U.S. stocks closed near session highs on Monday as investors prepare for a busy week of retail earnings from companies like Walmart and Target.  The Dow Jones Industrial Average jumped 0.4%, the S&P 500 +0.40% rose 0.4%, and the Nasdaq Composite ended up 0.6%.  William Houston, chief investment officer of Bay Street Capital Holdings, joins Cheddar News' Closing Bell to discuss.

Closing Bell

U.S. Stocks Close Near Session Highs to Start Week

well, turning back to the major indexes joining me now is William Houston, Chief investment Officer at Bay Street Capital Holdings, Thanks so much for coming on this show. Pretty nice gains in the stock market? This has got to feel good for the bulls today. Right? For sure. Like you said about moderna, you know, it's part science, part art. So I think skilled investors right now are looking at the markets and people are coming to different outcomes. But today was definitely a day for people looking at the long game, expecting for for strong for for a strong end of this quarter. Yeah, so I know retail really in focus this week, William, I'm sure you have your eye on it as well between retail sales data that will get on Wednesday as well as results earnings results from a lot of these retail companies. What's on your radar this week as we await those results. So just like the jobs market last week, we were saying, we were expecting that to come in strong this week. I think that the sales are going to come in strong as well, but I think it needs to depend on what sectors that you're looking at. You know, we've seen a shift in how people are spending that discretionary income travel is up 89% year today, airfare is up 44% year to date in hotels or 22% year to date. So I think for individuals that are looking to make decisions on that from an investment standpoint, you want to make sure that you're seeing how the consumer is shifting because although inflation is up despite that, there are some sectors that are still performing very well. Why is the consumer Williams so important to the strength of the economy and thus the stock market? Well, first, I think we want to look at consumer debt, you know, in an inflationary environment. The first thing we want to see is how is this affecting the consumer first and foremost? And right now, consumer debt isn't out of control. Additionally, corporate debt relative to GDP, which would be the next thing, you know, I would want to look at is also on trend. So I think that the consumer and how the reaction to this in the short term is why it's so important and why the markets are making a lot of these short term weeks? And also while we're seeing a lack of patients with some of These companies that have negative cash flows because the market is nervous and making impulsive decisions? Yeah. So certainly the data that we saw in July wasn't a one off for instance, in the sense that we had one positive data point, pretty much all the data William that came in for July was very positive after we had seen some disappointing data in June with those consumer prices rising at the fastest pace in 40 years and 9.1%. Do you think the lows in the stock market are behind us at this point In the short term? Not necessarily. Again, I can see with the, with the nervous market people will make impulsive decisions now for long-term investors, whether it's this week or two months from now that we hit a low, I don't think that that's gonna be material in the long term. I do think the Fed has also become much more data dependent as opposed to on autopilot. And we've seen that they're going to continue to to raise rates, but we're expecting a 50 basis points as opposed to 75. So all things are looking like they're trending positively. That certainly is a positive. Some even expect that the Fed might start lowering interest rates next year. Are you in that camp, that would be a very positive move for the stock market. Mm I think it would be hard to tell, you know, to call that today. I guess you will say because there is so much uncertainty around a lot of like how, how, how Covid is right now. You know, we've got monkey pox. We've still got a supply chain issue. But I think the good news is that again, overall the economy is very strong. Overall, the jobs market is very strong. And so we've got this very weird situation where on one hand, there's a lot of positive things going on. But in the other hand, there's a lot of hurdles that we've also got to get over. So it's hard to predict what's going to happen in the long term? But I will say, I think the Fed will continue to be looking at this from a very data driven standpoint and continue to be as vocal as they've been previously. Well we're toward the tail end of the second quarter reporting season, William, we've already started the third quarter, but retailers always the last report. And again, as you and I have been discussing those retail results, they'll start to come in actually in earnest tomorrow morning when walmart and Home Depot report, what's your view on the strength of corporate America is corporate America holding up? I think so and, and additionally, I think that even corporate America from the small business sector is doing very well. I'm in Atlanta right now. I had a meeting with the largest black owned commercial real estate company and to my surprise, they were very excited about the future. Whereas I would say prior to that meeting, I still had a lot of concerns around the commercial real estate sector. But all that to say, yeah, I wouldn't say just, you know, corporate like mega companies there have been performing well and they are and are starting to see some positive trends, but the good news is that small businesses are also very excited about how their position right now and how they're planning to move into the next couple of months? So as a chief investment Officer, William, as a chief investment officer, what are you recommending that your clients do, should they be dipping their toes back into this market, staying on the sidelines? What's the best path forward? So from a peace of mind standpoint, there's nothing like a programmatic investing strategy. So that's why we speak so much about dollar cost averaging, you know, you don't have to worry about a few times things appropriately in terms of how the whole portfolio is allocated again, we really think that the real estate sector is going to perform well over the long term. We like the the luxury travel space. We think that Covid has permanently shifted how individuals are going to travel. We think they're gonna be more interes in these private residences. The Airbnb s, the D R B. O. S. These, you know, these private experiences because they've got apps to replace things like room service, they can just, you know, doordash their food, they can doordash the massage. They don't necessarily have to go to the spa in the hotel environment where they're sharing a lot of, a lot of resources. So I think long term, seeing how the behavior of the consumers shifting is also going to end up playing well for investors that are trying to make a decision today. Yeah, well it sounds like William and I think many people are in the same camp as you that we could still see volatility ahead. That yes, july certainly was positive data, but questions as to whether or not that was just a breather and a short term pause or whether or not this economy is starting to turn around and get on a sturdier footing. So protect to protect against any potential downside. Are you recommending that investors buy commodities, anything to kind of take care of their portfolio in case we do retest these lows. So what I would invest for investors, especially with how late we are into year is not to make a rash decision. You know, if you're trying to say, what should I do with my portfolio now, if you've not done something six months ago, seven months ago, I would hang tight because you know, the market is going to reward you based on compound interest, you know, so just compounding these good decisions remain invested by the market now don't try to, you know, rebalance something prematurely, especially when we've seen a positive last couple of weeks just hang tight and and realize that over the long term instead of you trying to be so solely focused on what's going to happen tomorrow with said report knowing that hey, if you're, if you're invested in the long term, the market is doing fine, the indexes are going to be okay. And if you're looking for some outside returns, allocating something like real estate, that's going to be less volatile and allow you to kind of take a breather and have some peace of mind on the day to day basis would be a good decision. All right, William Houston, chief investment officer of Bay Street Capital Holdings. William. Thank you.