Jon Maier, Chief Investment Officer at Global X ETFs joined Cheddar News to discuss key earnings driving the market right now and what investors should watch next week. 

Stocks Open Higher After Tough Earnings Week

joining us now to discuss is john Mayer, chief investment officer at Global X E T F, john, thank you so much for joining us this morning. It's so happy to have you on set with us. Thanks for having me. Absolutely. So, you know, as I mentioned, it's been a really tough earning season. We've seen kind of a mixed bag when it comes to these major companies, What are you making of the markets in the early moments of trading on this friday? And you know, how are these earnings playing into the health of the economy so far? Um, we have seen kind of a mixed bag in the tech space. Apple reported earnings yesterday that were pretty good. Apple has been able to navigate supply chains pretty effectively. The iphone sales are a little bit below expectations, but still relatively strong considering what's going on, Apple is just able to kind of navigate these markets and innovate, they're also increasing prices for different services. So I think you're looking for companies that have the ability to effectively navigate supply chains really cost controls. Um, and Apple is certainly one beneficiary of those actions. Other companies are seeing um, challenges the consumer while still strong is definitely they're looking for lower priced items. They are changing the way they are spending and you are seeing that and some of tech companies and tech companies, actually, our cost cutting, you're seeing them spend less on cloud services, You saw that in the amazon numbers, AWS numbers and I think what investors are looking for is where can we find strong cash flows, um, dividends that could potentially grow and companies that have great management teams that can effectively navigate these supply chains and those are gonna be the beneficiaries. Now you mentioned Apple of course that big cash on hand that the company also is known for will likely help whether any future economic downturns we have as well. But I also want to circle back to amazon because you brought that company up as well. We had adjusted earnings of 28 cents a share on revenue of about $127 billion. But revenue and guidance missing expectations here. How are you advising your clients on amazon right now? So you know, we manage portfolios using E T. F. So amazon would be just one component in an E. T. F. So we look at the space communication services and tech, what we are recommending for clients right now. Overall in terms of portfolios is more of a value component, but value doesn't necessarily have to come in a value company. Sure, it can come from some of these energy companies but it can also come from companies like Apple where you're seeing the ability to kind of navigate these supply chains, essentially Apple's like a utility. What happened with amazon, I think amazon in terms of price action on here right now, so I'm not sure what the market's doing at the moment. Um but I think it's a little bit of overreaction revenues are still very strong but you have to remember stock prices, just the cash flow of future earnings and if the expectations that earnings are gonna go down, obviously the stock price is gonna go down. Um But we are looking for companies that are trading at better multiples um and we are seeing some of that in the more value oriented space you mentioned Exxon earlier because of the energy components. Energy companies are doing very well right now. Um And that's some energy is an area that we are including in our portfolios. Traditionally energy has been underweight in portfolios um and that's increasing in many different portfolios and they can increase dividends so shall increase their dividend yesterday. So I think that's a positive place, a strong place to be Now. In addition to earnings, we have a lot of data coming out that's kind of giving shutting insight on what the economy is doing. I want to mention that GDP data because we did see the US economy expanding at a rate of 2.6% in the third quarter. What does this tell you about maybe how the Fed is looking at this? Might this make them adjust their approach to rate hikes in the future? You know, I think the market wishes they would just their approach but the Fed is laser focused on inflation employment were essentially at full employment. Well that we can go forward potentially But we do believe that the Fed is on course to raise 75 basis points in November and likely 75 basis points in December. Now the good news is bad news. So the GDP numbers that came out yesterday probably will can lead the Fed to say, you know, we have the room to increase rates from here. Now what the Fed is doing is that, Yeah, raising short term rates, um there's a lag effect. It takes awhile for these rates to actually kick in. So if you look at where mortgage rates are now 7%, that's certainly impacting the housing market, but that's not necessarily feeding into the numbers yet. And there's so many downstream implications from housing in terms of how consumers purchase and if they're purchasing less homes or personal large items. So we think there's a lag effect and some of these inflation numbers, we saw the PC numbers, they are flattening out still at a very high level, but I do believe that terminal rate will still be in more in the 5% 5% range. Of course, a lot of talk that there will be a recession that we're currently in a recession recession's however, do typically end up being the shortest part of the business cycle. So given what you mentioned about the Fed and your expectations with rate hikes there, how are you advising clients for investing at this particular moment? So as I mentioned earlier, we are recommending a barbell approach focusing on that value component and value doesn't necessarily always come from value. Value could come in growth in companies that have strong cash flows. So there's also, so that's one component is kind of your base equity exposure. We're also recommending innovation um, at global X we have a lot of thematic e T s, whether it be cloud computing or cybersecurity or electric vehicles and what we believe should be included in a portfolio with very little overlap to the rest of your portfolio is kind of that forward looking nature of thematic investing. So you're looking for talent, what are some of the tail ones we saw the inflation reduction act? Lots of that's gonna go on over the next 10 years to combat climate change, whether it be putting charging stations in all 50 states, 50 excuse me. 50 states which will impact the tv ecosystem. So if you can look at different electric vehicles or components of electric vehicles, like lithium and battery technology that feeds into the electric vehicle ecosystem, that's they have that area has tail winds and we are suggesting a component of that in your portfolio. Also cybersecurity which is actually done rather well in the past few days. Despite mixed market action companies are spending on cybersecurity because they have to whether it be by their insurance companies are telling them that they have to protect their business model, government mandate they have to protect their data. So cybersecurity is another area where we are recommending for clients. Nice. And I was going to ask you, you know, what sorts of sectors you're watching, but instead I'll ask, you know, what's your outlook in the next couple of months here, obviously a lot of uncertainty, a lot of volatility happening here. Are we likely to see a rally? Well, what are you expecting? We are expecting volatility. Um, I think everyone is expecting volatility. There's always a rally in this type of environment when markets are oversold, it's very difficult to pick kind of that bottom part. So we we are recommending that clients dollar cost average into these themes that we believe that will play out over the next 5 to 10 years, cybersecurity, electric vehicles, there are certainties. Um, the E. V. Space is if you look at the penetration of sales of TVs in the U. S. It's about five or 6% china is 53% of new sales in the nordic countries, It's in the eighties, it's happening so we can't tell you the exact moment to putting your portfolio. So dollar cost averaging yeah 5%. That crucial tipping point of course here in the US to john thank you so much for your time this morning. It's great having you in studio that's john Mayer Chief Investment Officer at global X BTSS