While investors soured on Fed Chair Jerome Powell's remarks on interest rates Monday, Anthony Saccaro, Founder and President at Providence Financial explains why he is supportive of the Fed's approach on Cheddar News' Closing Bell.

Closing Bell

Stocks Close Lower After Fed Chair Powell Says U.S. Central Bank Will Act Further to Raise Interest Rates

Be waiting to see what signals Nike sends us. But in the meantime, let's turn back to the major indexes. It was a down day, of course after stocks had their best week since November of 2020. That of course comes amid a lot of selling and uncertainty this year and certainly volatility. Well, joining me now is Anthony Socorro founder and president of providence financial Anthony, thanks so much for joining the show. What's the concern among investors about Fed chair Jerome Powell's comments today when it comes to raising rates? Well, I think actually Jerome Powell and company are actually doing things very, very smart. Um, they've been behind the curve ball for a long time, but I feel like they're making an attempt to catch up When they raised interest rates. Last time, there was some talk on the street that rates might go up as much as 50 basis points. And so what happened is they only raised them 25 basis points. Uh, and so the market initially reacted negatively, but then very positively on that. And the reason for the positive responses because the rays and interest rates wasn't as much as it could have been. Well, now the reverse is happening in jerome Powell's comments today are basically setting the stage for the Federal Reserve to raise interest rates very aggressively. And that's usually not good for the stock market. So the stock market pulled back a little bit today, not as much as it could have. But what it really does is if the war with Russia goes really bad or we get involved, or inflation continues to say hot as it looks like it's going to, is it gives jerome Powell the ability in the future to say, we're not going to raise interest rates as as much as we want to as much as we thought we were going to. Uh, and that would have a positive impact on the market. So if the market starts to go bad for some reason, because of the Russian war or because inflation say it's hot, um, jerome Powell can back off and that story will cause the market to rebound. So certainly there are a lot of risks out there. I mean more risks today, I think that than we've seen in two years, of course, since the onset of the coronavirus and that steep market plunge By more than 30%, we are not nearly down that much from our own recent highs, but we are off our best levels Anthony, what are investors to do? What would you recommend that they do at this moment with their portfolios? Well, and that's a great question. We get that question all the time. The reality is, is you have to have a plan and a plan for a 30 or 40 year old is going to be different from uh, plan of a 60 or 70 year old, but any plan you have should be able to help you in any situation if you are invested in such a way to where your plans or your retirement is going to be destroyed or not able to be fulfilled. If the market goes against you, you are invested wrong, you need to be invested in such a way to where no matter what happens with the market, you can still get the income you need out of your portfolio or you can still put the money in into your portfolio and your plan is intact. Make sure that whatever your plan is Uh that that the market doesn't affect it and you're invested and you'll be fine either way. Okay, so here's a question for you. We've heard the warning signs, we see the prices ourselves from our own lived experience that prices are expected to continue rising this year, unexpected Tuesday, elevated inflation at a 40 year high. What's a 30 and 40 year old to do Anthony? Should they be buying the dips? I know you said the plan for a 30 and 40 year old is a bit different from someone around the age of retirement. Well, the challenge is, we don't know where the dips are right. I mean we know that the market came down 12% the broad index, we know that it's bounced back. Is it gonna go down more? Is it gonna go up the reality? Is is there some people that are actually calling for a, that that's saying this is a bear market rally. It very well could be, we do know that the market right now is at around six or 7% discount if you're 30 or 40 years old, get get into the market if you're not already keep dollar cost averaging. Do not try to sell and buy back and and and buy and sell. Don't play that game, continue putting money in. If you've got 30 years ahead of to continue dollar cost averaging, that's gonna be the best thing you can do and focus on dividend producing stocks. If you have that ability dividend producing stocks, I think something maybe that investors will be turning to these days Anthony, we're wrapping up earning season now, we're going to get Nike earnings after the close at some point today. But then we're going to begin a new earning season for the fiscal first quarter in april what's the message that these companies may be sending to investors that could change the direction of the stock market. Yeah, well investors are still very strong at this point. They have a lot of cash left over from uh, from the covid experience. If you will, they've saved a lot of money that cash is dwindling but the inflation doesn't seem to be hurting anything at this point. People are still spending money. I think you've got a bunch of cooped up people that are like, we don't care if inflation 5% or 7% or 10%. We gotta get out, we're going to go do some things in the price at the pump doesn't seem to be affecting things, but that's gonna change because they can only last so long for that. So I think these, you know, these companies that are the consumer products and the consumer staples, they have the ability to pass that price on the consumers um, and not having to affect them in the short run, but in the long run they're gonna have to be careful. I think we're okay for some months to come, but not for years to come if, if inflation stays at these levels. What's the message from main ST Anthony? I mean, we had seen Main Street and Wall Street diverge at the start of this pandemic. Finally, after two years, they do start to be moving in tandem with inflation, negatively impacting both the stock market as well as consumers wallets. How important is Main Street in the equation of Wall Street? Oh yeah, it's absolutely critical. And you're right for, you know, the last two years, especially at the start of Covid, there was an extreme disconnect between Main Street and Wall Street. I mean, the size of the Grand Canyon, the reality though is that, uh, Main Street right now. I still think there's a disconnect. Um, you know, with the war in Russia. Uh, the reality of that war should be causing a bigger stock market correction than we have now. The, the aggressiveness of the Federal Reserve that should be causing a bigger market correction that we are having with Jerome Powell's comment. So the fact that we just closed just less than half a percent on the dow and just almost even on the on the S. And P. Today. The reality is that it hasn't had the impact that it should have. And I think a lot of this is because Main Street feels like it has the Federal Reserve to cover its back at this point. And that's what it feels like. It's almost like stocks are no longer considered a risky asset. Uh They know that the Federal Reserve is not going to let the market drop. We saw that with the printing of money and now they can go back and and and become more dovish on their conversation. And I think the market will react positively. So people aren't concerned about the market, although they absolutely should be there, still disconnected. It's just not as big as it was. All right, we're gonna leave it there Anthony, Socorro founder and president of providence financial Anthony. We appreciate the time on what was a little bit of a down day for Wall Street