Markets slumped on Tuesday as a dismal warning from Snap weighed on investor sentiment. George Seay, CEO, Annandale Capital joined Cheddar's Opening Bell to discuss.

Opening Bell

Markets Slump as Dismal Snap Warning Weighs on Wall Street

for some more inside in early morning trading and activity. Let's bring in George C. Ceo of Annandale Capital George markets attempted yesterday to make a rebound? Clearly that's being reversed this morning at least early so far in this session. What do you make of this? You know, swinging back and forth activity? And the brief turnaround that we saw yesterday could, in fact, we get some momentum into today and then could this be a longer winning streak after what is it? A really long losing streak? Yeah, good morning. Um, we're in a bear market and investors ought to get used to that because it's gonna be a while before we come back and have good times again. And, and, and it's, it's a rough, uh, period for, for the markets and, and investors are gonna have to get used to that. It's, it's a, it's a tough time for investors, but that's part of the markets, we have bear markets and they come and go and we're in one right now and it's gonna be, it's gonna be rough going for the, for the near term and, and we're gonna have to just get used to it. It's, it's, it's Unfortunate, but it's, it's, it's reality. And investors have got to get used to the fact that we're not going straight up like we have for the last 13 years. It's been a long bull market and, and, and now we're now we're in a bear. So you say we're in a bear market, the tough kind of road ahead. Do you think then we have not hit the bottom yet. You know, I had thomas Hayes, a great Hill capital on my show yesterday. And he says, hey, he thinks that there are a lot of indicators that we've gotten as bad as it's probably going to get. What's your take, thomas is a good man. I've known him for many years and I think he's wrong. I think we're going lower and I think it's gonna be uh many months ahead uh for the bear. And I think we're gonna have to learn to deal with it. And then I think that it's going to be uh more time to come for negative marketing interaction. The Feds not done yet. And until the Fed is done, I think we're gonna, we're gonna have bear market rallies, but I think we're gonna go down further before we're done. So what paints the picture for that for you? You know, is it the persistent inflation, Is it thoughts of a recession as it relates to the persistent inflation and what the Fed has to do to really tamp down on that, that inflationary picture that we're all dealing with, What is it exactly? It's going to continue us into this broader pull back. Yeah, it's a it's a combination of factors, it's inflation, it's the Fed raising interest rates as the economy slowing down. It's it's the market being overvalued from a price to earnings, multiple, all those factors together, uh say that we've we've got more more to come. And I think investors got to be patient, They've got to be resilient and they've got to be long term in nature in terms of their perspective and they've got to be have dry powder on the, on the background in terms of buying more stock as things get cheaper and, and less expensive. And this is an opportunity for investors to invest more capital as, as the markets get cheaper. And I think people have just got to be really patient and this is part of the markets, these things happen and people have got to be resilient and patient. Yeah. Speaking of pain, I mean, one sector that has really felt the pain this year has to be tech, right? I mean it has fallen pretty significantly even good quality companies, you know, those legacy kind of, um, you know, blue chip tech names, those have pulled back quite significant. And then you get a report like yesterday SAP kind of issuing a warning of weaker kind of profits moving forward and then you meta alphabet amazon those again, really robust, strong companies pulling back on this note. How do you explain this drop? And do you really think that it certainly was warranted here? Yeah, they just got overpriced and they're, they're having a direction now and if I were investors, I would focus on quality tech, whether it's google or amazon or Microsoft or apple or things of that sort, those are the kind of stocks to buy as they go down there, They're great companies, they're gonna come back, they're gonna be investors, a lot of money over the years to come. But right now they're in a bear market and it's gonna take time for them to come back and you just gotta be patient, you gotta buy it as they keep going down. You gotta layer in overtime and not be in a hurry to put all your position in order. If you don't own these companies and you, you just need to layer in overtime as, as uh, as they keep going down. I think they're going to continue to, to go down over the national year or so. I think we're in a bear market and I think it's going to Keep going down for somewhere between six and 18 months and I don't know how long it's going to be, but take, take your, take your, take your time and be patient. So the pain is still to come for for quite some time. The median in there was probably a year when you paint the picture of this bear market. Obviously you mentioned obviously inflation being a big factor here and what the Fed has to do with inflation is really a lot of, a lot of what investors are trying to parse through on a day to day basis. We're set to get obviously the Fed minutes on inflation going to be probably the biggest topic talked about, you know, on Wall Street then. And even I imagine in those minutes, what are you expecting from this? Do you believe that the Fed is going to have to stick to his strategy, its strategy to really combat inflation, given that it's it's telegraph that strategy in a way that's pretty unprecedented. Yeah. The Fed hadn't had to do this for 40 years. It's been a long time since since we've had significant information and we do now and I think the Feds doing this job and I I commend Chairman Powell and all the board members who are doing this this work because it's really hard. It's really difficult. It's not fun. Um And the market is going to go down as a result of that. But they they have to do this, it's it's part of tamping down inflation for the good of the overall economy over time. And uh they're not done yet. They've got more to do and it's gonna take at least another six months if not more for them to quell inflation. And and and get inflation and the markets back on track. Speaking of inflation, President biden said that he was considering reducing tariffs on some products imported from china. That was part of the boost that we kind of saw yesterday amongst investors sentiment. What are your thoughts on that? Yeah, I think President biden and the Fed both are behind the curve on inflation and they're way, way uh way late in terms of dealing with it and and they need to get on it really quickly or it's gonna really hurt the economy even more than it already has. So uh whatever the President and his administration says, I think they're way behind the curve. If you're talking the president being behind the curve, the Fed being behind the curve, us dealing with some pain for probably 6 to 18 months from now, this market continuing to pull back. I imagine then the R. Word is something that that that's on the table there for you in terms of, you know, thinking of recession is unavoidable here. Is that the case? No, I I actually don't believe that that's that's kind of the conventional wisdom right now that the recession is unavoidable, I think it's about a 40% chance. I don't think it's unavoidable. I think we can avoid it if we have a soft landing and I think that that needs to do its very best to orchestrate that and and get us to where we have a lower economic growth rate but we don't go into recession, but we're going to find that out in the next 6-18 months. That's what we're gonna find out about the recession. I hope we avoid it. But it It's got at least a 40% chance right now. I think most people would say it's a 70% chance but I think that's wrong. I think we can still avoid it. Alright, George see their ceo of annandale capital.