Melissa Armo, founder and owner of The Stock Swoosh, joined Cheddar News to discuss Wednesday's session as stocks closed down amid concerns over a banking crisis and ahead of next week's Fed meeting.

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Stocks Close Down Amid Banking Concerns, Ahead of Fed Meeting

Joining me now is Melissa R Mo, founder and owner of the stock swoosh. Melissa. It's good to have you on the show today. Mixed market. I think investors kind of trying to figure out what to do. What do you make of the state of play? Well, really, I don't look at it as a mixed market. We've been down, we've been down for the last few weeks and I think it's a really difficult area here for anyone to go long while people are optimistic. Like you said that the fed will back off next week raising rates, meaning no, no raising rates at all, like zero flat. That's what people are talking about today, what people want and what the fed is going to do in my mind is two completely different things so people can talk between now and next week, what they want the fed to do or what they think the fed should do. I believe that the fed is going to raise rates next week. Interesting and of course, on the backdrop of still a pretty significant inflation, Melissa, how do we make sense of all of these moving parts? Inflation persisting concerns that there might be broader contagion in the banking sector and what it does mean for the consumer. Well, first of all, the fed is trying to curb inflation. They've been attempting to do that. That's one of the reasons that interest rates have gone up so quickly. And even they really did back off because they didn't raise rates a half. Last month, they raised it a quarter. So there was talk last week of them raising it a half and the markets sold off on that. But now people are again thinking that they're going to back off completely. I think they're probably going to raise rates a quarter of a point, not a half, which they might have done based on the fact that there's all of this going on right now with the banking industry. Do I think that any other banks go under? I don't know, I really don't know what all the other banks exposure. I know everyone's scrambling right now about that. And I think that, you know, the feds stepping in are the F D I C stepping in and saying that they're going to secure, You're insured and uninsured deposits at Silicon Valley Bank, I think is something that people are now deciding to feel. Well, maybe they would do that if other banks will go under. That's not really what the rules are. The rules are 250,000 on deposits. So I think it's going to be interesting in the coming days or really even the coming weeks to see how many banks can hold on. Because everyone probably right now is scrambling. The problem is the exposure to long term bond. So again, for those people that don't know if people have, if you, when you buy a long term bond, if interest rates move against you, it actually, then the value of the bond goes down when interest rates are low, interest rates are going down or staying low, then the value of the bond could go. And the problem with SBB Bank as far as everything that we know so far was they had too much exposure, long term bonds and then when they had a problem trying to raise capital, they had to sell them at too great of a loss. Right. Right. Okay. So what should investors do in this market? Melissa, what would you advise? I think people should sit tight if they can. So, don't panic is my greatest suggestion if you're a long term investor, even though the market is well off the highs knowing that full well, we could have another drop. You know, we could break the October lows. I know no one thinks that's possible and no one thought that was possible the beginning of the year because we rallied in January. I think that that is possible. I think that could happen. And it's not just because of the fed and rising interest rates. It is because of the economy. It is because of inflation. It is because we, We could go into recession. It is because what's happening in Ukraine and Russia, I can name 10 other things. The fact is that if you invest in the market long term, I wouldn't panic because again, if you're young, you're nowhere near retirement, the markets probably gonna go back if you're in retirement now, you really should have sat down and looked at this six months ago. As far as your investments, too many people were optimistic that things would turn around and I think that the Fed is going to keep raising rates. And what does that really mean for the economy? Well, it remains to be seen. Mm hmm. So contagion Melissa, I mean, you watch the stock charts very closely. Obviously, you have a sense of where momentum is going. You're right to note that by and large. Obviously, we have been down, we're off of the highs selling started in February after very strong almost como rally some called it that we saw in January and it's continued here into March. But what do the charts say? I mean, is momentum clearly going one way or the other momentum? Well, first of all, we were in a range, if you want to look at it overall, we've been in a range since the beginning of the year, however, we could go negative on the year and if that happens in the next couple of days again, if the fed decides to raise rates or we get other economic data that, that the market decides to sell off or something else happens with banks. It's so now think about it later and that's how people reacted again last week. So I think contagion is the truest form of what happens because you know, when you have a run on banks, what it means is that everyone gets scared, they and they want to go get their money out. No bank has all of the cash available for everyone to go out and take out their deposits. So the reason that the fed came in and said they were gonna, they were gonna make good on all the deposits from the uninsured depositors was SVB was really mostly I think to be able to contain that there wasn't a run on every single solitary bank in the country. So yeah, contagion is a big part of it, but it's really based on the fear factor. If people panic and want to pull the deposits, it's gonna be a problem. It's going to be the problem for you. U S markets. It's gonna be a problem globally and nobody wants to see that happen. And I think the Fed has a tough job in the next couple of days and I'm sure they're evaluating things because if they don't raise rates and how are we going to curb inflation? And personally, I don't think raising rates, the rest of the year is going to bring inflation down to 2% because we're so far off of that. I think the biggest problem is oil, oil prices are still too high. And unless oil prices come down, you're going to see continued prices be at the same level or slightly less. Even with the rising interest rate and raising interest rates could actually push us into a recession. And that's the fear and that's why so many people are saying don't raise rates, don't raise rates. But I don't think the fed is going to look at that because the only thing that they can possibly do to help with inflation is of course lowering, raising interest rates. And I think they kept rates too low for too long and now they're cool with it. All right. Melissa Armor, founder and owner of the stock swoosh. Melissa. Thanks so much for joining today. Certainly a lot going on out there in the stock market.