Markets started the trading day mixed on Wednesday as investors reacted to higher than expected inflation data, and continued to digest the broader tech sell-off. Chis Campbell, the chief strategist for Kroll, joined Cheddar's Opening Bell to discuss.

Opening Bell

Markets Open Mixed As Investors React to Hotter-Than-Expected Inflation Data

for more inside in early morning trading and activity. Let's bring in chris. Campbell chief strategist at Kroll and former U. S. Assistant Treasury Secretary for financial institutions chris want to get your read on C. P. I. 8.3% in april it serves a year over year about 3/10 of a percent for the month over month. That's a slightly hotter read than the expectation. But again improvements from March. What's your take on how we should be reading this report? Look I think you're right it's not there's no questions inflation is is it looks like it's going to be very sticking it to stick around for some time. Which is gonna you know, certainly complicates the the challenges of both the monetary and fiscal policy. Right? So that's what the Fed can do what what policymakers in Washington can do. Um And it's gonna make for continue to say a very lumpy year this year on the markets. And it it certainly has its proven out to be the case when I see this report. Obviously I think of the Fed and what investors are thinking in terms of how does this shift or change Fed activity. You know, last week Fed chair jerome Powell promised that the Fed wouldn't take an even more hawkish approach saying essentially the Fed is not considering 75 basis points. But if you look at the last couple of trading sessions that clearly looks like the market's pricing in a potential for 75 basis points? What is your take on this? Does this change the Fed's stance towards that this this increase the likelihood of that? Or do you think the Fed just keeps course? I don't think so. I look, you know, I had a great honor to work with Chairman Powell, I was a Treasury, there's uh you know, he's a very steady person and a consensus uh you know, a leader and so I think that there's likely going to be a slow and steady increase in rates um which has been forecasted, I don't, you know, I think that there's a lot of lessons to be learned on the Volcker years, you know, like something that's dramatic that could be really significantly put a shock in the economy. Um You know, they have to try to find a way to to do a soft landing without creating a recession. Um Like I think there's gonna be a recession like the anyway. Um but I think, you know, I get a really strong strong and rate increases could create a significant shock, which I think would be quite alarming and you know, um let's remember back that that stagflation can be quite exhaustive and and really, really challenging for the economy and try to find its way out of. Do you think we are even close to peak? Or do you think we stall here for some time, given the very reality that a lot of the inflationary pressures and this picture is really built that we're talking about this a few moments ago on supply side and the Feds only control really is on demand, which makes that soft landing so much more trickier? Yeah, look, it's, you're exactly right on this point, right? So what the Fed can do and certainly what policymakers in Washington can do, they can, they can get their arms wrapped around about half of the challenges of inflation, but the other half are just completely outside their control. So Russia Ukraine oil, natural gas supply chains really are kind of outside the control of both of both of those people in Canada and the combination of the two. And so there's a real challenge and it's at some of the substance has to work itself out, which is going to take some time, you know, I think on a positive note, I would like to say something positive, you know, I can, many of the funds that we advise are raising right now, and because I think there's gonna be some opportunity of buying, um next year. And so I think, you know, and I think, which could actually could really flatten the the challenge of, you know, further further receding into a deeper recession, because there will be a lot of money in the markets, you know, buying up, uh, you know, revalued um, equities, uh, you know, whenever, whenever the market believes that that that, that we've reached the bottom. Well, speaking of opportunities, obviously, we have seen the broader tech sector just sell off pretty significantly amazon this week, hitting a 52 week low, even meta continuing its slump. Would you consider now a good, good buying opportunity for at least some of those, those big names in the tech sector. How are you advising whole investors kind of, I think more broadly here, especially when it comes to tech. Look, I think tanks going along right alongside the economy in this. And I don't think the economy is, we've seen the bottom of the economy yet, unfortunately. And so, um, you know, like in inflation is, we've seen that this morning inflation continues to rise. Real interest rates are going to continue to rise along with that. And so that, that's, you know, so the economy still has some rebalancing to do, um, which is going to cause some real challenges and some real pain unfortunately from a lot of american families along the way. But in reality I did, I believe that tech is the, is the one sector that, and probably real estate as well. They're really gonna ride alongside this economy, um, which could be, you know, a real challenge again for, for the sector as, as, as revalues. But, uh, yeah, I don't think that we've seen the bottom, unfortunately, I think we've seen the bottom and in tech yet, you mentioned real estate there for a moment, are you meeting real estate is going to pull back and right along the economy, paint that picture for me? Yeah. So look as typically as, as federal, uh, that is the feting increases in interest rates, mortgage has become more expensive. And they're typically tends to be a reevaluation of real estate itself because the entry point for for for for some homebuyers becomes really, really more much more difficult as the, as the cost cost of capital goes up. And so typically there's a bit of a rebalance there, that that, that, you know, it's, it's kind of um connected in some way. And so we were, you know, it technically tendency that we'll see some kind of revaluation real estate as um, as the cost of capital or the cost of home buying both commercial and, and retail side, home side. I am curious though, because there's there seems to be a train of thought when it comes to real estate right now that because inventory levels are so uniquely low and the consumer is uniquely stronger now that there will be a bit of a delay in what we typically would think would be a higher interest rate environment that would slow down the demand in real estate. Do you see that as well? Yes. Look, I think, I think that's, that's there's certainly one school of thought then the other third school of thought is if we do dip into recession that the american consumer right now, who's in charge and really the the individual's right now in charge of, and really in the driver's seat of of, of employment where they really, really can effectively set the terms as a very mobile workforce and everything else. But if we do dip into recession and confirms start to pull back and actually start to shed jobs, uh, and not create jobs they, as we see today, um, that changes the dynamic changes quite quickly and quite rapidly. Um, and so because of that, the, the power of the consumer I think will be diminished a bit if we do dip into recession, which I think likely is going to happen later this year, more broadly here when we look at kind of market activity. I'm looking at this session alone, I've looked the dow, it's been up 3/10 of a percent, it's been down 3/10 of a percent. We've only been in eight minutes of trading so far in this session right now, if you are advising kind of newer investors trying to navigate this space, trying to think where is the point where I could jump in and, and, you know, put my money to work here. How do you advise them amid these kind of like, meltdown moments and wild swings we're seeing. Yeah, like it's gonna be a bump being wild ride. I think this and in cases like this? I think, you know, like, uh, I think you have to be more of a long term and it's certainly able and willing to take some risks. Um, but, you know, there's going to be certainly opportunity buying, uh, you know, for the longer term investors, I think it's, um, you know, you try to buy the, the, the, the value stocks as best as you can, um, and hold, um, this is gonna, again, where the economy and the market always rebound. I always would, I would never bet against american and american markets. Um, and, uh, you know, I think this too will pass, but there's certainly going to be some more challenging times ahead, both in the economy and the markets. And this is, you know, I think if, if this is, if you're a significantly a challenged or if you're, if you're close to retirement, if you're, if you don't have a lot of risk tolerance, this perhaps may not be the best time to be in the markets because I think there's gonna be a lot of ups and downs in the next, in the next several quarters. Last question for you here, which sectors are you dying right now in terms of the most growth potential? Um, and do you have any contrarian views in terms of other sectors out there that you think aren't being watched as closely, but I do have some value to them. Look, I think I across the board, I think we're gonna, we're, um, there's gonna be some revaluations across the board, no matter what I think, you know, health care is always something that, that's, tends to, you know, we're, again, we're still in the coronavirus challenge. And while we're not here about it every single day, it's still around and there's, there's another variant going around now. Um, you know, so I think healthcare stocks are an opportunity, I think that, um, you know, like, I'm heavy in Fintech. Um, it's, you know, it's, it's, it's getting hammered now, parts of it, but it's, um, you know, I think that there's some significant value there as well. Um, and so like, I think that, you know, perhaps as, uh, as we come back and start traveling again, travel entertainment, I could will also rebound as well. Um, but, you know, a lot of this stuff is going to be, depend on, on how the economy shapes up and, and really, uh, the ups and downs and I do believe it's going to be a bit of a roller coaster, which can, you know, it's gonna be a challenge and to find, um, what those, you know, those specific sectors are. But I, uh, you know, we look forward to helping our clients, um, you know, navigate those challenges and, and do it in a way that's going to be successful for them. It does feel like we are on a bit of a roller coaster ride with this economy and even this market kind of following the economy chris really appreciate your time and your insight chris. Campbell Chief strategist at Kroll