Andrew Mies, 6 Meridian chief investment officer, joins Yahoo Finance to discuss the Fed policy decisions and market outlook.
Video Transcript
JULIE HYMAN: Well, we're looking at futures indicating a lower open as we approach the opening bell here this morning. As we've been talking about, Brian, we've been watching tech stocks under pressure. We've been watching SPACs under pressure as we see this sort of rollover and roiling of the market continue.
Let's bring in Andrew Mies. He is 6 Meridian chief investment officer. Andrew, it's good to see you. We keep trying to sort of figure out where we are in this process, right, in this process of reflation, reopening trade, because even though we seem to have changed direction, it has not at all been consistent. So what's your assessment of where we are in that process?
ANDREW MIES: Thank you for having me. And I think you're exactly right. There is a lot of confusion. One thing that's consistent though, is that the underlying data for your average person out there is getting better. So if you think about what's happening with-- look at the report this morning on jobless claims, which were much better than expected.
You look at the vaccination rates. I'm here in Wichita, Kansas. And we're seeing a pretty significant uptick in the number of vaccinations. I think that's true across the country as well. And then you're seeing companies that are obviously reporting very good results as well.
So the market is in some ways digesting a lot of good news that it priced in last year. And as a result, the big question that we have and that I think clients have and investors generally is, what's the next incremental bit of news that moves the market? Because a lot of the things that are happening right now are things that probably got priced in over the last three to six months.
BRIAN SOZZI: Andrew, I'm going to throw a red flag onto the field here. Yesterday, we saw a really, I would say, jarring reversal in the markets off of that hot PMI data. Perhaps that makes sense. But some big selloffs. Peloton down close to 11%. DocuSign got crushed. Some of those stocks are getting crushed again here in the premarket or just seeing just major moves in the red. Is there another bottom about to drop out of big cap tech stocks here?
ANDREW MIES: Well, I think that I would tell you that we would look at it in two different segments, big cap tech being maybe the Googles and Microsofts and Amazons. And then if you look at maybe the Pelotons and some of the other names, the moves that those stocks have had are just incredible. And the fact that they get digested over time isn't unusual.
You can look at a lot of history of emerging growth companies that have major selloffs along their way to continued success. And so I'm not sure that I would say that it's something that we're very concerned about in terms of some of these stocks that are up 300%, 400%, 500% over the last year. But there is a rotation taking place.
I mean, everybody is talking about it, the rotation into cyclical value stocks. And when that rotation takes place, it is a matter of money flows to what what's been working. And more money has been flowing to banks and energy and things that are benefiting from this reopening.
So I guess I would say if you own Peloton and you've seen it go up multiples, you're probably not going to sell it now, all of a sudden, to pay the capital gains tax on it. But it's probably going to be a bumpy ride.
JULIE HYMAN: And so talk to me about what you guys are doing specifically, Andrew. As you've been watching all of this go on, have you kind of made some reallocations, or where are you guys overweight? Just gimme a snapshot here.
ANDREW MIES: Sure. Well, one of the things that my team and I've been looking at right now is the move in interest rates. And we're significantly underweight duration coming into the year, which that didn't require heroics or to be particularly smart to do that. With the 10-year under 1%, you just underweight long-duration assets. Now you've got to move closer to the 2% and the longer-duration bonds even higher, we are looking at taking that, not going overweight, not getting aggressive but maybe less underweight duration.
And then we also have been looking at the move in small caps relative to large caps. It's been a tremendous move this year. So we're seeing a little bit of a pullback on that for people who are less tax-sensitive maybe, not being able pull some small cap exposure down. But we generally think that the tailwinds are OK for the market right here. It's not nearly the opportunity we had last summer when you saw things were improving.
But there's also a lot of built-in tax consequences. Our clients are generally taxpayers. And so you can't make quick moves in order to capitalize on things because the government takes a big chunk of it if you move too quickly.
BRIAN SOZZI: And we had the opening bell on Wall Street. SemRush was ringing that opening bell. They call themselves online marketing tools maker, interesting business model.
Andrew, may you briefly mentioned taxes. How many questions are you getting from clients on the potential of the administration to raise taxes? And are you yet making changes to portfolios, given any concerns of higher taxes?
ANDREW MIES: We are. It is a big topic of conversation. So your average high net worth investor is going to be looking at tax rates and the conversation on tax rates. And it's a big, big driver of how they plan.
So the first one you look at is the move up in individual rates. That's not hugely significant, going from 37 to 39. And the move up in the corporate tax rate-- but it's really the long-term capital gains tax rate, if that were to move from the low 20s currently up to the marginal tax rate, that would be a significant driver of investor behavior. And I think that you could see a lot of people starting to anticipatorially sell to lock things in, maybe, that they feel is pretty fully valued, to lock that tax rate in.
So more to come. But we are watching it closely. And for your typical high net worth investor, that move in capital gains tax rate is a big deal.
JULIE HYMAN: Interesting. We'll keep an eye on that, any tax-related selling that could be coming down the pike later this year. Andrew Mies, thank you so much for being here. Appreciate it.