Opening Bell

Eddie Ghabour

for more inside in early morning trading, I'm joined by Eddie Gabor co owner at the Key group, Key Advisor Group, Eddie really glad to have you on, um, it's a rough day for the markets to start out. The SNP is down nearly 9% from its high just this month on top of today's activity trading at levels not seen since early october, I think october 2020 actually, The NASDAQ is having the worst start since 2008. What are you gonna be paying attention to this weekend? And how should investors kind of examine their portfolio um, in this downward market? So, you know, our clients and anyone that's followed us on twitter or any of our interviews, no, that we got bearish back in november because of what the Fed had done in regards to delaying tightening and we know, or we felt strongly that the economy was going to be slowing down this year and when the Fed tightens into a slowdown, that's the worst case scenario for risk assets. So since november, we've been selling rips and rotating into gold utilities staples, that's been the playbook that we've used for clients and the money that we managed to really help volatility and of course, uh, luckily in the short term, that has been a great place to be. So, this selloff hasn't really surprised us at all. We expected it now, the playbook is very simple, if the Fed comes out this week, extremely hawkish then this is just the beginning and we're gonna see another big leg down in the market, I believe right now, in our opinion that this open being down big is actually a blessing because you may get a flush out today. And I think the Fed has an opportunity to kind of set the table that the fact that maybe they won't be as aggressive in tightening as the market is pricing in and you could get a really nice bounce. But I will tell you that that bounce in my opinion for our clients anyway would be something that we would more than likely sell because the writing is on the wall, inflation is an issue. The Fed is too late to the game, they're gonna have to tighten while we're slowing down. And the second quarter, as we have continued to say, is going to be the most problematic because the earnings that are gonna come out in the second quarter. When you look at the comps to last year, I mean it's an impossible hurdle for them to get over. So as you know, I'm usually very, very bullish, but I am not, this is the most cautious. I've been probably in my career because the bubbles were massive that were created and when you have to unwind that this is the pain that you feel. So if investors get a bounce and they don't like how their portfolio has performed in the last two months, then they need to take that in my opinion and rotate into the more defensive plays. Like we have, you mentioned the Fed obviously and a lot is going to depend on the Fed activity, you know, tomorrow kicks off the meeting will kind of get the notes. Um, and probably hear from the Fed, you know, on, on Wednesday, how do you, I think you're kind of insinuating that the Fed is potentially not going to be as hawkish, but given this inflationary environment amid the pressure for the Fed to act, how does the Fed not come out even more hawkish than anticipated? Well this is what they put themselves in this corner. So they're gonna have a big decision to make if he comes out and they say they're going to do four or more rate hikes. This market in my opinion is going to crash because there's no way this economy can handle that. And so I think ultimately it's going to be the way that they weren't how they tighten. We know they're not going to be dovish, but it's a matter of how hawkish they're willing to be and what type of risk to the markets because then all of a sudden you could start having liquidity events with people that are over leveraged and whatnot and the high yield market start to go crazy. So look, they've put themselves in this position unfortunately. And we know in our opinion that the selloff still has more legs. It's just a matter of how fast it happened. So I think the Fed is going to try to smooth and calm markets down this week. Um Because look, you have some people saying six rate hikes, I mean, come on, if we get six rate hikes this year, then gold and cash in my opinion are probably gonna be the only safe places to be. There's no way we can handle that aggressive of tightening and the economic environment that we're in. Did you say though that the Fed has arguably kind of kept the markets in mind and has been operating in a way it's try and kind of, you know, make sure that markets don't crash while trying to, you know, deal with inflation but not truly being being able to get to inflation and really tackle that and then being criticized because of it? And some calling for a kind of this hawkish stance, wouldn't you say that's what's already done? So if it kind of takes that same playbook this time around, it's just continuing to do the same thing, hoping for a different outcome. Well look again, at the end of the day, they did make a very big policy mistake by not recognizing inflation and slowly tightening. Uh So again, I think the Fed will tighten. Make no mistake about it. But look, if this market drops another 10 or 15% from here, I'm talking about the broader market, not even the higher risk stuff. Do we really believe the Fed will continue to tighten into that and by then now we're in a recession, they're just not gonna do it. They've never done that. In my opinion. They've always switched their stance because they've been late to the game. Uh, and so we'll see if we're right or not. Um Again, we're prepared for it because we're defensively positioned. But I think this, the Fed is going to be very careful in how they word things tomorrow or Wednesday. They're certainly going to have to thread a very, very thin needle. It seems like the needle gets thinner and thinner. Um, day by day. I want to get your take. Obviously the NASDAQ probably being the most hit given kind of its exposure or, you know, risk it to this inflationary or these, this interest environment. Um, do you see though any opportunity even amid the pullback, um, with big tech? Okay, I do not, you know, uh, not right now. I think that tech, again, in my opinion, if I was a trader right now, I would say we're probably oversold on a short term basis and we're gonna get bounces. But we think this market is going to basically act like a bear market for the next 6-8 months. So rallies in our opinion should be used as opportunity to sell for those that are over leveraged or overweight those sectors. Technology. Look, they still could go quite a bit lower from here, especially if this Fed is hawkish like we all expect. So we don't think that it's going to be clear sailing until past second quarter. I think again, I can't stress it enough that the second quarter is going to be very, very problematic Before I have to let you go here. Let's just dip into energy for a quick minute energy, kind of top performing industry this year, sector of of what, 15% in the last three weeks. Oil has always been kind of a big subject. You know, when it comes to geopolitical risk, how do you see the tension between the us and Russia really impacting the oil industry and what's your outlook on the energy market as a whole? So long term? Like 3 to 5 years? I think oil structurally is probably one of the best places because of the supply constraints and the fact that we're depending on foreign oil. So I do expect oil to go higher over the next 3 to 5 years. However, it's one of the only commodities that hasn't really had a material drop over the last few months. When you look at the commodity sector and I think it's because of the Russia Ukraine tension. If that goes away in the short term, I think the short term position on oil will be going lower before it goes higher. So I know that's not consensus, but that's how we would trade it if we were trading that right now. All right. I like the hot. Take Eddie appreciate your time. Eddie Gabor, co owner at the Key advisors group.