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 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 somewhere 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, you know, 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
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. They're not as highly leveraged
balance sheets are generally healthy, but 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.