Anthony Saccaro, founder and president of Providence Financial, joined Cheddar News to discuss Thursday's trading session as stocks and indexes showed positive gains following some economic data but fears of a recession continue to grow.

Closing Bell

Stocks Near Session Highs but Continued Inflation Concerns Prompt Fears of Recession

Joining me now is Anthony Sarro, founder and president of Providence Capital, Anthony. Thanks so much for coming on the show, decent gains across the board today for the major indexes, a steady climb higher ending at session. Highs. What do you make of today's action? Well, it certainly goes to the leading indicator of the P P I for sure. I mean, that's great news that, you know, things are starting to come down a little bit again. That backs up what the C P I told us yesterday. Uh the P P I though is more of a leading indicator was the C P I is more of a lagging indicator and all signs are indicating that the economy is slowing down, the economy is weakening. What's keeping the economy from or inflation from coming down even faster is the fact that the consumer is still strong or more importantly, the labor market is still strong right now. There are still somewhere in the range of 1.5 jobs available for every worker that's out there. And, and that's what's driving this market. The Federal Reserve has said that by the end of the year, they expect unemployment to creep up to 4.5% or so. And a lot of experts, including myself think it needs to get over 7% in order for this inflation to come under control. So it's really the labor market that is acting as the major headwind for the decline in inflation. So what should investors do, Anthony in this environment? I mean, some have pointed out that we've kind of been range bound for the major indexes in certain sectors for the past. Well, I guess at least year to date or so. Would you recommend that investors try to dip their toe back into this market or stand on the sidelines to wait for more information? Well, as a general, I think the market has some, has a downward trend to go. I think there's going to be some problems ahead with the market. We are likely going to have a recession. It's not so much whether we're going to have a recession anymore. I think it's how deep and how short or how long and how, you know, and deep. So the reality is we're going to have a recession. It's just how long it's going to be. Um It depends on the stage of life you're in as to what you do if you're younger and your dollar cost averaging, stay the course, keep having your money taken out of your retirement account or out of your check, put into your retirement account. Dollar cost. Averaging is the way to go if you're a little bit older and you're going to retire in the next, you know, anywhere between one and 10 years, you need to start shoring up your portfolio and you need to start focusing on what you can count on and what you can count on dividends and interest. You're not going to be able to count on share price over the next 10 years, but you can't count on income. That's what people that are a little older need to focus on is income from their portfolio. So what are some of those income plays, Anthony? There are stocks obviously that have dividends. There are treasuries as well. What are sort of the income options that you would recommend? Yes. So outside of stocks, there are things like preferred stocks, it's got the name stock in it, but a preferred stock is not a common stock. It's a different class of stock. And when the company issues a preferred stock, they issue a promise to pay a dividend. The yields on preferred right now are probably six in the range of 6%. There are BDC out there, business development companies that are yielding nine and 10%. At this point, there are corporate bonds, you get quality corporate bonds for four and 5%. And as income specialists here at Providence Financial, we focus on the universe of income producing options that by the time you're done with the balanced portfolio, you're going to average somewhere in the range of 5% after fees. So that is, that is what we are guiding our clients to focus on what, you know, you can count on bonds, bdc's preferred stocks, even some annuities in there, you can get four or 5% long term with annuities. And if you're retired and you want safety of principle, you're worried about a recession. These things can actually help you provide the income regardless of whether there's a recession or not. I want to go back to inflation Anthony because I think obviously there's a lot of optimism in this market. There's still money on the sidelines. I think today it would show that the market wants to go higher, but you're not the only guest or market partici that I've heard from of late that says, you know, we should be prepared potentially for another like low or potentially another correction of at least about 10% or so. Some even say in a worst case scenario, we might re test those October lows. So the inflation data that we got today, do you think it's a one off or could it potentially show that this inflation tide is actually turning? Yeah, I don't think it's a one off. I think the trend is going down and we've seen that for a little while, although it's been very, very incremental in the C P I. It's been hanging around in the mid sixties for a while. We got big drop yesterday, which was great. Um So I think it is going down, but you have to remember that the consumer can stop spending money and, and adjust for inflation right away, but companies cannot, and there is going to be a lag effect of this inflation that's never going to be overcome. And a lot of that has to do with wages, you know, as an employer, I've had to get a lot of raises over the last couple of years to keep my employees and a lot of companies are having to pay more because it's an employee's market out there. And, you know, with regards to consumer goods, you know, if the price of commodities comes down, well, a company can adjust for, they can lower their price. If it goes up, they can raise their price. But when it comes to labor, once you give a raise to someone, try taking it back and just see what happens. So there is going to be a permanent effect of the inflation that's already happened, even though inflation is coming down and heading in that direction, it's not going to negate the inflation we've already had. And that's why I think there is still going to be a recession and problems ahead and a big adjustment in the future. All right, Anthony, founder and president of Providence Financial Anthony. Thank you for sharing your insight.