Matthew Tuttle, CEO and Chief Investment Officer at Tuttle Capital Management, talks about the geopolitical and economic uncertainty impacting market performance.  

Opening Bell

Investors Concerned Over Fed Plans for Rate Hikes, Russia-Ukraine Tensions

so more inside an early morning activity and trading. I'm joined by Matthew tuttle Ceo and Chief Investment Officer of Total Capital Management. Um I just kind of outlined the big concerns obviously or the big things weighing on the market right now CP I Fed kind of lingering uncertainty there. Russia, Ukraine escalation, we still have earnings out, you know, this week, certainly last week was a major week of earnings that moved the markets quite notably what's kind of the biggest thing to you, kind of moving markets and the biggest concern, especially in the short term. Mhm. Yeah. And it's really the things you mentioned, it's how bad inflation going to be, what's the Fed going to do about it and what happens with Russia and Ukraine and you know, this is gonna be a really volatile week. We're going to see a lot of things about that last week with CP I this week's PP. I, you have FomC minutes, you gotta figure there's going to be a lot of news going on about Russia and Ukraine this week and you've got a lot of Fed speakers this week and you know, you had one this morning, so it's going to be another interesting week out there. You just mentioned one this morning. Bullard actually actually talked this morning and I think one of the comments that he gave was that the Fred might have to kind of front load rate hikes that would indicate to me at least we could see a rate hike of what 50 basis points in March potentially. Is that kind of your interpretation and how likely do you think that really is? So it's my interpretation now Bullard tends to be Powell's mouthpiece. So I kind of you know always go into it thinking anything that Bullard is saying is is coming from Powell. So you know it looks like they're getting us ready for a 50 basis point rate hike interestingly I think a lot of people thought he was going to walk back Thursdays comments and he doubled down on him. Which is why at least at the open I think you're seeing a little bit of weakness. What's the impact of a 50 basis point? Um you know hiking in March do you think the market is priced at in or is that what's happening right now? We're starting to see that get priced in. So I think you're you started to see that get priced in on thursday and you know it's continuing to be priced into the market. So you know I think that's that's pretty much gone. I think the biggest issue now is is how many, You know you're seeing some people saying three some people saying seven that's a big difference and you know people are going to be looking at the FomC minutes and listening to the speakers this week to try to get a better sense of that? Obviously you mentioned thursday when the market started pricing in the potential for 50 basis point rate hike that obviously coming after C. P. I. Data that came in 7.5% kind of the trailing 12 month average essentially on on inflation. What is your take on household spending in light of just the continued pressures around inflation? Do you think the consumer holds up? Do you think we continue to see um what has been the consumer you know willing to take the higher prices or do we start to see a slowdown? Yeah I think we start to see a slowdown. You know you look at what's going up oil you know we all have cars we all fill them up. That's a direct tax on consumers. You know all the other areas that are inflating and you know and you look at a big source of liquidity which is home equity which is impacted by higher interest rates. So you know the consumer can't help but be hurt by this which is what you need to have happen if you want to fight inflation it's a double edged sword here. You know I looked at obviously energy and food prices that was kind of the biggest mover in the latest reading I think january essentially double almost doubling the rate of increase that we saw in december I think december for both categories is about a half a percent versus in january about 9/10 of a percent given that the volatility is mostly in the highest increases mostly in food and energy. Do you see a scenario we kind of see interest rates or inflation? Excuse me, kind of move markedly lower, more dramatically lower, um I don't know any time soon. So that's actually what we do. See, I mean, our intermediate term and long term view on the market right now is still very bearish. You know, we think it'll be a long time before we come back and try to retest the highs and wouldn't be surprised, you know, at some point within the next couple of weeks that we're retesting january's lows and you know, what you talked about is a big part of that. You know, the NASDAQ really over the, over the start of this year has really kind of been hit the hardest given the concern around the interest rate environment and the likelihood for the Feds to go ahead and start those interest rate hikes in March, I think it's down by 7% over the last four weeks alone, given kind of this continue inflationary environment, this, this interest rate environment. How should investors really be thinking about their position in tech and what opportunities are you starting to see within the sector? So it depends on how nimble you are. As I said long term in, in intermediate term, we're bearish short term, we're oversold, we're due for a balance. And if we do see that bounce, it's going to be led by the stuff that's gotten beaten down the most. So the NASDAQ small cap speculative technology, If you're nimble, you can play that bounce if you're not nimble and you're holding on to some of these stocks, you use the bounce to get out and get kind of more in line with value, energy, financials, you know, consumer defensive, the more boring stuff, which, you know, Yeah, it's not as exciting as a firm and upstart and some of those names, but you know that that's where the market's going right now. It certainly feels a bit safer. And certainly to your point there where the market seems to be heading, we've got big names reporting earnings this week, Viacom walmart Airbnb among others, set to kind of report their earnings. What are you looking for out of some of these companies, You know, we're looking for the same thing we kind of saw last week and the week before where, you know, in a bear market, good earnings aren't necessarily rewarded, expect a lot of volatility. I would not be trying to play earnings on anything. I mean, look at what some of these stocks have done. You know, you're facebook's, your netflix, your firm's, you know, it's, it's so difficult, especially in a bear market to try to bet on earnings. Uh So I I just, I'd be very careful here because some of these reactions have been pretty ugly. You're going into this year. Almost every analyst that I spoke to said the two sectors to kind of look out for that would likely do the best, especially kind of, you know, in this interest rate environment would be financials and energy, energy has certainly proved out. But financials not so much, it means declined nearly 3% in the last four weeks. What's your outlook on the financial sector this quarter? So financials are our third favorite sector. Energy is first, even though that is looking a bit overextended, the commodity stuff, the metal stuff is second. Financials are third. You know, the problem with financials is, yes, they do like higher interest rates, but only if it leads to a steeper yield curve. And so we've seen some situations where you've had some flattening and that's impacted financials. So we still like them, but we'd be a little bit more careful here, depending on how the short versus the long term rates react to what the Fed is saying. As I noted, energy obviously, um, kind of has been the outperformer up over 26% year to date. How long does this tear on energy last? And what are the potential headwinds or signals? Um, that we could see a slowdown in the momentum around energy. So, I mean, oil looks like it wants to get over 100. Um, and history has shown us that if it does get over 100 it can stay there for a while. Uh, you know, a lot is going to depend on what happens with the Russia and Ukraine, you know, obviously some of this latest move you've seen in oil prices is based on those tensions and we did hear, you know, some kind of semblance that, that maybe Russia was open to talk. So, you know, we'll see how that goes. You know, it's still our favorite sector, still undervalued intermediate term. Maybe you take a little bit off the table here just because it's so overextended, but oil can, can get up there and it can stay up there. You mentioned, uh, oil and energy being kind of the industry, that's your favorite right now, let's talk about other industries that you see potential upside and kind of given this environment with kind of interest rate hikes, inflationary pressures. And I think, you know, most of your argument has been kind of a bear, um, bear case environment. Yeah, a couple of the other sectors we like anything kind of commodity based, whether it's agricultural commodities or the medals, we like one thing that's kind of coming up the right side now is gold and gold miners, you know, I mean that has tons and tons of head fakes. It looked like it wanted to break out a bunch of times and hasn't, but that's something we're going to be watching really intently, especially this week, especially around Russia and Ukraine. And you know, besides that and energy, you've got some reopening things. The hotels are looking all right. The gaming stocks are looking all right. Uh, you know, so those are some areas as well that that we keep on watch. All right. All great insight. Thank you so much. Matthew Tuttle Ceo and chief investment officer at Tuttle Capital Manager.