Stocks closed near session highs Wednesday as investors digested the Federal Reserve's decision to raise rates by half a percentage point. Jim Worden, Chief Investment Officer at Wealth Consulting Group, joins Closing Bell to discuss Wednesday's close, what the Fed's rate hike decision means, and more. 

Closing Bell

Stocks Close Near Session Highs as Investors Digest Fed's Half-Point Rate Hike

let's turn back to the major indexes stocks in major rally mode today on the back of a Fed decision to raise rates by half of a percentage point. But again, keeping that pace going forward, avoiding even more aggressive Policy moves. You see the gains there on the major indexes, the NASDAQ up 3.2% the Dow, almost rising 1000 points. And joining me now is Jim Warden, chief investment officer at Well consulting group. Jim thanks so much for coming on the show your take on today's rally and how sustainable it is. Thanks for having me. Kristen it's a great day to, to see a day like today in the markets. And I, I think today is really almost one of these, uh, sell the rumor by the news, right? You know, people, some people thought the Fed might raise more than 50 basis points, We thought that they would raise 50 basis points. A lot of people thought it was 50, but you know, people, people worry it's been a tough market April was a very difficult month for investors, not just for stock investors, bond investors, it was a very, very difficult month. And so I think today's news very welcome. I don't think we're completely out of the park here in terms of, uh, better news ahead. We have to be data dependent. As the, as the Fed likes to say, we'll continue to look at the data. And, and as, as your last commentator was mentioning about, you know, some of these reports that were much better and much worse. Its earnings is really a mixed bag at this point question jim, certainly it is a mixed bag. We see wild swings in stock prices lift being one of them today after earnings come in. Of course, positive guidance is rewarded by the stock market certainly now, but just a simple beat on earnings and revenue not always enough to lift shares. My question to you is as a chief investment officer at your firm in the wake of today's news. What are you recommending to clients? Yeah, it's a good, it's a fair question. So we are recommending to clients to, to be very, very cautious in terms of uh, you know what they own and their portfolio asset allocation we believe still works diversification still works Now. A lot of people would look at last month and say stocks and bonds both did really, really poorly but we believe it still works. But we think that the days of the rising tide lifting all boats and evaluation is just getting to very extreme levels. We think those days are over. And so some of the names that some of the names we like are some of them were born. Some of the names that are consumer staples. We think that some names in in the growth area have have gotten beaten up enough to where they may be attractive. You know, the netflix is of the world and the Paypal's of the world but there's, there's some names that we may see some more downside interesting as so let's talk about energy and financial staff. Certainly energy stocks have been on a tear I think to find some people's expect nations as Russia's war Ukraine does continue. Bank stocks of course would benefit from a steeper yield curve. But with concerns about a recession out there, it is sort of this double edged sword and bank stocks certainly have struggled and even underperformed this year. What is your firm stance on energy and bank investments? Yeah, that's right. So we we actually like both areas, financials we like as more of a longer term trade. And I will admit it's been difficult right now because with rates rising on the short end, um, in most environments, banks would be doing better than they have been doing. But because we've seen rising inflation and rising wages, that has been more difficult for banks now for energy. We still like energy, we're still overweight energy. We don't think that trade is going to be as long term because there is this idea of demand destruction and we think that when things do resolve with Russia Ukraine that the oil prices will come down as we get more supply coming online here in the US that's that's also going to put downward pressure and as consumers to make decisions to say that, you know what, we're not going to travel as much Uh, that can put downward pressure on oil prices. It's it's hard when you're filling up the tank and you know, it it's costing that much for consumers. I know we had a guest on earlier this week from hopper, of course the travel booking app that looks to save consumers money saying that jet fuel is up 95% today versus pre pandemic levels. So certainly it is extremely expensive. So we also learned of course from the Fed decision this afternoon that next month come june june 1st to be exact that the Fed is going to start shrinking its own portfolio gym. There's always, you know, so much focus specifically on rates the Fed funds rate, but the shrinking of the balance sheet, is there any the impact that that could have in the stock market? Yeah, I think that the biggest impact there is going to be the areas that are high valuation, uh longer duration. Um, some of your larger growth growth, your companies that don't have a lot of free cash flow that trade like they're longer duration. So, so some of these grow thier companies have already, it's already priced in for some of them. They've already come down a lot. So I think that's that's that's a challenge for some of those equities. Again, quality earnings, good, free cash flow yields. We like those companies as far as what the Fed is doing. We think that's going to be painful for bond investors, especially people owning the Bloomberg us aggregate bond that have a lot of mortgage backed securities, mortgage backed securities are likely going to have some extension risk, and duration is likely going to get longer, and and that might be more painful for bond investors. We've got to leave it there. Jim warden, good to get your take, stay with us. We're gonna have more earnings throughout the hour, but for now we're gonna leave the market chatter there. Jim is the chief investment officer at wealth consulting group.