It's no secret that the Federal Reserve and its chair, Jerome Powell, are currently facing a major challenge when it comes to maintaining the country's economic stability.  On Thursday, the same day the U.S. senate voted to confirm Powell for a second term, the Fed chair acknowledged for the first time, in an interview on NPR's 'Marketplace,' that the prospect of a soft landing for the economy following months of high inflation may be out of the Fed's control.  The comment cames after Powell said a soft landing for the economy was possible just a week prior.  So how should investors be responding when it comes to managing their portfolios?  Joining now to discuss is Emily Green, director of private wealth management for the investment platform, Ellevest, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Markets, Investors Face Uncertainty Following Mixed Messaging From Fed Chair Jerome Powell

Welcome back to closing bell on Shadow News everyone. I'm kristen schueler down here on the floor of the stock exchange, we have a relief rally on our hands today, but it comes after a week of heavy selling from thursday of last week to Wednesday of this week. And it's no secret that the Fed and its chair, jerome Powell are currently facing a major challenge when it comes to maintaining the country's economic stability. A day after the U. S. Senate voted to confirm Powell for a second term, The Fed Chair acknowledging for the first time in an interview yesterday that the prospect of a soft landing for the economy following months of high inflation may be out of the Feds control after all, but it does come only a week after the Fed Chair said we would see a soft landing during the Fed decision last week. So quite a reversal in a short amount of time. How should investors be responding when it comes to managing their portfolios? Were joining me now, is Emily Green, the director of private wealth management for the investment platform, L a vest. Um Emily thanks so much for coming on the show. What would you recommend to investors when it comes to managing the recent bout of volatility that we've seen in the stock market. So I think it's a really tricky situation and obviously the Fed isn't a very sticky spot right now trying to get inflation under control while keeping unemployment low and keeping the economy out of a recession. Um It's it's seeming more and more likely like we'll go into a recession, especially from defensive comments this week. Um but you know, I think that this is a slightly different situation than a lot of people are used to because while we talk about market volatility doesn't actually feel very volatile. As you said, it just feels like the stock market is going one way until today, thankfully, But we are seeing some positivity, you know, the of the S&P 500 companies that have reported earnings, 3/4 of them Actually beat Q1 earnings surprise. So in line with previous quarters and so we still see a lot of positivity in terms of what actual companies are doing with their performance and so, you know, when you, while the short term maybe bumpy, I think companies are still well positioned for growth over the long term. Okay, interesting. Now, if you are an investor and you're looking to put money to work, what would your recommendation be? We've had guests come on the show saying a dollar cost average model is the best way to get in bit by bit to the stock market, even though oftentimes people do try to wait until that very bottom to really capitalize on future potential gains. So that doesn't work. Um if you actually look at it, if you look at the last 25 years If you missed the best 10 trading days over the last 25 years in the S&P 500, your returns would be less than half and so you may try to get that best day, but you're likely going to miss some of those best days within their and so I totally agree. Get invested, getting invested suitor today is better than getting invested in a month. Um That that power of the time within their, but really I would focus on building a diversified portfolio right now. While fixed income you're seeing, you know, we're in a bear market and fixed income, the worst that we've seen in a long time, buying fixed income is starting to look more and more attractive. When you think about the um tax equivalent fields of municipal bonds, you're starting to be able to buy higher coupon bonds. Um looking at the valuations of stocks, they are more attractive today than they were in january and then thinking about Emily, let me just jump in here. Um I want you to finish that thought, but I also want to ask you, how much money should people have in cash. I think that's another question that they have right now, knowing that what if we do go into a recession, how much of my portfolio should be allocated to cash. So I always think it depends on your situation. And so, You know, you'd say somewhere between three and 12 months of spending, but it depends, you know, if your portfolio goes down by half, is that still going to be enough for you? I think about it. Are you a vulnerable or investor that if you lose a lot of portfolio that ruins your retirement, that ruins what you're spending. Is that ruins your future or are you in a position that you have more flexibility that you're young? Your portfolio has a lot of time to grow, then a lot of times you're not going to need to depend on your portfolio. And so keeping less cash is probably the better bet. And I'd say today cash is not risk free either because inflation is so high, you're actually losing your purchasing power every single day. And so while cash can feel risk free, it's not a risk free asset anymore. Now, where do you see opportunity? Obviously a diversified portfolio has long been the best way to go in the stock market, but we do actually see difference of performance across the major indexes. So the NASDAQ, these growth companies, I mean some of the individual names are down close to 90% from their recent highs, But the NASDAQ down roughly 30% from its record, The S&P down about 28, Uh close to 19%. Excuse me from its own record and the Dow down about 15%. So knowing that different ones offer different deals, but also different stability if you are starting to dip your toe back in what might be the best approach in terms of different securities out there. Yeah, I think you should be careful about just looking for what's been beaten down the most, you're right. Some of these texts talks, especially the ones with them public last year have been beaten down. But it's gonna be really hard for them to get back up to those prices. And frankly, I think a lot of them went too far too fast with that. And so I'd be really careful about buying things just because it looks like they've come down so much. And so looking at quality value stocks, dividend paying stocks, you know, still having some of that tech in there two, make sure that you're in it when it comes back. But really looking at the quality of your portfolio today versus trying to find that deal, I think is the most important thing. Um, my other question that I have for you is fed chair jerome Powell, giving us mixed messages. How much does that complicate the investing scenario? So the market hates uncertainty. And he just created a little bit more uncertainty over the past week by, by saying that the soft landing might not happen. I think, you know, we all could have guessed that it's going to be a very, very hard thing for them to figure out, um, to, to get that done. So, you know, I think that until we see more certainty in the markets, it's, it's from their messaging and stuff. It's gonna be tough. Um, if we can keep out of our session, I think what we're doing right now is probably a good thing. I don't think the economy has the capacity to continue at that same level. And so at some point we needed to slow down the economy. It's just are we going to be able to balance that out in the right way? And what is that going to mean for markets over the long term? And, um, you know, over the long term, I think markets will go up, but I expect volatility over the short term. Alright, Emily Green, director of private wealth management for the investment platform. Alibaba's Emily thanks so much for coming on the show.