U.S. stocks closed lower to end Thursday's session amid ongoing concerns about future rate hikes from the Federal Reserve.  The Dow fell 0.02%, the S&P 500 slid 0.31%, and the Nasdaq declined 0.35%.  Matthew Johnson, president of Johnson Wealth & Income Management, joins Cheddar News' Closing Bell to discuss.

U.S. Stocks Close Lower Amid Rate Hike Concerns

well if we turn back to the major indexes joining me now, is Matthew johnson, president of johnson wealth and income management? Matthew, thanks so much for joining me today a sea of red, unfortunately. But just fractional losses ending off of our worst levels of the day seems like those higher interest rates taking the stock market down today. Is that what you see? Yeah, I really do. And thank you for having me kristen it's good to be on the program. You know, I think that this little rally that we've been experiencing is it's it's a good sign and it's really a testament to the optimism that we all kind of naturally have. We want to be able to see a soft landing. But I'm very cautiously optimistic. I'm, I'm more so indicating or suggesting to clients right now that this is more of a rally that we get to rent rather than get to own. And we have to be aware of what's happening in the future. We know that the Feds are going to continue to work and systematically raise interest rates because let's face it, inflation is just still too high. And we know that their their goal is extremely optimistic. They want to get that inflation down to 2% right now, we're at 7.7. So what do they have to do to make that happen? They have to continue to raise those interest rates and that's gonna have a bearing on the market and the economy, you know, unfortunately, uh Matthew the impact that we see on the economy and households across the board, is this uptick that we've seen in layoffs think it happened first with some of these small businesses startups now spreading to these big tech giants, meta amazon the streaming service raku obviously announcing some layoffs today as well. What's your projection for layoffs ahead and what it might mean for american households? Well, unfortunately it's coming at a terrible time, right? I mean, there's just nothing worse than layoffs just before the Christmas season. But as we get into this um earning season and we see what's happening where earnings are starting to decline very rapidly. And we know that early on there was a tremendous amount of hiring that was going on in 2021 because many of these companies thought that there was going to be really a boom and they were going to need the human resource and now they're determining, well, they really don't need them. Unfortunately, I think we're going to continue to see the layoffs get worse and worse. And I believe it was about a month ago or so that even uh Jerome Powell came out and suggested that, you know, unemployment is still very, very low. He's he's looking for somewhere in the 4% to 4.4%, which means that we may be looking at another 1.3 million people losing their jobs across America in order for the Federal Reserve to say, okay, we're getting to a point in unemployment where we feel that we're going to see that inflationary factor come down. But people are feeling this from all various stages of their life. They're feeling the lack of wealth right now because their stock portfolios are down there, four oh one K. S are down. So it's it's really something that I think is going to continue to be long lasting, at least for a time into 2023. So what should investors do? Matthew, what advice would you give them as they still try to manage this volatility? Well, I'm glad you asked because I think that there is a tremendous need for people to pay attention to the fundamentals. Again, I think that what we have seen with this little rally that's taking place is more optimism kind of overpowering fundamental uh data and we need to be looking at companies and paying attention or they are they bleeding money if they are, we want to avoid owning them right now because there's gonna be more pain to come. I believe uh Number two, I think we really want to focus on value stocks because value stocks tend to do better in a rising interest rate environment and you you have to look for value stock companies are gonna be paying dividends because dividends are income dividends are free dividends, I can spend, I can reinvest them back into uh more stocks if I wish to, and then I think we would be remiss if we didn't talk about things that are outside of the conventional way of investing in stocks and mutual funds for those individuals that are maybe a little bit older. They're looking for income. They need to maybe satisfy required minimum distributions. Maybe instead of looking so heavily at stocks and stock mutual funds, you're looking at things like, say, individual bonds that right now, corporate bonds that are priced down because interest rates went up, they're paying 5%. You got preferred stocks that are paying 5.5 to 6.5%. And then you can't forget, business development companies, business development companies have really seen a resurgence because of the benefit these rising interest rates are to them and you can get yields in the BDC market between 8 to 9%. It's fantastic. Many of us would kill just to get that kind of in that amount of percentage in appreciation. But these be DCs are paying that in dividend income and that is amazing gridlock in Washington Matthew, do you think that that will help at least provide some floor for the stock market in the years ahead? I'm not so I'm not so convinced that everything that's going on within Washington right now is going to necessarily be paying attention to what we need to be paying attention to, which is infrastructure, we need to see our government quit the argument and all of the bickering back and forth and all the investment. We need to focus on America and I'd love to be able to see this administration pay more attention to the infrastructure and be investing in it because let's face it, the reason that we're seeing a lot of this inflation is still due to the bottlenecks and granted they're getting better. We're seeing some relief from material goods starting to free up and come in. But we need our politicians to be advocating for us and to be focusing on what's important, which is the american family and their pocketbook and the infrastructure of our economy and paying attention to that instead of the bantering back and forth. I think that's a good point Matthew, but when it comes to infrastructure, the president did pass a more than $1 trillion dollar infrastructure bill amid his time in office. And so is it that we need to see those dollars actually deployed to get the economy in a stronger spot? I would totally agree with that. The unfortunate thing about bills and passage of bills and things like this that are stimulus packages is, you know, we see the, the ink drying on the piece of paper, but it takes forever for those dollars to trickle down into the areas that are really affecting main street. And so we need to see the concerted effort in the continual effort of, of politicians to work together across the aisles to make certain that they're making certain that these dollars make it to their intended market, the intended target, that they're trying to get these things to. Otherwise, it's just money that's floating around and maybe it's making the fat cats richer, but it's not helping Main Street families and that's really what we need to be focused on right now. All right. Matthew johnson, president of johnson wealth and income management. Matthew, thank you.