Kevin Nicholson talks latest market trends on Opening Bell.

Opening Bell

Kevin Nicholson

for more insight on early morning trading. I'm joined by Kevin Nicholson C. I. O. Of global fixed income at riverfront Investment Group kevin welcome. Welcome inflation is now at levels. Good morning inflation is now at levels not seen since august of 1982. Many economists say five rate hikes won't get the economy to that 2% target that the Fed is looking for with numbers like these. Do you anticipate the Fed needs to be more aggressive when it comes to the number of rate hikes? I think at this point it doesn't really, it's not gonna really matter whether the Fed is going to front load it or they're gonna back loaded at the end of the day. The Fed is behind the curve and they need to get started and a big thing here is that they need to stop QE I mean they're continuing to purchase into that March meeting and right now I think that that's adding to the pressure of putting them further and further behind. I think that they really just need to pull the cord the ripcord here and get rid of Q. E. Uh Immediately analyst is saying there there is a 50% change of a rate hike of 50 basis points. Is that likely given the Fed's communication that we've been hearing. Well, I think that in order for it to have a 50 basis point hike, the Fed is going to have to come out and start changing their communication. Everyone who's marched out over the last couple of weeks have basically said that no two a 50 basis point hike and that they wanted to take their time and move, you know, in 25 basis point increments. If they do move in 25 basis point increments, I think that you're gonna have consecutive meetings on top of one another where they're going to hike at least in through the middle of the summer. Let's talk jobless claims totaling 223,000 coming in below the 230,000, analysts did estimate what does the signal about the strength of our labor market and what's your outlook when it comes to workforce participation? As COVID-19 cases continue to decline in our country? I think that it says that we have a very strong labor market and the labor market is going to continue to get stronger. I think that, you know, the participation rate is going to go back up because let's face it, people are starting to run out of money. Those folks that were able to not work for an extended period of time at the beginning of Covid, uh now they are no longer getting transfer payments. They are burning through their savings and they have to get back to work, especially since prices are rising. So they're eating more and more of their savings up because we have such high inflation. So I think that the participation rate will get back to about the levels that we saw at the beginning of the pandemic where I believe we were at 63.4% on the participation rate. And so I think we'll eventually get back up there as more and more people need to have an income coming in. The NASDAQ is nearly out of correction territory. However, index is down 4.1% over the last four weeks. What opportunities do you see within technology, especially with the ten-year Treasury yield ticking closer to 1.99 Kevin. You know, one of the things that we've focused on in technology has been the mega cap tech because these are companies that we believe that have pricing power and they have the ability to be able to continue to grow earnings and they're not going to have to depend on having to go and get loans in order to finance their business. Uh those are the places where we're really focused and it's really been in the software and services uh, on part of the technology that we really focused in on financials have climbed nearly 3% in the last five sessions were seeking regional bank m and A activity rising a lot this year. So in addition to higher interest rates, could more bank mergers help boost profit margins within the credit industry, at least when we talk long term, What's your outlook on the financial sector of this quarter? You know, I think from the perspective of having more bank mergers, I don't know that that is actually going to happen just given the environment, regulatory environment that we're in about with mergers now, obviously the smaller banks may be able to emerge, but once you get to the super regional sizes, I think it's going to become more and more difficult for them to merge. However, I do see that, you know, loan growth will probably pick up. We've seen over the last few months that uh individuals, consumers are now starting to uh use more of their credit lines, they're using charging more on their credit cards. So we definitely think that financials have some upside from here, fixed income investors are gravitating towards overseas markets to take advantage of the monetary easing happening in other regions. China's bond market is one of the best performing in the world right now. What's your take kevin on investing in the foreign bond market, you know, at this juncture? I have not been really all of that enthusiastic about investing in the foreign bar market, especially going into china. Um right now, I think of china as being a little abrasive, so to speak to investors. Um and so we have stood clear from them. Uh and I think that as we get more and more, you know, the yields rising here in the US, I think that people are going to gravitate back to the U. S. Bond market just because of the general overall safety Energy is up over 23% year to date. What do you make of energies performance over the last month? What long term challenges do you see impacting this specific industry Kevin? Well I think that for energy energy has been a great performer to start the year. Um However the thing that you know energy has had its run for a couple of reasons. One of them has been because of the Russia Ukraine issue. I think people are concerned that energy prices, especially in europe are going to run hot uh in the coming months as uh you know, they're in in their cold season. And so I think some of the challenges that you're going to find in energy is to be able to maintain this momentum. Especially given the fact that you know, opec is gradually turning their speak, it's up this, pick it up. So I think that over time they're going to be a further and further pushes for um more production and if production actually comes online then I think that you're going to see prices come down also we have to remember that we still don't have the Frackers back online like talking about here in the U. S. And so with price, if prices maintain these current levels then I think that we at some point you're gonna see private equity start to um put money into the energy space and help fund some of these Frackers um operations and I think that that would put pressure on where energy prices are today. Great insight, kevin, Nicholson, c i. O, of global fixed income at Riverfront Investment Group. A lot of a lot of great information there, kevin, thank you so much.