Sylvia Jablonski, Co-Founder at CIO Defiance ETFs, joined Cheddar News to discuss the state of the retail sector and what investors are watching ahead of the December Fed meeting. 

Sylvia Jablonski, Co-Founder at CIO Defiance ETFs, joined Cheddar News to discuss the state of the retail sector and what investors are watching ahead of the December Fed meeting.&nbsp;

Wake Up With Cheddar

Stocks Open Higher Ahead of Rate Hike Concerns

joining us now to discuss all of this is Sylvia, Jablonski, co founder and chief investment officer at defiance. E. T. S. Sylvia, welcome, thanks so much for joining us. What was the big takeaway this week when it comes to market sentiment in your opinion. Good morning. And thanks so much for having me. Well, I think this week was super interesting, right? If we look back to last friday it was well we'll see how this friday ends, but last friday was certainly very exciting with you know, the S. And P. Moving up over 5%. And then this week I think took some of that back, took a good amount of that back. And the reason why is that, you know, we have this continued instability in the markets, we have volatility in the markets for many reasons. On the positive side. You know, you sort of see good news out of producer pricing, you see good news out of C. P. I. You see that the Fed is doing is arguably working. And you know, prices are coming down, inflation is coming down although not enough. And then, you know, followed by Fed chairs coming out with continued hawkish tones about, you know, sort of what they need to do and where we need to go. So I think the problem is that in order to have this sustained year end rally that we're all hoping for whether it's seasonality, midterm elections, santa claus rally whatever you sort of want to call it, we need all of the noise to kind of stop and and that's just not happening. So the headwinds of uncertainty about Fed officials, uncertainty about recession are weighing on the minds of the market, so you know, short term volatility continues. Yeah, obviously that's the case here as we see all three major indices pointing up in these early moments of trading now we did have some winners and losers in the retail sector this week. What do you make of the market's reaction to these earnings so far? Yeah, so I think, you know, on one hand, if you look at the data from from Thursday and tells us the consumers still remains strong, right? And that's very important because the consumers 70% of GDP so some of these companies came out and said that yes inflation is impacting us inventories are being impacted and they came out with sort of you know, less than positive outlook for the future and that's to be expected, right? Because if if we're cooling off the economy, if you know, wage inflation is sort of starting to shrink a little bit if the Fed is tightening and consumers, you know pricing power has gone down, you're going to see that play out in the retailers. And I think that that's something that you know, we're going to see and probably the next 4 to 6 months you might really start to see some um pull back in those types of names around this as the economy cools off. So we have to get through this period of what inflation has actually done to the market and then absorb it for a few months. I think before we start to talk about turning things around now, Sylvia you mentioned earlier, more hawkish sentiment from the Fed and I do wanna you know, bring that up ST louis Fed President James Bullard's comments that the policy rate is not yet in a zone that's considered sufficiently restrictive that we could potentially see the funds rate go up to 5 to 7% range. What's your reaction to this? Was this expected? Do you think that's likely? Yeah, so so terrible. He he's always sort of on on the outs I guess in terms of, you know, some of the predictions and things like that. So I think 7% is just certainly not what the market is expecting. And it's also not really what the Fed has indicated. If you look at kind of the average estimate, they get us to five and a quarter to 5.5. But what's important about that, that were about 1% away from that. So what that tells us and what the market expects I think is that, you know, we will see another 1% of rate hikes and I think that happens between now and perhaps, you know, first quarter of next year and then they told us that they plan to stay there for a while to not sort of repeat the problems of the seventies. So we're going to be living with this for a while. I think that it's it's Going to be hard to really see, you know, kind of that that face for being rally until we get past first quarter of next year just because of what the Fed continues to tell us that they want to do. But in terms of 7%, I mean, you already see the impact of what the Fed has done working, albeit slowly. So it seems unlikely that we would get to 7% um at least not within the next year or so. Let's talk about politics. So Congress is now divided after republicans gained control over the house. How do you invest in a political environment where Congress is split in this way? So, you know, I think the there's there's, you know, the positives of this are that you will be unlikely to see um government spending, which will, you know, unlikely feed inflation higher. So in a way that maybe makes the Fed's job easier just because nothing gets done um in terms of, you know, investing, I think, you know, kind of the classic place here could be energy, although it's sort of working for both sides, You know, I think, um if you increase get increased production and things like that, maybe that works with with sort of the split, um biotech and Medicare, you know, perhaps some of that that price discounting won't happen in that space. That's that's something to look at there. But overall split, I think just means not a whole lot is going to happen, there won't be a lot of spending. And so, you know, that's sort of good for the Fed and in general, that tends to get the market to rally defense is a good one. Um, you know, we obviously have big geo geopolitical issues right now. So, um, while that's, you know, essentially terrible for the fate of sort of geopolitics and what's going on there, the companies that benefit from these types of things are in the defensive sector and both sides I think would support growth in spending there. So that might be the one area that gets a bum Sylvia. Thank you so much for your time this morning that Sylvia Jablonski, co founder and chief investment officer at defiance CTSS