Michele Schneider, partner and director of trading research & education for MarketGauge.com, joined Cheddar News to discuss the market after stocks closed lower again as banking concerns continue.

Michele Schneider, partner and director of trading research &amp; education for MarketGauge.com, joined Cheddar News to discuss the market after stocks closed lower again as banking concerns continue.

Closing Bell

Stocks Close Lower Again as Banking Concerns Continue

Joining me now to make sense of the action is Michelle Schneider, partner and Director of education and research for markets dot com. Michelle, it's great to have you on the show today. And what do investors need to know heading into the weekend? Well, you pointed out a lot of the strengths of the market. Uh and obviously the banks were the biggest weakness, but there's a couple of other things I think people have to really focus on for next week. First and foremost, I would say would be the dollar because right now the dollar, usually when there's any kind of flight to safety, we see the dollar go up. But in this case, the dollar actually has been weakening and looks very vulnerable. And the reason why that's important, especially ahead of an FOMC meeting is if that the stays the course, which is what we think will most likely happen. I believe consensus is about 25 basis points hike on on Wednesday, then the dollar would typically go up. But if it doesn't happen, I think it's just another indication of the lack of control that governments and central banks are feeling right now. In the face of what happened with the banks. And also some of the other economic statistics which have been really weak among a strong labor market. So help me make sense of this. And for our viewers, Michelle was such weakness and banks and serious questions about the viability of banks going forward, which ones might stay the course, which ones might come under collapse in the wake of those comments on the Treasury Secretary today. How is it that the major indexes are actually higher on the week? Even though some of them do have exposure to banks? Well, right now, we're actually like a rubber band that's being stretched because that's true. We've had great results this week in the growth stocks. But at the same time, look at the retail sector, the retail sector has actually also particularly in the discretionary area, fallen very, very weak. So we've got a division now in terms of what's going to happen. And I think it's all based on the fact that p People believe still that the Fed after they've printed and actually raised their balance sheet by $300 billion dollars this week when they were supposed to be reducing, it means that there's going to be some relaxation of those yields. And that's why money flocked in to some of the areas of the market and particularly the growth stocks, area of the market, technology. But we know that technology can only go up so far without participation from some of the more real I think intrinsic areas of the United States economy, small caps, they collapsed this week. Retail section sector, as I mentioned. And transportation is kind of on the precipice right here. So that would be another area to watch. So I wouldn't get too complacent thinking we're out of the woods, but at the same time, yeah, a lot of money has come in mostly from the retail side. Okay. So let's make sense of this, right? Concerns at least at Goldman Sachs rising, the odds rising, that we could see a recession from 25 to 35%. Obviously, we saw runs on banks this week and still a lot of unanswered questions even aside, um, from the fed here, if we do go into recession, do we see the stock market weakened or does the stock market cannot just simply go higher from here? Because rate policy could reverse? I mean, these are the things right that sometimes main Street and Wall Street don't entirely line up. Absolutely. And that's a really great question because I think that is the question. So essentially there's an area in between that called stagflation, right? Where we still will see a weakening economy but not necessarily horrible recession. And this is what makes the fed. So it's so impossible for them right now because they see certain areas strong and they want to stay the course because of inflation potential, which is still way out there, even though the inflation numbers have come off. Look at what the gold market did today. So really what we're looking at right now is still a trading range, particularly, we look at SPX, we could go lower and still hold a major point before we say horrible recession. But we're certainly not, sir, even in the chip stocks, any real growth taking out a two year cycle. So essentially right now is extremely dangerous for monetary policy. And I think a little bit for investors, but again, let's get back to gold. What is gold telling you people are looking right now and saying the one sure thing is this hard asset of gold. I know that if things go bad, if they go south in a recessionary environment, it could mean a crisis, not just a recession and if things hold, but inflation goes out of control, gold's still gonna be valuable because it's going to put a lot of pressure on the dollar and fiat currencies in general. And that's why Bitcoin is even rallied here. That's kind of separated from the market. Yeah, I know that the Bitcoin rally definitely something that's been hard to ignore this week as well. Michelle, what is your expectation for inflation? Because of course, we have a lot of people watching the show and you know, they might be wondering, should I take risk off the table? Um if inflation is gonna remain high, if I need to just get by right pay for these everyday essentials with rates, credit card rates still at record highs. Well, I've been sort of thinking hashtag looking for inflation in all the wrong places because the expectation actually for inflation, in terms of the numbers that came out today with consumer sentiment down was that even the expectations were lower. But we have to look to where the inflation could come from. And right now, what was not hardly discussed this week was so the geopolitical factors, China is going president, she is going to Russia next week. They're talking about defending uh Russians more with some militia. And we know North Korea has been sort of acting up again. And so, you know, you've got a little bit of the war behind us right now, not necessarily being talked about, but still a factor. And um you know, that, that that could be very inflationary. And I think really to my feeling, I think we're going to go into a different type of inflationary cycle. It may not look like housing prices and it may not look like used cars post COVID like we saw, but it could definitely look like food hoarding social unrest, geopolitical stress. And again, it could be some structural fractures in, in economies that would only force more spending, more printing, which would of course then take inflation and put it out of control. So I think people need to be careful all Right, Michelle Schneider, partner and Director of Research and Education for Market Gauge dot com. Michelle. Thank you.