Joining me now here at the S is Alex Morris
, president and Chief Investment Officer at FM Investment.
Alex. Thanks for coming on the show. Thanks
for having me. All right, expectations, decent
gain as our viewers see on the screen there in
the wake of some optimism around the debt deal.
Are you optimistic? I am. I'm cautiously optimistic
. Politicians are known for saying one thing and then
not delivering on that. I don't know that the
deal sitting in the speaker or the president's head is
final one we get, but it's clear that folks
have realized this is serious damage is done every day
. We don't have a deal. So now it's
time to make this no longer an issue before the
deadline hits interesting. We were also taking a look
at some regional banks there and it's been quite remarkable
that the overall stock market has held up as well
as it has given the 2nd, 3rd and 4th
biggest bank failures that we've seen in us history just
in these past few months. Are we out of
the woods when it comes to the woes facing some
of these banks? I think mostly that we have
to remember there's 4000 banks in America, which is
an awful lot of banks. So it's inevitable.
Something happens. I think we're probably out of the
top 2025 banks and banks are generally speaking, very
well founded at the moment. They're very well capitalized
the reforms. Post 2008 mostly worked. There are
some things that we miss, we're going to change
legislation. We'll see that coming out most likely next
year to fix up some of the duration mismanagement protocols
that were put in. But long term, I
think the banks are fairly well sound and the big
ones are over. So based on what you're telling
me, Alex, I'm gathering that you think stocks
can go higher from here. I think they can
and we believe that both treasuries and growth stocks can
go higher. It's folks who are looking for a
safe haven asset, whether that's the US Treasury or
some of the largest tech stocks that we see because
those companies we all know are not going away.
So explain that right, because I think people would
say the NASDAQ might not necessarily always perform in lock
step with treasuries. That's true. If you look
at the historical correlation, higher rates, we think
we're bad for tech companies. And that was definitely
true in the nineties when most NASDAQ companies couldn't make
next month's payroll without a fresh debt round. That's
just absolutely no longer the case for Microsoft or Alphabet
or Meta or NVIDIA, these companies are safe and
sound and interest rates hurt some of their growth but
not like. So it's interesting in the sense that
the NASDAQ made up with the largest waiting, right
, of some of these technology names and also the
S and P might be in a more solid position
than the blue chip dow. I think that's probably
right and it's just a virtue of those companies are
such an important part of our daily lives. It
was only a few decades ago, we got rid
of the railroad sector in the dow which although logistics
are a big part of our day, we all
have iphones and we use those a lot more than
we do the railroads. So what do you recommend
to clients as a chief investment officer and president at
FM Investment? Should they be dipping their toes back
into this market? And if so in what sort
of way specific stocks sectors or even the broader indexes
? So we still have a preference for the short
end of the curve. We are asking folks and
advising folks to take on more duration. So to
look into longer end of bonds and the fixed income
, we still think this year will be a major
gain for fixed income across the board. But on
the tech side, if you've been sitting in too
much cash and you want to go back into the
markets, we like the growth stocks and the tech
stocks. Ok. And in terms of longer duration
, are we talking three years, 10 years.
So we've seen our primary shift focus from less than
six to now the mid curve. So 57 years
, I don't think folks unless you really want to
see some price movement should go much beyond that for
the time being. But the 10 years is always
a great place to be. We've seen a lot
of action in our products that work around the 10
year duration mark and think that's probably a good spot
for the next few months. And that must be
the expectation, I guess just for the next few
months. But the expectation that rates will stay elevated
, that's founded on that. We think rates stay
elevated into 2024. That the pause is a prolonged
pause and that cuts are going to happen when the
fed says it is, which is not any time
soon, right? Rate cuts, not a base
case. Of course, that's what we've heard from
the Fed, even though I think the stock market
is still wanted to go higher. But you're right
. The NASDAQ has been out performing in fact,
these past four weeks. So we'll see how long
that can last. Alex Morris, president and Chief
Investment Officer for F Investments. Alex. Thank you
. Thank you.