Defiance ETFs CIO Sylvia Jablonski joins Yahoo Finance Live to discuss the outlook for stocks amid Fed rate hikes, inflation, supply chain constraints, volatility, and economic risks stemming from the Russia-Ukraine war.
Video Transcript
JULIE HYMAN: All right. Let's broaden it back out now and talk about what we have seen this week, what we could see next. Sylvia Jablonski is with us. She's the CIO and co-founder of Defiance ETFs. Sylvia, it's always great to see you. I want to start by picking up on the point that we were talking about at the beginning of this conversation, which is just how we have seen this sort of rebound in stocks and seeming resilience in the face of, yes, oil prices come down a little bit. But by and large, we've still seen a big move upward. The Fed's raising rates. There's still a war going on. What do you think that sort of resilience is coming from?
SYLVIA JABLONSKI: Hi, Julie. Good morning. And great to see you. Look, I think that we're in this state of rangebound volatility that's going to continue. And the momentum to the downside is almost equal to the momentum on the upside. My sense of what happened this week is that investors are starting to see a tradable bottom here. There's $2.7 trillion of savings sitting on the sidelines. And if you leave that in cash, you're essentially taking a loss because of inflation.
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So if you look back and look at some of these mega-cap names like Apple, at some point we saw a head and shoulders pattern there. S&P death cross for a hot second there. If you go back, it's 2008 that we're looking at when you had these opportunities to get in. So I'm not calling a bottom here. But I think we're definitely in some sort of tradable bottom range. And I think that investors with a longer term horizon are going to jump at their opportunity to get into some of these stocks finally. So that's what we saw this week.
BRIAN SOZZI: Sylvia, tradable bottom. When I hear that, I think investors would be better served to ignore what's happening in Russia and Ukraine and higher oil prices, no?
SYLVIA JABLONSKI: Yeah. I mean, it's hard to sort of ignore it, right, because that's the potential headwind. And that's the risk to all of this not playing out. If things between Russia and Ukraine get worse, and they're arguably terrible right now, and you have this continued issue with oil prices and the pressures of price inflations on our market, that'll sort of change people's perception of their own wealth.
And that will make them sort of hold back on spending and things like that in the long term. But I think if we get a resolution here and we get some pullback on inflation, which we hope to see, and perhaps may, if we sort of get past this and see some of the supply chain issues ease up, then it is reasonable to expect the market to finish up this year. So it's not sort of like close your eyes and nothing bad can go wrong. But I think that a lot of the evidence in the market-- strong economy, although it's slower growth, it's still positive growth. Over 2% per Jay Powell is the estimation. Again, that savings job numbers are great. Consumers have cash. Companies have cash. It's a good time to take, I think, that risk.
JULIE HYMAN: Sylvia, we just had a list of the things that you think are the highest risks up on the screen, things like COVID, things like supply chain constraints. And I would ask you as you talk about this sort more optimistic tilt is it that you think the market has mostly priced in these various elements? Is it that you think that these things are not going to worsen and they're well understood at this point? What do you think?
SYLVIA JABLONSKI: I think that the market has priced most of this in. The only outlier I think-- or the biggest headwind-- would be Russia in Ukraine. I think we anticipated what the Fed was going to say. And it sounds like they're going to stay the course, but also with transparency and also keeping in mind the relative risks to the economy.
So I think the market had that priced in. In terms of inflation, we know that story. It's been going on for a long time. And if anything, we would hope that if Russia and Ukraine gets resolved and supply chain issues ease up, that starts to sort of fade and lower in coming months. So, yeah, I think it's priced into the market. And I think investors expect and are sort of just living with this volatility now.
BRIAN SOZZI: What ETFs, Sylvia, do you like? If this is in fact a tradable bottom, where do you go?
SYLVIA JABLONSKI: Yeah. I think three things. Number one, the mega-cap darlings, the Apples, companies that make their own chips. 40% revenue increases. The cloud companies. Amazon, Google, Microsoft. They sort of touch everything from cybersecurity, cloud, augmented reality, AI. And they had 30% to 40% year over year growth in some of those areas.
But ETFs on our side, I love 5G. You need 5G to be successful in wartime, for example, to check missiles, targets, to communicate. You need it for electric vehicles, artificial intelligence, all of these secular tech trends. And kind of the sleepy reopen trade, the travel revenge trade. Cruises, airlines, hotels. Prior to Russia and Ukraine, some of those names-- Marriott, Southwest, Royal Caribbean, sort of pick one-- were up mid-single digits, 7% to 8%, versus S&P, which was down about 8% at that time.
So you saw that pent-up demand. You saw that hitting the stocks. And saw that sort of recovery there. I think Russia price of oil pulled all that back. But again, once we get past that, I think that those are the areas that soar. We're all dying to get out there. And I think live in the world and spend some money doing it. So I do think that the cruise, hotel, airline trade will work.
JULIE HYMAN: I mean, it's interesting when you talk about tradable bottom and then you talk about the travel industry because I feel like either way we're in for a tough road in the medium term it feels like, in the short to medium term. Do you think that investors generally need to be looking a little bit longer term here than they have been?
SYLVIA JABLONSKI: Yeah. That's a great point. I think given the volatility, if you're an experienced day trader, maybe you're making sort of quick PNO on some of these mega-cap names and playing these 2% moves and whatnot. However, I think investors do need to have a longer term view. I don't think that any of this will play out overnight. My suspicion is that it plays out closer to Q4 this year. I do think we're going to end the year up across various sectors, but particularly in NASDAQ and S&P in these travel names.
But I think if you have an even longer term view, that's probably an even safer bet. But, again, we're looking at levels-- we're looking at opportunities that we haven't seen for over a decade. So it's reasonable to get into the market.
JULIE HYMAN: Sylvia, it's great to see you. Sylvia Jablonski, CEO and co-founder of Defiance ETFs.