Laffer Tengler Investments CEO and Chief Investment Officer Nancy Tengler joins Yahoo Finance Live to discuss the recent struggles of Tesla stock, why earnings season could be disappointing for investors and the possibility of a recession.
Video Transcript
[AUDIO TONE]
DAVE BRIGGS: Let’s move on to the closing bell on Wall Street.
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[APPLAUSE]
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Well, you have the closing bell on Wall Street this Tuesday. It’s nice to see lots of green, all green on this board as the Dow is up 187 points. S&P is also up by 27 points. And the NASDAQ, despite everything we’ve made of this higher rate environment, the day’s biggest gainer, usually the most sensitive to these higher rates that the Fed keeps repeating, is not going to be cut 106 points higher in 23 years. Seana, who gained more than 1% for the day.
SEANA SMITH: Good. Let’s talk about what this means for stocks for the rest of the year. Definitely off to a strong start if we want to call it that. We’d like to bring Nancy Tengler, CEO and Chief Investment Officer of Laffer Tengler Investments.
Nancy, it’s great to have you here in the studio. So it’s certainly been a stronger start to 2023. So many questions about what the next few months will look like. What’s your biggest takeaway from the trading action we’ve seen so far, and what does it mean?
NANCY TENGLER: Well, Sean, thank you so much for having me. Yes, I think of a few things. You know, we sold a lot. And at the end of the year we wrote a post that we thought investors were very pessimistic and we started adding some risk to our portfolio. But I don’t think we’re done.
I think we should finish the earnings season and see some disappointments. We’ll see some volatility, I think. But I think in the second half of the year or the end of the year, the market will pick up in a normal way, not in a big way, you know, low double digits, potentially, volatility in the first half of the year. So we actively add different aspects, different sectors to our capital portfolio.
DAVE BRIGGS: Yes, Nancy. Nice to see you. Dave is here. Many are calling 3000, 3200 lows for the S&P. Do you think the bottom is in? You talked about earnings, what do you expect to learn when the big banks start reporting on Friday?
NANCY TENGLER: Yes. I wish I knew that, Dave. Nice to see you. But I think they should benefit from the rising interest rate environment. We think our favorite bank for 2023 is Goldman Sachs because we think they are going — volatility will help trading returns. We think you will start to see an increase in M&A activity.
Many companies have large amounts of cash on their balance sheets, even with rising interest rates. And there are some really attractive valuations for companies out there. So we think that, you know, they’re going to be a little bit better than expected and that’s going to put a nice floor under the market, at least for the rest of the earnings.
SEANA SMITH: Nancy, you mentioned that you were actively supplementing even before earnings season. Given all the uncertainty ahead, what do you like now?
NANCY TENGLER: So we created a position at Tesla called Seana. We thought the sale was over the top. We had him years ago when Elon was in bigger trouble than he is now. Remember, after that there was the SEC. He slept on the factory floor. You know, he was doing podcasts with Joe Rogan drinking whiskey and smoking bongs. And he was losing staff in a meaningful way.
We learned– we doubled in the fund and got out and left a lot of money on the table. I think when you look at the growth, even with reduced demand, this is a stock you want to own in three to five years. Maybe not in the next three months, but it will give us an opportunity to add to our position. So there is a name on the risk side.
And then on the non-risk side, we do dividend — generally, most of our assets are in dividend growth strategies. So we add names – add to names like Oracle. We add to Chubb. And so there’s a little bit of risk-free and a little bit of risk, and we’re beefing up our portfolio accordingly.
DAVE BRIGGS: And Nancy, markets continue to move up and down every time a Fed official opens his mouth. You are listening to the bond market. What does that tell you?
NANCY TENGLER: So the bond market is having a big fight with the Fed right now. I think this tells us that the Fed is not going to be as aggressive as they say, in fact, we could be in a recession. But it won’t be that deep. My money is on the bond market, because let’s not forget that the Fed’s December 2021 dot plans didn’t even see us hitting 3% in the Fed funds rate until 2024.
And so I think we have to take that into account. This is a Fed that has been wrong at every major turning point since Chairman Powell took office in 2018. That is, its first moon market was in 2018, from early October to Christmas Eve. So I suspect that the rhetoric will not match their actions.
Now, I know a lot of people disagree with me, but I think that’s the way the bond market is – I’m in their camp. I don’t have them.
SEANA SMITH: Yeah, Nancy, that’s interesting because the markets believe what you’re saying, because every time we get a hint of dovishness, not even dovish, they don’t double down on the most hawkish stance we’ve heard these days. lasts for several months. We have certainly seen an upswing in the market. So if you don’t think the Fed will be as aggressive as they are signaling now, what do you expect at the next meeting? And do you think they will take a break?
NANCY TENGLER: Well, yes, I do. I mean, if you look at it, they depended on the data in Jackson Hole in 2020, which means they’re looking back to make policy for the coming quarters and years. But if you look at the actual data, the PMIs rolled. Prices paid, which are highly correlated with CPI, fell off a cliff last month. Shipping costs are reduced. Rents are falling, wheat, corn, commodities, energy.
So I think they’re going to find that the CPI is going to be better. And if you look at the annual figure that looks three months back, it’s not the number that’s quoted, it’s the one year figure that’s going back. But the annual rate is about 3.3.5% for CPI. It’s already below [NO AUDIO] it `s degree.
I think the risk is that maybe there is some ego, some legacy. I don’t think we should set Fed policy that way. But the data will show that they are doing enough, and let’s start the delayed effects. I think 25, you start hearing it. But it doesn’t matter. We are closer to the end than we were a few months ago.
DAVE BRIGGS: Let that medicine do its job. Nice to see you, Nancy. Many thanks.
NANCY TENGLER: Yes. Thank you, David.