Stocks closed slightly lower Wednesday after the market struggled to rebound for part of the day. Investors are digesting comments from Federal Reserve Chairman Jerome Powell about the central bank's moves to fight inflation. Rhys Williams, Chief Strategist at Spouting Rock Asset Management, joins Closing Bell to discuss today's close, where to find investment opportunity, recession risks, and more 

Closing Bell

Stocks Close Slightly Lower Wednesday as Investors Weigh Fed Chair's Comments on Fighting Inflation 

but joining me now to help us break down the action is Rhys Williams chief strategist at spouting rock asset management Reece thanks so much for coming on the show. What is your reaction to today's stock market action? You know, I think it's somewhat encouraging. I don't think we've had sort of a boring day or a flattish day in quite a while, it's either up or usually down a couple percent. And so I think given the strength yesterday and somewhat of a mixed market today, I think that we can build on that a little bit. Okay, interesting. So do you think the bottom has been reached? Because I think for a lot of investors out there, that is the billion dollar question, should they get in at these levels or do they need to look at their portfolios and even perhaps consider selling? I think my message is the 60 40 portfolio, which has done very poorly this year because you've lost money in stocks and bonds ought to be more of a natural hedge going forward. I do think every time the bond market has gone above 3% since the great financial crisis, there's been appreciable slowing in the economy and I don't think this time is different, we're already seeing lots of evidence that that's the case. Um and so I do think that the bonds will at least part of that portfolio will stop going down and therefore the overall returns for the investor won't be so miserable. Do you think that a recession is inevitable? I don't think it's inevitable. Um but clearly the market's very skeptical and so maybe the odds are, you know, one third, uh, that, that, that we can engineer some sort of mild recession or, or even, you know, no recession and maybe two thirds that, that we can't. But in that particular case and the in the sort of one third scenario, then your stock portfolio should do very well because there's a lot of stocks discounting, you know, a severe recession. So how would you play it? Do you think investors should try to find some bargains here, dip their toes back into the market res or do you think it's more prudent to stay on the sidelines? Well, like I said, I think if somebody's got cash, I would feel comfortable, you know, in some sort of 60 40 allocation, putting something to work into stocks and bonds. But I would do it really as a package because I don't, I think it's, there's so many, so many, so many uncertainties out there, you know, one wouldn't want to go all in on stocks or all in on bonds. But I do think that there's plenty of opportunity given, You know, the average stocks down 30-plus percent this year and this has been the worst bond market in in the last 40. So how do you weigh the unknowns and when I think about those Russia's ongoing invasion. Certainly one of them, the coronavirus, another major one will another variant pop up. This is still a pandemic, will china enacted zero tolerance policy and basically disrupt the global supply chain. Again, it seems like there are still a lot of unknowns out there, correct? I mean, and that's why, you know, that's why the market's done what the market has done. It. It has been, you know, just an awful first half where there's been a lot of negative surprises starting with, you know, Putin invading uh Ukraine. And then, and then I think most people thought that we would have covid behind us in china and, and clearly, you know, there was a shutdown for two months. So, um there's been a lot of negative news. Um that being said um there does appear to be at least some sort of a pickup going on in china. Um they are actually cutting rates as opposed to every place else is raising rates. And I do think that's going to help if china does come back in the second half of the year because they've been missing in action in the first half of the year. So what does that mean for us, what does that mean for us? Right, We do know at least here in the US in western countries when central banks cut rates, it does obviously historically tend to lead to pretty nice gains in the stock market because money is cheap, You can continue to grow and borrow at cheap prices. The fact that china is now doing this. Does that have any benefit on us stocks? Well, I think it it helps because it it's good for worldwide economic growth and and you know, I'm sure that china is negative right now in terms of growth, given the shutdown that occurred there. Uh, and so I think the second half of the year, if that snaps back, that's gonna help copper, that's gonna help oil, that's gonna help a lot of the lot of the prices that have sort of come down here recently. Um you know, because clearly the sort of the big inflationary drivers of the first, you know, three or four months of the year have have really tailed off lumber. Another, another leading indicator is, you know, probably off at 50% from from its highs. So even in this commodity inflationary environment that we've been experiencing, there's increasing signs that things are slow. So I think, I think it will help avoid a severe worldwide recession if china comes back in the second half. Um, Well, I think certainly a lot of people hoping, hoping that we don't enter a recession, let alone on a global scale just because of the macro economic domino effects there. I also want to ask about um Russia's invasion of Ukraine, We've been discussing it a bit here and President biden this afternoon calling on the federal government and state and local governments to do away with the gas tax as prices continue to hit new record highs at the pump, partly because Russia has no end game in sight here for finishing its invasion of Ukraine. And that is impacting quite directly prices at the pump, as long as that goes on. What is the pressure to global growth? Well, I mean, there is significant pressure to go go growth and I do think that the likely cases that that goes on because it doesn't appear that there is a deal right now that Russia or Ukraine will accept. So. So therefore, I think the logical thing to expect is that this war continues for a while. That being said, um, there's, they've already started to be some certain workarounds. You've, you've gotten more planting going on outside of Ukraine that ought to help with agricultural commodities in the second half of the year, at least by the time you get to the fall season and then on on oil, there's been a real shutdown in terms of the Russian demand for europe, but china and India has picked up. So that that probably helped at least the overall demand supply situation for oil. And it's been one of the reasons that oil has come down in the last three or four days. All right, we got to leave it there. Thanks so much for coming on this show and talking about this still volatile stock market. That's Rhys Williams chief strategist at spouting rock asset management