Nancy Tengler, CEO and Chief Investment Officer of Laffer Tengler Investments, joins Yahoo Finance Live to discuss the state of Tesla stock amid its recent troubles, why the earnings season could disappoint investors, and the likelihood of a recession.
video transcript
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DAVE BRIGGS: Let’s move on to the closure of Wall Street.
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All right, your closing bell is ringing on Wall Street this Tuesday. And it’s nice to see a lot of green, all green on this board as the Dow is up 187 points, just over half a percent. The S&P also ended up 27 points higher. And the NASDAQ, the big winner of the day, despite what we make of this higher rate environment, usually the most sensitive to these higher rates that the Fed has repeated time and time again, 23 won’t cut, up 106 points. more than 1% winner that day, Seana.
SEANA SMITH: All right. Let’s talk about what this could mean for equities for the rest of the year here. Certainly a strong start, if we want to call it that. We would like to enlist Nancy Tengler, CEO and Chief Investment Officer of Laffer Tengler Investments.
Nancy, it’s great to have you here in the studio. So the start to 2023 was certainly better. Many questions about how the next few months will look like. What’s your big takeaway from the trading action we’ve seen so far, and what does that signal?
NANCY TENGLER: Well, Seana, thank you for inviting me. Yes, I think a few things. You know we got oversold. And we wrote an article at the end of the year where we said we thought investors were too bearish and we started adding some risk back to our portfolios. But I don’t think we’re done.
I think we have to get through earnings season and we’re going to see some disappointments. We will see some volatility I suspect. But I think in the second half of the year or until the end of the year the market isn’t going to go up a lot, but in a normal way, you know, maybe low double digit volatility in the first half of the year. So we have been actively adding different aspects and different sectors to our equity portfolios.
The story goes on
DAVE BRIGGS: Yes, Nancy. Good to see you. David here. Many are calling for 3,000, 3,200 low for the S&P. Do you think the soil is in? And you talked about earnings, what do you expect we’ll learn next Friday when the big banks start reporting?
NANCY TENGLER: Yes. I wish I knew that, Dave. Good to see you. But I think they should benefit from a rising rate environment. We think our favorite bank for 2023 is Goldman Sachs because we think they will – the volatility will help trading returns. We assume that M&A activity will pick up.
Many companies have enormous amounts of cash on their balance sheets, even when interest rates are rising. And there are some really attractive valuations that companies can snap up. So we think, you know, they’re probably going to be a little bit better than expected, and at least that will create a nice bottom under the market that feeds into the rest of the profits.
SEANA SMITH: Nancy, prior to earnings season, you mentioned the fact that you were actively adding. With all the uncertainty ahead, what are you enjoying right now?
NANCY TENGLER: Well, so we just opened a position, Seana, at Tesla. We thought the sell-off had been overdone. We had owned it years ago when Elon was in much bigger trouble than he is now. Remember, he was through SEC. He slept on the factory floor. He podcasted, drank whiskey and smoked a bong with Joe Rogan. And he lost staff in a meaningful way.
We learned, we doubled the stock and got out, leaving a lot of money on the table. I think if you look at the growth, this is a stock you’d want to own three to five years from now, even if demand slows down. Maybe not in the next three months, but this gives us an opportunity to expand our position. So that’s a name on the risk side.
And on the risk-free side, we’re dividends — generally the bulk of our wealth is in dividend growth strategies. So we add names – add names, like Oracle. We add Chubb. So a little bit of non-risk and a little bit of risk, and we balance our portfolios accordingly.
DAVE BRIGGS: And Nancy, the markets continue to go up and down almost every time a Fed official opens his mouth. You listen to the bond market. What does it tell you is around the corner?
NANCY TENGLER: So the bond market is having a big fight with the Fed right now. I think it tells us that the Fed won’t be as aggressive as they say we might actually get a recession. But it won’t be very deep. And my money is in the bond market, because let’s not forget that the dot plots, which were the Fed’s own predictions in December 2021, didn’t even see that we achieved a 3% return on the fed funds rate by 2024.
And so I think we have to keep that in mind. This is a Fed that has been wrong at every major turning point, starting with Chairman Powell’s takeover in 2018. I mean, its first bear market was in 2018, October through early October through Christmas Eve. So I am suspicious that the rhetoric will not match their actions.
Well, I know a lot of people don’t agree with me on that, but I think the bond market is– I mean, I’m in their camp. They are not in mine.
SEANA SMITH: Well, Nancy, that’s interesting because it seems like the markets believe what you’re saying, because every time we get a hint of restraint — not even restraint, that they don’t double down our most restrictive stance in heard in the past few months. We have certainly seen an upswing in the market. So if you don’t think the Fed will be as aggressive as it’s signaling right now, what do you expect at the next meeting? And then you think they’re going to pause?
NANCY TENGLER: Yes, I do. I mean, if you look at that, in Jackson Hole 2020 they became data dependent, which means they’re looking back to shape policy for the quarters and years to come. But when you look at the actual data, the PMIs have shifted. Prices paid, which are highly correlated to CPI, fell off a cliff last month. Shipping costs have gone down. Rents are falling, wheat, corn, raw materials, energy.
So I think they’re going to be faced with the fact that CPI will do better. And if you’re looking at the three-month retrospective annualized number, not the number that’s being quoted, which is a trailing one-year number. But the annualized rate is about 3.3.5% for CPI. That’s below [NO AUDIO] Valuation.
So I think, I think the risk is maybe there’s some ego, legacy involved. I don’t think that’s how we should set Fed policy. But the data would show they’ve done enough, and let’s factor in the lagging effects. So I think 25 you’re starting to hear that. But it doesn’t matter either. We are certainly closer to the end than we were a few months ago.
DAVE BRIGGS: Let the drug work. Nancy, nice to see you. Many Thanks.
NANCY TENGLER: Yes. Thank you David