Bill Baruch, Blue Line Futures President, and Jason Ware, Albion Financial Group Partner and Chief Investment Officer, join Yahoo Finance Live to discuss market lows, the Fed, the financial and bank sectors, and investing opportunities amid high volatility periods.

Video Transcript

- All right, we have got about a minute until the closing bell, and we are accelerating to the downside. Another day of selloffs. Let's introduce you to the panel that's going to help us understand what we're witnessing after we get the gavel. Bill Baruch is the president of Blue Line Futures. Jason Ware, Albion Financial Group partner and chief investment officer, is also here.

But let's take a look what's happening right now as we set up for the closing bell. You've got the Dow off 1.5%, down 560 points, the S&P 500 off almost 2%, down almost 90 points, and the NASDAQ off 400 points today, down two plus, 2.5%. A couple of things to keep in mind, too. While there are losers, obviously, today in the Dow, there are winners.

Among the gainers today, Caterpillar, Visa, and Chevron. They did trade higher today. But we're watching the selloff accelerate because there's concern about what Goldman Sachs reported before the bell. And we have to keep an eye on that, as interest rates also are rising now over the 10-year, over 1.85, 1.85%. Here's the bell.

[BELL RINGING]

- And that is the closing bell this Tuesday, January 18. As Adam was mentioning, definitely some heavy selling action heading into the close, in the minutes leading up to that, especially in tech stocks. Now, the NASDAQ composite down about 2.6%. The Dow is going to settle lower by more than 500 points, or about 1.5%. And Adam was mentioning some of the winners, but some of the losers Goldman Sachs, JP Morgan, and Cisco, all leading the way to the downside in that index.

But let's kick it back over to our panel. And Jason, I'll start with you. We're near correction territory on the NASDAQ. We're down about 10% from close to close from a recent high. Is there further to fall on tech stocks? And if so, how much further?

JASON WARE: Good to be with you guys. And thanks for the question, Emily. You know, you're asking me to put on my trader hat, and I'm not a great trader. We are good long-term investors at Albion. But nevertheless, I'll try to answer your question.

What we saw today was a bit of a technical breakdown in the NASDAQ, in that it is trading below its 200-day moving average for the first time in quite a long time. So does that mean we have more selling to go? I think there's an argument to be made once we break down below that key level, and given the momentum in the market to the downside to start the year and given the nervousness from traders around Fed policy, that this correction is probably not over yet, but at some point will find a bottom where investors start to sniff around for bargains within the broader selloff.

- Bill, you know, those of us who might classify ourselves as average investors, when we get a report like we did from Goldman Sachs, that if the alleged best names in the business actually have an equities slowdown, if their trading desk isn't performing as is expected, what is the message to the rest of us, who might perceive the fact that we don't play in their league?

BILL BARUCH: Listen, I think that the best of the banks have really set expectations over the years to under-promise and overdeliver. And you know, today I think, you know, you look back at the last few quarters, and there was quite a bit of overdelivering, not necessarily overpromising. But today, I think they're setting a stage of under-promising. And I like Goldman Sachs. I nibbled on that here, you know, to add to that position today. I'm looking forward to Morgan Stanley tomorrow. I think really two-- there's obviously the reports today, but the flattening of the yield curve in that two and against that 10 is really at a very critical technical level, as well. So I think that also hurt the financial space.

- Jason, you mentioned taking a longer-term view to some of your investments. Where are you and where is Albion Financial seeing opportunities beginning to appear, given the volatility that we've had so far in 2022?

JASON WARE: Yeah, great question. So we're seeing opportunities across our entire portfolio, which of course means our entire portfolio is selling off with the broader market. So whether it's a company like Starbucks-- and it was actually highlighted prior to this segment as a quote unquote Chinese stock-- we think that's a company that continues to execute well within a coffee market that has fairly secular growth, in our view. And there's a lot of share to be taken in new products to innovate on, as far as the menu's concerned. And yet, the stock's down 16.5% year to date, after underperforming in 2021, mind you.

So I think there are areas you can go to find high-quality companies. We think the megacap technology sector still looks attractive here. I know I've been on this network many times over the last several years, pounding the table on the likes of Amazon and Apple and Microsoft, Google, Accenture, et cetera. We also like Oracle within that group as a relative value play in cloud. So I think if you're taking a long-term view, if you're thinking and acting over the long term, you can find great companies that are selling at discounts, whether it's 15% to 20% off of their highs, that you can really lean into here, understanding that they may go lower before they reverse trend. So just look for high quality, great companies with secular growth tailwinds, and I think you'll be all right.

- Bill, part of what Jason just said, wouldn't financials benefit from-- I'm looking at the 10-year, the yield, 1.86. Aren't they-- I get how important the spread is between short-term duration and the 10-year, but aren't the financials going to stand to gain as we're in this, you know, increasing interest rate environment?

BILL BARUCH: I absolutely agree with that. And that's one of the reasons why, you know, I nibbled on Goldman Sachs today, a little bit of JP Morgan and Morgan Stanley on Friday. I think that they're going to be performing pretty well. But here's the reality, is it's a very consensus play right now. Everybody's fairly bullish on the banks, and they've had a heck of a run.

It really-- you know, it wasn't time to be adding to banks through the last two months. It was the time to be adding to the banks for the last six months prior to that to 18 months prior, you know, when the 10-year was at 60 basis points. That's when we really started building in big positions in the banks. So you know, I think you're seeing a little bit selling as some of the exuberance around it has kind of cooled off a bit, but I think that brings opportunity, and I do expect them to outperform this year.

- Jason, we're about a week out until the next Fed meeting. I'm wondering, what do you think investors should be looking at next week in that statement and in that press conference to get a sense of how we're setting up for that March meeting, and whether we may actually get liftoff at that point.

JASON WARE: Yeah, I think the futures market is very clear in that liftoff in March is likely to be the case. I mean, as well, we've heard from a very-- you know, a chorus of Fed speakers, whether it's Daly or Bullard, et cetera, saying that-- I mean, you know, even Brainard suggested that March is in play. So I think, at this point, it's very clear that the first rate hike will be at the March meeting. So I think as we look at the January meeting, which is likely to produce very little, or zero, quite frankly, in policy terms, what investors and what we're going to be looking at is really just the language around inflation, because at the end of the day, inflation is what's driving Fed policy, at least over the medium term.

They feel like they've checked the box on full employment mandate. I think we largely agree with that assessment. But inflation is the big question for 2022. And if we start to see disinflation as we work through this year, which is our base case view, that might give the Fed a little bit more cover to not raise rates in the markets, now saying about four times. We think it might be more like two or three times if we do see that disinflation take hold. So keying in on what the FOMC is seeing around price growth is going to be critical for the January meeting as we get to March, which will likely be liftoff.

- Jason, one absolute guaranteed fact when they give us the statement from the January meeting, the one word, the one vocabulary word you can ignore, transitory will not be in there when they're talking about inflation.

JASON WARE: That's right. Yep.

- We appreciate you joining us, Jason Ware, Albion Financial Group partner and chief investment officer. Also the president of Blue Line Futures, Bill Baruch.