Wall Street is ready for the weekend after a particularly rough end to the week. Sean O'Hara, president of Pacer ETFs.

Closing Bell

What to Investors Can Do After Wall Street's Dismal Week

Joining me now is Sean O'Hara president at Pacer ETF. Sean. Thanks so much for coming on. The show is certainly no shortage of topics to discuss today. As we do see the major indexes, not only seen losses on the session, but all down worse than 4% on the week. Should investors be concerned? Good afternoon. Thanks for having me and thank God the week's over. Right? I mean, it's been a brutal week this week and in the second half of last week wasn't much better. Look, the markets sort of in the turmoil position here. I mean, you've got a lot of sort of counterbalancing narratives. If you will, we have fed testimony this week, the feds committed to continuing to raise interest rates in Titan. That's not good for corporate earnings, not good for the stock market. And then you throw a little bit of a disaster in there right now and some instability like what happened with Silicon Valley Bank. And I think it sort of creates this, this, this, this environment of turmoil. And I think that's sort of what we're going to see for the, for the foreseeable future where the stock market, you know, in an environment like this with corporate earnings where all the forecasts are sort of being guided lower. And we have high interest rates and high inflation, The market still trading at a little bit of a high multiple historically sort of 18-19 times earnings. And so I think it's a time to be careful as investors and to make sure you're buying high quality stocks, get paid a dividend if you can. Some of the overseas stuff has been more important. And, and today in particular, you know, you mentioned the Russell 2000, we have a fund that select stocks out of the S&P 600, which is another small cap index. Those two indexes got humbled today because they're loaded with financials and small financials. And so that really dragged those big indexes down. We don't happen to own any financials in our small cap E T F, but it's just a lot of crazy stuff going on. And I think for now it's just sort of just going to be common sort of way things out. Let's hope that some of this bad news gets behind us and we get a better direction going forward. So, so let's talk about Sean, what investors should do if they are sitting on cash or even wondering is the stock market safe, given the developments that we've seen this week? What would you recommend to viewers? Well, what I'd say is the stock market safe over the long run. If you have a long time horizon, you know, it's, it's not certainly very easy to time the market. Although if you have some cash on days, like today or on weeks, like today again, if it's long term money, I think it makes sense to start to put some of that money in your certainly buying at lower prices. But I wouldn't be in any, any huge hurry to put all my money. And if I was sitting on a big lump sum of cash today, especially now that you can get paid a decent amount of money, some around 5% for example, in the 1980 bill. So until we get better clarity around corporate earnings, until we get to a more reasonable valuations, until we really see where the feds gonna wind up. I think we're going to continue to see this excess volatility that we've been dealing with for the last several months. Really? What do you think are the chances that we do see contagion Sean, whether it's in the banking space or even some of the small caps growth stocks in the wake of the collapse regulators taking over Silicon Valley Bank. Yeah, I mean, you know, it'll be interesting to see, you know, I think, you know, the fed raising interest rates is sort of what caused the problem here. You know, I think that I read that Silicon Valley Bank took a $1.8 billion hit on their treasury portfolio. They sold it all in one block and that was really what, what caused a big problem. I think the other shooter you have to watch out for on the bank side is commercial real estate and multi family. You know, those, those types of assets right now are coming under pressure as well and as interest rates remain stubbornly higher, persistently high, there could be some challenges there. The good news, I guess would be that the banks are probably in better shape today than they were in the financial crisis are not as highly leveraged and their bank balance sheets are generally healthy, but that's, that's certainly a negative force against the markets and in particular financials, how long Sean do you think the fed will need to continue raising rates? And what is the terminal rate as inflation has proven sticky, especially in the services sector? Yeah, you know, it wouldn't surprise me if they wound up at six or greater. I think that the answer to the question is, has been given to us by Jerome Powell over and over and over again. And that is that they're going to continue to remain diligent raising interest rates and tightening until they get inflation back to their target level. Um you know, when inflation was 9% plus moving that down from say 9% to 7% is not a very difficult or a big challenge. It's the next four or 5% getting it back to a 2% target. That's a real challenge. And so I don't expect them to change their direction. I expect them to continue along this path as long as it takes to get back down to that level of inflation that they're seeking and that could take some time because you know, inflation at these levels and moving it down from here is going to be a pretty heavy task. A big lift. Alright, Sean o'hara, we got to leave it there. She is the president of Pacer E T S. We appreciated Shawn, especially on what was a rough day and a rough week for stocks.