Stocks closed lower Wednesday after July retail sales data came in flat from the month prior. Notably, the Dow snapped a five-day streak. Investors continue to digest this week's economic data and news, including the July Federal Reserve minutes out today noting that the central bank will continue its aggressive rate hikes in an effort to tame inflation. Ryan Payne, President of Payne Capital Management, joins Closing Bell to discuss today's close, his bullish take on market performance, outlook on inflation and earnings, and more. 

Closing Bell

Stocks Close Lower After Tepid Retail Sales Data

Well, let's turn back to the major indexes joining me now is Ryan Payne, president of Pain Capital Management Ryan. It's good to see you will get your full face on the screen here in a second. Good to see you. There you are. Um, now we're talking so I'm looking up here at the big board down here on the floor of the stock exchange, fractional losses. What's your take on the recent market activity that we've seen? Oh, I really like it. I mean we've had a huge rebound since the middle of june and I think it just speaks to just how dour dour rather expectations were going into the summer and you know, markets tend to trade in that space between what expectations are in reality are and what we're learning here throughout this earnings season and economic data that's been coming out is man, reality is not that bad. Right? We've got plenty of jobs, wages are going up and we're starting to see inflation come down and that's probably one of the few on Wall Street that was actually more optimistic coming into this earnings season and where the state the economy is. So I like you kristen, I'm feeling good. Okay, so I'm glad you're feeling good. Um, we did get some disappointing results though from target this morning Ryan. Any indication there as to what shape these retailers are in and the strength of the consumer going forward. Yeah, I don't think as much of a surprise, obviously a lot of these were preemptive, right? We already knew the target was gonna come in with poor earnings, Obviously the consumer shift their spending drastically right? We went from sitting inside ordering goods online. Um, you know, putting pretty much all of our money into goods and now we're back out living in the economy again. So you're being seeing a big shift in where consumer behavior is. And if you're a big retailer, you know, sometimes it's very hard because you're dealing with supply chain issues, you're trying to keep up with demand, then demand changes. So I, so I do think a lot of that is priced in, you know, the stock is always getting hit hard this year, it's down over 20% but it is also rebounded since the middle of june. So I suspect even though the stocks down today, a lot of that bad news is priced in. Now, we're starting to look to the future where a lot of these retailers will start to readjust and recap celebrate for where consumer spending is going to be in the future. So I think a lot of that bad news is out of the way. So are you still optimistic getting into the fall? I mean, certainly july saw turn around in the data Ryan, most of the data points were pretty positive, but I do sense that general uncertainty on Wall Street that people are unclear. They're not super confident that the data can continue to improve in the way that it did in the month of july Yeah, nothing warms my heart more christian than when those strategists and, and Wall Street economists and portfolio managers are nervous. Um, and you know the reason I say that is because they're typically behind the eight ball and you're seeing that right now, if you went into the, when you went into the summer, they had a great survey about Four weeks ago by Bank of America money managers were sitting the largest amount of cash on their portfolio since the bottom of the financial crisis. So this move has caught a lot of professionals off guard. There's something like $200 billion dollars sitting on mutual fund cash balance sheets that need to get invested again. So I think there's gonna be a lot of fomo here. We can see a real bull stampede coming into the fall just because so many money money managers have missed this move and they have to play catch up now. Okay. So it sounds like let's say in the next 12 months you don't think we'll be retesting the mid june lows. Is that the case? Well, statistically, I think it's very, very low. In fact, any time since World War Two we've seen the market go down over 20% which we saw. Um and then it retraced half that move, which we've, we've seen as well. We've actually covered half the losses this year. The market is never going on to retest the lows. So odds and probabilities say that's very, very, that's actually going to happen interesting. Okay, I'm reading a note here from you Ryan that says Berkshire Hathaway is by, why is that? And which sectors, which stocks look attractive to you right now? What are some of the characteristics of stocks or sectors that you might be buying if it's boring Kristin, I like it. Um And Berkshire has a lot of boring businesses. You know, energy stocks have done phenomenally well this year obviously they have a lot of energy positions. In fact they bought a large position. Occidental petroleum, they may buy the whole company will see they've got a lot of cash on their balance sheet. So when interest rates go up that cash earns more interest, so their interest income is going up. So it's kind of an inflationary play there. They also own a lot of financials like Bank of America and you know, I do think the consumers in good shape. So I think lending is going to be strong and I do think that the bottom line is interest rates are gonna stay higher and they make money on those spreads those net interest margins because last time I look, even though interest rates have gone up, I'm still getting a lousy return on my savings account. The bank banks benefit from that. So I think, you know, financials look great energy and I think even europe and it was a bold statement, but you know europe here at this point is already priced in a full blown recession. So if we get any positive news on the energy front or eastern europe um you know with the conflict there or even a weaker dollar, that's gonna be very very good for europe. Which right now is price probably as cheap as I've ever seen in my My career and you're getting like a 34% dividend on those European stocks so have international your portfolio, it's important. Okay so you do feel comfortable despite Russia's ongoing invasion of Ukraine without some sort of end in sight, you still feel comfortable Ryan putting money to work in Europe right now because I think right now the market is already pricing that all in right markets are forward looking. So if anything your biggest risk here and this has been my argument all year surprises in the positive and we just saw that here in the U. S. Once those C. P. I. Numbers came in less than expected and once employment numbers came in stronger than X right markets ramped up quick. So remember markets don't settle down, they settle up when you get some good news. And I think europe at this point, any surprise at this point has to be positive because it's all negative right now. What about the inflation reduction act? How does that impact the stock market? Um I think it's a little bit ironic, it's gonna be a lot of taxing and spending done in that bill that they're calling the inflation reduction act. But I think what the market likes is it's a much smaller bill than was initially proposed that build back America plan which was like something like $4 billion. Excuse me, $4 trillion. So they really brought that down significantly from what the original proposal was. So I think the market likes gridlock. It likes the fact that it's less spending that was initially anticipated in terms of oil. I know that energy stocks were a big bet for you. Um, and that was probably at this point more than a year ago, year and a half ago. Certainly I'm sure that was a winning bet for you. Just what we've seen play out in the energy space of late Ryan, are those stocks or sectors that you're dumping at this point or do you think there is still further to run in the energy space? Good memory kristen um, No, we still have a core energy component to our portfolios. I mean the bottom line is I always look at it this way, you know, fossil fuels. Um, they're gonna, they're not peak demand for fossil fuels is another like decade away. Meanwhile energy stocks still trade cheap. They're gonna, their profits are gonna be double what technology is this year? I call energy is the new tech um, and has the highest dividend. S&P 500. So there's a long runway there the stocks again a reasonable evaluation to buy energy here. So I think that's more of a long term play to have in your portfolio should definitely have a near portfolio. And again, growth rates, they're going to be like what tech growth rates used to be as as we know tech here has gotten hit the hardest with inflation going up in the economy slower. So in terms of dividend stocks because I know you mentioned earlier that boring is back or if it's boring you like it at the moment Ryan. And so for some of these these dividend players investing in in sectors or E. T. S. Or products that follow a lot of these dividend stocks, how long do you see that being a trade that is in favor knowing that we could continue to see inflation elevated for a while. That's a really good question. I think the bottom line is, look, I think inflation is going to come down, it's starting to come down. But the question is is inflation going to be higher than what's been anticipated? And the Fed says inflation's going to 2%. I don't believe it. So I think if we have heightened inflation the next couple years, which I think we will because the labor market is going to be tight. Um and labor costs are going to play into that inflation number. You know, you you want to own those high dividend paying stocks that are more cyclical to the economy, um, and have profits in the immediate right? That's why a lot of these tech companies are disruptive technologies where they're trading at 50, 100 times earnings. They're less valuable and a high interest rate environment because those earnings are so far down the line. So I think that that old boring old school type companies, you know, whatever happens to be, whether it's your energy stocks, like even like a coca cola that has pricing power with inflation, you want to have a large portion of your portfolio invested there. That's a longer term trend. That's not something that's going to be, you know, the next couple of quarters or something like that. That's probably the next couple of years. All right, Ryan pain. We got to leave it there. Ryan. Good to get your take as always. Ryan is the president of paying capital Management.