Sylvia Jablonski, co-founder and CIO at Defiance ETFs, joins Cheddar News to talk about what investors are watching ahead of the Fed meeting. 

Between Bells

Stocks Rebound Ahead of Federal Reserve Meeting Results

and between those bad guys on chatter news stocks opened much higher this morning that admit today's Fed policy update that's coming up at two o'clock Eastern time, the S and P actually rising by more than 1% after the Open, and the NASDAQ gained more than 2%. The Dow rose over 200 points. I believe the Dow over 300 points right now. Investors hoping that the Fed could ease up on its hawkish rhetoric. Just a tad, that is. The market has been tumbling so far this year as tensions escalate between Russia and Ukraine. So joining us now to discuss this and so much more. Sylvia Jablonski co founder and C i o of defiance CTS Sylvia. Good to see you. As always, rate hikes traditionally pretty good for stocks. But why might this time be different here from the Fed? Hi. Good afternoon. Great to speak with you today. Well, you know, I think this this time they feel a little bit different because of of a few reasons. Um, one of the reasons is that it feels like the market has just been absolutely stellar for the last couple of years and and the Fed had a big part in that, um, there was so much liquidity sort of pumped into the market. You know, borrowing money was sort of free. So that was great for technology and growth stocks that have led the market. So seeing that pulled back is a bit scary. I think investors have have been reacting, um, somewhat emotionally to to to the news that the Fed might hike a little bit. Um, you know, if we sort of put things in perspective, the Fed is still expanding the balance sheet. I mean, they're still buying their reducing, but they're they're still buying. And, um, I think that, you know, if we see a massive pullback in the market like this and there's sort of a systemic risk to the growth and record an economic recovery, then the Fed might actually have some flexibility and may not have to raise rates as many times as they would have. The other thing that's a little bit different is, you know, we thought we were getting a three trillion spending package. We don't have that. We've got geopolitical issues with Russia and Ukraine, and that's not something that was in the mix a couple of months ago and, you know, the sort of the liquidity and and the slight level of uncertainty now around another potential virus coming into the ecosystem. So things are a little bit different this time. Okay, So, based off of that, I mean, you're absolutely spot on, because going into the year, the expectation was even Maybe four, maybe five interest rate hikes. Do you still expect that to be basically the case here or do you think, based on everything that sort of happened within the last month? Maybe Jerome Powell basically pulls back from that from that. And maybe there's gonna be less here. You know, I I I'm on the camp of the in the camp of the ladder. Um, I can't really comment on what Jay Powell will do, but my thoughts are that, you know, inflation is high. Yes, it's a real issue. It's an issue to, you know, the average American in this country experiencing those price increases. But when you look at that, it's sort of a still model. It's still muddled number. They don't have the proof that that is the actual inflation figure going forward. right. We've had the supply chain issues, you know, Omicron came at us hard again, um, into the holidays, right? And kind of shut things down again. So that exasperated it again. Um, so I think that we'll have some news around inflation going sort of in the right direction throughout the year. And that will help. But I think that that will give the feds and flexibility. I think these sort of massive Pullbacks in the market are not something that the Fed wants to see because it's it's gonna be hard to get consumers to go out there and and continue to spend and and, you know, get the revenge travel trade going on All these things if a lot of their personal savings that have come into the market are just getting demolished, right? So I think that there's a there's a tricky line. Um, there's there's a lot that they have to sort of consider in balancing this decision. But I suspect, you know, and this is again just my opinion that maybe they would kind of do a little more on the balance sheet side and a little less on the rate hike side. Do you expect maybe a rally in risk assets. If, let's just say the Fed comes out and essentially isn't as hawkish or aggressive when it comes to these rate hikes, Do you think maybe you'll see a rally and risk stuff here? I do. I do. And I think it'll be. You know, again, as emotionally based as the fullback has been right, I think it will probably, um, go the other way. But what's good about the market? And and you know what? I What I like about that is that, you know, we've had Pullbacks, right? We've had about 26 pullback since World War 2 13% or higher and the average recovery time is about four months. So so that's all sort of good. If you have money in the market, chances are you can sort of wait this out and you'll see. You'll see it come back. If it comes back quickly, then I expect we're going to have this sort of up and down, um, volatility along the way until we kind of settle in and see that Yes, you know, we're in the heart of an economic expansion. Fundamentals are good. You know a lot of these tech companies and high valuation macro tech stocks. They're well positioned. The horses that got us there are, you know, Microsoft was a good good start in earnings, right? And I think strong balance sheets, part of five G. Web three point. Oh, Metaverse, they're part of the future. Um, they've got the cash to spend and 2% really isn't going to hit them that hard. I think things like that are going to sort of play out and the rational, um, you know, the rationality of the market will kind of come back into play regarding geopolitics here, Let's just say hypothetically Russia does invade Ukraine, which we should note the president of the United States is sort of indicating he believes that Russia will do that. Do you think that potentially could rattle investors? And do you think that that will have an effect on the market? If Russia indeed does that? You know, it's hard to say. I think that the uncertainty around that will will play a factor in in markets. I don't know how much it's going to hit equities. I I think that the rate hike honestly is is more on the mind of investors, even though the geopolitical issue is probably a much more severe sort of, um, problem and issue for us to grapple with. But, um, you know, my thought is that you'll see this. You'll sort of see the strain on commodities. You'll see, um, probably energy and oil pop and and a lot of volatility in that sector initially. But, you know, I don't think that it's going to be a major reason for the U. S. Equities to pull back. Um, but, you know, China trade wars and trade tariffs and things like that certainly had an impact on the market. So it's it's uncertainty equals volatility. Yeah, no good point there. And, of course, we're going to see what the Fed decides at two o'clock today and, of course, have live coverage for you here on Cheddar news when it happens. Sylvia Jablonski, co founder and CEO of Defiance CTS, thanks so much for joining us as always, Sylvia