Stocks started the week down as pressure on tech continued.
Here’s what investors are saying about the markets.
Roger McNamee, Elevation Partners co-founder, says there could be more downside for technology ahead.
“Now we’re in a situation where, uh-oh, there’s some inflation showing up. And we are faced with the challenge of dealing with the structural flaws in our economy that were exposed by the pandemic, the fact that we couldn’t make cotton swabs or PPE when we needed them, and it feels like [President Joe] Biden’s strategy is to move on to infrastructure and deal with those problems as the next step, which has further implications for inflation, has further implications for investors. … And so to me what’s going on is that for tech investors, we’re looking at a possible transition where the share of the pie going to tech is going to be lower for a while.”
Tiffany McGhee, CEO of Pivotal Advisors, says it could take time to get back to a sense of normalcy in the job market.
“I really believe that we’re in a transition period. We’re really trying to figure out what our new normal is … and it’s not that we’re going to snap our fingers and go to this reopened state. It’s going to take a while for us to get there. … I’m really thinking about the jobs number that came out. And so, when you think about the Fed, and the Fed has been so very vocal about saying that they’re watching the jobs numbers, I don’t think that this job recovery is going to be as smooth as everybody thinks. We’ve all been at home, either working from home or maybe out of work and getting employment, and I think that we’ve gotten used to a particular quality of life, and I don’t think you snap your fingers and you go back to the same situation that you were in before, especially if you’re making more money in unemployment than you were working before and you get to stay home with your kids. I think there are a number of factors involved that are really going to not make this jobs recovery as smooth as everybody thinks that it’s going to be or expects it to.”
Mark Grant, chief global market strategist at B. Riley Securities, urges caution in this market.
“There’s a huge correlation between every time the Fed puts in more money … it’s basically a positive for stocks but then you also have at the moment in my opinion a lot of froth in the market, you have almost a gambling mentality with some of this stuff. … I think speculation, meaning buying something at one price and hoping it goes higher, is fine. I think plays for yield and cash flows are a very important part of the market, but I’m not the gambling type, so I think that people have to be careful what they’re doing.”
Mohamed El-Erian, Allianz chief economic advisor, shares what he believes the Federal Reserve‘s next move might be.
“The Fed certainly is showing absolutely no hesitation in reasserting its conviction that inflation is transitory. So short term I don’t think the Fed moves at all. It will need unambiguous evidence that we’ve turned. And then by the time it gets it, it has to go through a whole cycle. … Whether it extends as far as 2023, I’m not sure.”
Jim McDonald, chief investment strategist at Northern Trust, breaks down his portfolio strategy.
“If you look at the history of the performance of stocks, they can do fine with inflation up into the 3% to 3.5% level, and companies have pricing power and they tend to do pretty well in that environment. P/Es don’t get hurt too bad. So in our positioning we are in a 60/40 portfolio — 68% risk assets and just 32% in bonds, because we do want to be positioned for growth, but we want to understand the inflation sensitivity of what we own.”
