Jon Maier, Chief Investment Officer at Global X ETFs, joins Cheddar News' Closing Bell, where he says he believes investors feel inflation will remain at a higher level for a longer period of time, which will force the Fed to act accordingly.

Closing Bell

Stocks Close Near Session Lows on Heels of April Consumer Inflation Data

Let's turn back to the major indexes because clearly stocks struggling to find their footing. We're looking at new lows for the year on the major indexes, with the NASDAQ dropping worse than 3% of the Dow shedding More than 300 points down now for 1/5 straight session, of course, as inflation did come in higher than expected. So joining me now is john Mayer, chief investment officer at Global X CTF. JOHn, thanks for coming on. What do you make of this stock market action? Well, certainly the market is digesting the inflation report today and what the market is saying is that inflation is going to be remain at a higher level for a longer period of time. And what that means is that the Fed is going to have to act accordingly. And what the Fed really has at its disposal is raising short term rates essentially to curb demand. Because we know there is a supply side issue and a lot of demand and a lot of other concerns with respect to higher energy prices, higher food prices. And the Feds only major tool is to increase rates to squash demand and that the market is digesting that and accepting that it's going to be higher for longer. And I think that certain sectors today benefited or didn't get us hurt. Like healthcare and energy and utilities, some of the safer, more defensive sectors and more growth. The areas are certainly getting hurt. Okay, so my question to you is, how much further could we fall john because already the NASDAQ is down about 30% from its own high. The S and P 500 down close to 20%. Also looking to join the NASDAQ and bear market territory. Could we fall further from here? I mean, I think it is possible that we will fall fall a bit further from here. The market is forward looking and we know that earnings are going to decelerate because there's higher input costs, um there's going to be uh less demand because Fed actions going forward. So it certainly is possible that markets could go lower here and where we're thinking about uh deploying money is areas that could be a benefit or hurt, get hurt less in this environment like mlps which are correlated to higher interest rates and higher energy prices as well as others. Some other value oriented sectors such as healthcare and utilities and staples. How is your firm pricing and the chances of a recession knowing that at least with today's inflation rate, the Fed is likely going to continue aggressively raising rates. So, you know, last quarter we saw a negative GDP print. I don't think it's likely that we will see another negative GDP uh print in the second quarter. Um but I do believe that a small recession is not out of the realm sometime in early 2023, but we're not forecasting at four this year, but we are expecting growth to decline are expecting growth to decline. This is the consumer price index. You know what's amazing to me, john, is that airfare up 19% in april from from March and then in March it was more than 10% from the month before in february. These airline staffs of course are grappling with much higher fuel costs, but it's the expectation that this airline sector might look attractive if they are able to charge such high prices with consumer demand still out there. Yeah, you're seeing that big shift from goods to services. People have been locked up for two years. They certainly want to get out and enjoy the world as it opens up. So it is possible that these higher fares will stay at these elevated levels for a longer period of time. And certainly airlines will be a beneficiary. As you mentioned, there are other input costs that will impact margins like higher energy costs. And the war in Ukraine certainly is causing concern out there with respect to higher energy prices, potentially europe getting cutting off oil from, from Russia. And that would certainly elevate oil even further unless there's more drilling from Opec or do you expect that the biden administration can effectively try to curtail even higher energy prices from here. There's always so much any administration can do. So they certainly can release some of the oil from the strategic oil reserves, which they have had done, but it only has a small impact, potentially individual states can reduce taxes um that certainly would bring down the cost of energy prices, at least at the pump. Um, those are some things that could be done, but it's a global market, so it's really set by supply and demand, so there's only so much a government can do. John, thanks for joining us. Um, we got to leave it there. That's john Mayer, chief investment officer of Global X E t f.