U.S. stocks closed off their session lows on Tuesday, as losses continue following comments from Fed chair Jerome Powell, which signaled the central bank will continue to make efforts to lower inflation with rate hikes. The S&P 500 closed down 1.1%, the Dow fell around 1%, and the tech-heavy Nasdaq shed 1.1%  Michelle Cluver, Portfolio Strategist at Global X, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Stocks Close Off Session Lows as Rate Hike Concerns Linger

let's turn back to the major indexes though. Michelle Kluver joins me now portfolio strategist at Global X, which is a provider of E. T. S covering areas of technology, equity income, emerging markets and more, thanks so much for coming on the show. We did see losses across the board. What's behind the stock market action today? Thanks Kristen. Good to see you again. So obviously a lot of the action today's markets are still reacting to the comments made by the Fed last week on friday at Jackson Hole. Um there was a lot stronger comments made about interest rates needing to continue rising and staying at higher levels in order to combat the inflation. We're currently seeing this is a much more hawkish tone for the Fed and it's having an impact on markets. Obviously the equity mother is moving a lot fixed income markets and yields haven't been moving as much, particularly on the long end. So it has yet to be seen the longer term implication of this, but there's certainly been a large equity market move. Right? So I think the question is, is this beginning of the beginning of another downtrend, three straight days of losses, Michelle and ending near our session lows today, what do you think? Um, so it's difficult to call when exactly the bottom will be, but in terms of the current exposure, there's opportunities as well as challenges. So yes, equity markets are in a difficult position. Um there could still be some more pain as we ship towards interest rate environment. But expectations remain that um, yields will rise during this year. But there's still expectations that the trajectory of the Fed will certainly slow next year. And so there is still potential to create an environment that is okay for equities. Um And then even within that environment, when you're comparing the situation within the US versus internationally the US is in a far stronger position. And so from an investment opportunity perspective, there are still ways to position portfolios that can make the most of the current situation. Let me ask you this, Michelle, how would you position a portfolio? Where do you see opportunities? What are maybe some positions to you should cut? Those are challenges as you mentioned. How would you structure that? Yeah. So currently at the moment, I'm starting on the areas where challenges, europe has a lot more short term headwinds um leading up to the winter and that's an area where a lot more cautious on and then going on to the opportunities side um within the climate change, clean energy, there are a lot of opportunities that well to the current environment and focus areas with challenges on energy supply. Um And the shift towards more renewable sources. Are there certain stocks E. T. F. Um investment products that can be opportunistic in that regard? Yeah, certainly. Um So within the Global X suite, we actually have two different products that actually talk within that area. Um C Tech which is the clean technology E. T. F. It focuses more on the industrial and technology aspect of the clean technology transition. And then on the other side is our Nrg, which is on the renewable energy distribution, and that's more focused on the utility aspect of clean technology. And so investors can use one or both of them together, depending on their views on different. Obviously, our Nrg is a little bit more defensive with its higher utility exposure. Let me ask you this Michelle. I think investors try to map out their plans, especially as people head back to school, investors return some of these big money institutions and have head fund hedge fund traders, excuse me, after the Labor Day holiday, which investors prepare for these final four months of the year knowing that the Fed is set to continue raising rates. So I'd say the key area that they should be watching is consumer and employment. Um That's an area where we haven't yet seen any negative feedback loops, but that's the key area that we believe is important to be watching. Um It currently is a lot better than the rest of the world, but consumption is a place where we do expect some pressure um into the fall. Um as consumption can't continue to the growth and consumption can't continue to exceed that of income. Yeah. How long does that last? I mean, that was the big question. Right. Were we in a recession in the first six months of the year, even if we weren't in a recession, I think the concern is that it's still gonna be challenging ahead. Right. People are still digging deeper and deeper into savings to pay for basic items. And then on top of that, yes, wages are increasing, but they're still not keeping pace with inflation. And so how long what's the runway does this environment potentially look as concerning or more concerning? Michelle for the consumer. So I would say what we've seen thus far is more stagnating rather than yet going backwards. Um, I would expect a Q three to look a lot more encouraging because we have had a fair amount of spending during the summer period of still trying to make the most of um getting out and doing things after Covid. Um, I would say the concern would be more looking into the fourth quarter and that people would have to start saving a little bit more. Um if you're comparing GDP with gross national income, um that kind of creates a um contrast of looking at the same point, but different sides of it, they should be basically the same. But one of them has been reflecting growth. One of them's been reflecting the decline and so on average, they're actually more on a stagnant basis. That is very helpful. I think we have a little bit more time here, Michelle. I do want to ask you another quick question. Um in terms of the consumer potentially a stagnating in the fourth quarter. Does that change portfolio allocations then? Perhaps do maybe some of these beat up consumer stocks look attractive now, but maybe not necessarily into the fourth quarter. Um, that's a challenging question. Um, and so it really depends on your current exposures within your portfolio. Um, it's an area where we're underweight, but there always is still a place for consumer exposure, and while we do have more reservations around the area, it's still important and diversification is always key. All right, Michelle Kluver portfolio strategist Global X. Michelle thanks so much for coming on the show.