its base case, but I think the stock market is acting like that is going to happen. Yeah, that's what it feels like. I mean, I could, I could definitely see one more hike of 25 basis points before things kind of kind of level off. But I think the investors in the market is saying, hey, listen, we think we're at the end of this thing right now and I think that's why you're seeing people buying a lot of these risk on stocks because they're saying, hey, the Fed is going to have to pause here, right? And potentially cut in Q four or Q one of 2024. It does kind of feel like a roller coaster though, right? Since the lows of the pandemic, it was a drip drip, drip and then kind of a dramatic fall. Of course, the pandemic, lows rates are cut to zero stocks rip and they continue to rip for a long time for about a year and a half and then we've fallen quite dramatically. How should investors, what should investors know when they do want to put their money to work in a market like this? Right. So I think buying on the dips, it has been a very popular situation, but, you know, we're in a camp where value is going to outperform growth and coming out of coming out of a recession starting to look at more of, you know, if we are, if we are in a position where it's going to be risk on, you still want to look on the value side to get some high quality stocks, but you can go down to capitalization, right. So start adding some of those small cap names, some of those names on the portfolio and rebalance more towards more towards the value side because I think you could pick up some stocks that once again have been getting indiscriminately bought out here, sold off here recently and have some good upside going forward. So, diversification is key. That's what I'm gathering. DeVos. Absolutely. Absolutely. Devon Drew Coo and Chief investment Officer of DFD partners, Devon. Thank you.