So let's turn back to the major indexes stocks ending
at their session lows with losses accelerating in the final
hour of trade ahead of that key inflation report that
will get tomorrow for the month of May and consumer
prices. And joining me now is Art Hogan chief
market strategist for national Holdings, which is the parent
corporation of several financial services companies. Art, it's
good to see you and unfortunately the sentiment among investors
worsening as we headed into the close what was behind
the action today. I think there's a couple things
first and I think first and foremost, you know
, it felt as though over the weekend we were
getting better news on the china zero covid policy lockdown
. So then that went to reverse this morning.
So hearing about, you know, a couple million
people being shut in certainly doesn't speed up the recovery
of china and the global economy but certainly doesn't help
us unglued those supply chains that we're concerned about and
clearly that had been a wish right? And I
think that you take that coupled with the fact that
the number one concern that investors have right now is
inflation. And we've really had no catalyst this week
in terms of economic data and fed speakers have been
on a on a quiet appeared in front of the
meeting next week. So you put those two things
together today and it feels as though the markets trying
to predict a very disappointing sleepy eye tomorrow, not
just in equity markets, but if you look at
the yield markets, the yield on the 10 year
and the yield on the two year bouncing a bit
higher after, you know the U. S.
Tenure had gotten down to 2.76 just six trading days
ago. So about 3% Certainly, you know sort
of inflicts that or or brings on that risk off
mode and it almost feels like someone's got a copy
of the CPC report already. Especially as you look
at the Treasury market. So and again we do
anticipate that consumer prices more than 8% or at least
. That's a consensus among economists for the month of
May when we guess that when we get that price
data out tomorrow morning art but as we enter the
summer months, how are you feeling? Are you
optimistic or pessimistic about the path board for the stock
market, we've come off of our lows that we
saw in May but there are some calls that we
could retest those levels. Yeah there's always a potential
degree. Tesla's levels but I think you need a
whole lot more in terms of negative catalysts that we
haven't effectively priced in. So you've got a war
in Ukraine and that's been going on for four months
now. So I think the markets had plenty of
time to sort of look at the consequences of this
is an ag prices. I think this china lockdown
story if we can get that behind us. And
it feels like we're getting closer to that. Not
as close as we'd. Like. but it put
those two things behind us and then start looking at
the data in terms of the sequential improvement, right
? So March was likely the peak and cp I
april saw some sequential improvement on a month over month
basis and will likely see some improvement in this print
tomorrow. So you take all that together and say
well what else do we know? And we certainly
know that there are those companies that are coming out
and pre announcing for the next quarter, but more
having to do with currency issues than having to do
with demand issues. So I still think that corporate
balance sheet is in really good shape but I think
a couple of things can fall in the right direction
if we see a sequential improvement. Um And the
and the inflation figures on a quarter over quarter basis
through the second quarter and into the second half,
that likely will mean that we priced in a lot
of the things that we know um in terms of
valuations, we we started the year with a multiple
about 21 a half for the four or 12 on
the S and P. 500 that's worked its way
down to about 16 times. So we're in a
better place. Um We've been stuck in place for
you know about two weeks but we're in a better
place on a multiple basis. And uh I think
all of those things sort of add up to the
fact that we're probably closer to the bottom in the
middle of the cycle. Okay. Certainly good news
for investors are growing concerns that a recession might be
on the horizon in 2023. We still have a
summer to navigate consumer price index tomorrow morning Fed decision
next week. Even though we do expect the Fed
to raise rates by half of a percentage point.
And as you mentioned, that has been well broadcast
, What are you advising investors do right now?
Should they stay the course or are there actionable moves
that they should take? Well, I I think
some of the actual moves that you should take when
you look into before they make sure it's diversified and
make sure all of your growth stocks are measured in
a price to earnings, right? You know,
we'll hear from stitch fix and rent the runway and
doc you sign over the course of, you know
, the after hours here and all of those still
fall into that bucket of very disruptive but still measured
on a price of revenues. And, and I
think those stocks still will feel the pressure because we
don't know where interest rates peak here. But if
you're looking at companies that have had multiple contraction and
have strong cash flows, um, strong businesses and
are measured on a P. E. I think
you can get into growth stocks at this level.
I think we've done a lot of multiple contraction there
on the other side of that barbara, you want
to make sure you have exposure to cyclicals, things
like energy. The best performing sector in the S
and P. 500 last year will be this year
, likely will be next year. Financials and industrials
. So if you balance that off and try to
try to avoid that temptation that hey, the stock
is down 50 60 70%. It must be a
deal here because those stocks can still go down another
50%. All right, stay with me. I
do want to break in with an earnings alert because
you mentioned rent the runway. We've been covering it
all day long and that stock actually soaring in the
after hours as we get the earnings alert for rent
the runway, the stock up 10.5% in the after
hours. Better than expected earnings per share even though
it was a loss and better than expected sales plus
Better than expected outlook for the full year when it
comes to revenue. So the numbers are an earnings
per share loss of 67 cents. But Wall Street
had expected an earnings per share loss of 73 cents
. So again, not as bad as projected and
revenue coming in at 67 million. Wall Street had
expected 64 million. The company also providing for your
sales guidance well above Wall Street's expectation kind of coalescing
around that$300 million. Mark. Wall Street had
only expected$202 million. So very nice outlook there
again, all sending the stock higher in the after
hours. This combination of factors. Also, some
comments from the Ceo and co founder jennifer Hyman saying
our strong performance evidence of our firm position in the
broader experience economy, which has enabled us to make
significant progress on our path to profitability and achieve record
ending active subscribers in the first quarter of 20 and
22. So are what this signals to me is
that this economic reopen is underway a year after it
officially started with vaccinations and covid treatments. A desire
to get out and be social again, whether that's
at the office or with your friends and family at
events and personal gatherings. What's your take on rent
? The runway's results. Yeah, I think that
sums it up. If we're gonna have two million
weddings, this wedding season rental. Runway is gonna
have a busy summer time and I think that it
offers that value. You oftentimes think about, yes
, I've got to go to three weddings this year
. Do I really want to buy three different outfits
for that or is there a more value conscious way
for me to do this. It's very much like
that. You know what I think is going to
be one of the, the, the winners and
that sort of inventory issue that a lot of the
big box retailers have and that's the discount change.
Like the T. J. Maxx is in the
raw stores rental once it gets into that value proposition
. Yes, we're out and about doing things we
haven't done for a couple of years. We need
to be appropriately attired for that runway seems to fit
right into that narrative. And I certainly think with
a stock down 55% year to date, it had
a lot of room to make up and certainly a
pretty big air pocket. Like we're sitting in the
trading run after the report. Right? So even
though it's getting in the after hours, I mean
we're talking about a 22 set game technically on a
per share price trading at$3.75 a piece when the
recent 52 week high was$24.77. So you write
a massive, massive pullback that we've seen in this
particular stock, even though companies, some companies are
able to cut costs, they're able to capitalize on
consumer spending. Or do you anticipate? We could
see an environment where we see more hiring freezes.
We see more layoffs as consumer spending could start to
pull back. Yeah. If you look at the
announcement that stitch just made six stitch fix making announcements
about 15% of their Go back over the course of
the last two weeks for the companies that have actually
talked about laughs, we probably lost about 25-30,000 jobs
in a two week period in announced layoffs. That
makes sense. You know, the bad news is
that's the first line of defense from companies want to
cut costs and they see a slowing environment for demand
for their particular goods and services. The good news
is we have two jobs available for every person looking
for one. So the only way to get that
back and balance is to see this kind of slow
down. It's actually what, you know, brings
inflation down. It keeps wage price pressure in check
. And I think it's one of the natural things
that we suspect we're going to see over the course
of the next six months. Alright, Art Hogan
, chief market strategist for National Holdings, are thanks
so much for coming on the show and dropping your
knowledge. We appreciate it.