Stocks extended Friday's losses Monday as investors still remain worried about rising interest rates and tighter monetary policy. Federal Reserve Chair Jerome Powell didn't mince words during the central bank's Jackson Hole symposium, saying there would be more 'pain' ahead as the central bank works to fight inflation. Art Hogan, Chief Market Strategist at B. Riley Wealth Management, joins Closing Bell to discuss today's price movement, whether and how long this volatility could continue, how much the Fed could continue to raise rates this year, and more. 

Closing Bell

Wall Street's Sell-Off Continues as Investors Remain Concerned About Fed Rate Hikes, Tighter Monetary Policy

Welcome back to cheddar news closing bell, everyone stocks extending friday's losses today as worries over rising rates and tighter monetary policy continued to grow. So let's take a look at the stock market now we are down fractionally but actually well off of our lows of the session after we had seen on friday, both the NASDAQ and the S and P. Having their worst days since mid june, the dow falling more than 1000 points after the Fed chair, jerome Powell warned that morning of potentially more pain to come as the central bank continues to raise rates in an effort to combat inflation. So joining me now is Art Hogan chief market strategist at B Riley wealth management are always good to see you. Is this the end of the summer rally that I think a lot of people were hopeful might continue into the fall. Yeah, I think that the answer to that question is predicated I suppose on what you thought the driver for the summer rally was. Now, if you were of the camp that thought the reason we rallied in july so handedly and into the first week and a half of august was because there was a narrative out there that after the july Fed meeting that the chair jay Powell had signaled some sort of pivot and then the we had raised rates in 22 but end up having to cut rates in 23 that has obviously been put to bed right, that's been put to rest. So what's interesting to me is if if you think the rally was predicated on other things like much better than feared, second quarter earnings reporting season or economic data that continues to show sequential improvement. And we saw more of that on friday with both of you mish sentiments and the pc coming down. So I think if if that was your thought process and you thought the first half markets have gotten oversold, which are clearly ahead, then I think there's potential and I'm in this camp that there's potential for this to continue clearly, it's not going to be a straight run up. But I think that the consensus for the terminal rate of the Fed funds really hasn't budged much. It's three and three quarters to 4%. That's where it was before Jackson Hole. Um, you know, whether or not we go 75 basis points in september doesn't really matter. It's just how high do we go before we stop going up? So whether we go 50 or 75 in september, I think this market's got room to grow and I think we're going to continue to see an improvement in the sequential economic data very much like we've seen for the last month and a half. So that definitely would be good news. Alright. I mean it has been a long time, obviously since mid june we had bottom then that we had seen such a dramatic drop on a daily basis for both the NASDAQ and the S and P 500 as I mentioned earlier. And and again, I can't remember the last time the dow was actually down 1000 points in a single day even though it's been a very volatile years. So it sounds like you do think though still that inflation will continue to moderate that the Fed's actions are actually working to some extent and that this labor market might be able to avoid some sort of ultimate catastrophe. Is that the case? Yeah, that really is the case. And I think you sit right at the heart of it, right being on the floor of the new york stock exchange, you've seen that volumes for the last two weeks have been extremely light and light via means, light liquidity and light liquidity tends to volatility tends to increase volatility. So I think that that's part of why we've seen the outside move on friday and and the percentage moves that we've seen on the down days. But I would tell you that if you actually look at the estimates for the economic data that's in front of us, including the jobs number on friday, all of them look very solid. So to me I think you can listen what the Fed says but you want to watch what the economy does look at the inputs. They're gonna be disseminating at the 21st meeting and going forward into the end of this year if we continue to see um sequential improvement in economic data, especially the inflation inputs. We're likely going to see a Fed that that gets to call it 3.5, 3 and three quarters and then takes a breather and and and doesn't raise rates any further and then the faster inflation comes down the sooner they can take that down to a more normalized level. So a question that I have to as the chief market strategist at the rally wealth management is how do you compare us stocks versus some global options out there? Right. I mean europe does seem to be very much on sale right now but still the prospects of growth in that region might not be as strong here in the U. S. How are you advising clients? Do you think U. S. Stocks are the way to go? Well I will tell you this. I think that when we compare and contrast us potential for europe, I think europe is look cheaper for a decade and and there's reasons for that, there's demographic reasons for it. But I think this go around has much more to do with how long and how deep their recession will be coming out of this pandemic, especially with their reliance upon Russia for a lot of their energy products. So they're in a place where they're likely worse off and they had less fish and monetary policy reaction during the pandemic. So they're going to fall deeper and it's going to be a longer slog for them to get there will be a point in time where we would look towards european equities as a bargain as a value. But it's just not right now. We would like, you know to look towards emerging markets, especially those emerging markets that are producers of commodities, especially in the ad complex. So when you think about latin America, that's probably a great place to look and and again that looks a whole lot cheaper than the U. S. But remember you know when you were thinking about emerging markets, your exposure has to be dollar denominated. So if if you're not if you're not willing to make that currency translation yourself, you should invest in an E. T. F. That gives you that exposure. But does it in dollars? Okay, so fractional losses today after 1000 point drop that we saw in the market on friday art. Do you think a 75 basis point rate rise from the Fed is priced in in september and if so can the market continue to kind of at least hold the status quo until then. Yeah. I certainly think 75 basis points is the consensus. And oddly enough, it was the consensus even before Jackson Hole in that short but hawkish speech by jpl and I think that when we look at expectations further beyond that we're gonna have 100 25 basis points this year. So to me it doesn't matter if we go 50 50 25 or if we go 75 50 and take december off that. It's the end goal. Where do we end up at the end of this year, which is likely between three and a quarter and 3.5. And then from there we get, you know, something like three and three quarters or 4% and then we pop they're all of that seems to be priced. And if you look at the Fed funds futures, so I don't think any of that catches us by surprise. I think it's much more of the trying to figure out what quantitative easing means when that's going full bore and is the incoming economic data something that persuades the Fed that they've gotten to a place where they're starting to see substantial improvement in inflation inputs and that likely is going to be much more visible by the end of this year and the start of next year. Now do the interns get monday off? Is that part of the deal? Yeah, careful what you wish for one of the interns that sound asleep right behind us and the other ones up in the green room getting ready for his cameo. So they don't take Mondays off. But this is their, this is their lunchtime one last little summer, maybe vacay. Um I hope they enjoy their lunch art Hogan good to see you as always. Thank you are the chief market strategist at b Riley wealth management