Tim Seymour-.founder and Chief Investment Officer of Seymour Asset Management (SAM). SAM provides both asset management and wealth management services for its clients. Tim is also the Portfolio Manager of the Amplify Seymour Cannabis ETF ticker: $CNBS.
2024 Market Outlook.
2024 Market Outlook.
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NewsTranscript
00:00 Tim Seymour, CIO at Seymour Asset Management, joining us here on PreMarketPrep.
00:07 Tim, how are you doing?
00:09 How has the year been treating you?
00:11 The year's been treating me great.
00:13 It's been a year of picking stocks.
00:15 It's been a year, obviously, of the sentiment typically being pushing in one direction,
00:24 and that's led to major countertrend rallies.
00:27 I think you guys know this over the years.
00:29 I'm kind of a long cycle investor, at least with some of the things in my international world.
00:35 There's some really interesting long-term trends that I think have been continuing to play out,
00:43 whether it's the dollar.
00:44 We talk about rates all the time.
00:46 The move higher in rates is not just – and then the move lower, of course.
00:50 But I still think we're in a move higher from 2015 on rates that I still think at least still needs to be proven
00:58 that it's not still going higher.
01:00 The move in gold, the 20-year gold chart is one of the best charts out there.
01:07 So there's a lot to talk about.
01:08 It's been a great year, most importantly.
01:12 Friends and family, a lot of good help.
01:14 And the Rangers have come out of the gates as the best team in the National Hockey League.
01:19 The best team.
01:21 The conventional wisdom this year was supposed to be don't fight the Fed, right?
01:27 Because rates are going up and you should have alternatives to the market, right?
01:31 And that happened until October.
01:33 And then you all know what happened in November and December.
01:36 It could be a flip of the switch here next year with rates going down that the market goes down with it.
01:44 Is there any chance of that happening?
01:46 Or is it just good when rates go up and good when rates go down?
01:50 No, it's obviously higher rates were bad, so lower rates seem better is, of course,
01:58 what we've been doing since rates peaked in the end of October market.
02:03 We all know what these numbers are.
02:05 So it's 20 percent on the Q's.
02:08 It's 16 percent on the Spies, more or less.
02:10 It's stratosphere on semis all making relative new highs.
02:15 There's different pieces of this analysis.
02:17 But you're asking me about rates.
02:19 We all know that lower rates ultimately are not what we want.
02:22 And we're talking about whatever whatever that line in the sand is.
02:26 It's probably 350 in the 10 year where people start to get really upset.
02:30 And it is emblematic of at least the economic conditions.
02:36 Everybody's got their history books out.
02:38 Everybody knows when the Fed starts cutting.
02:41 It's you know, there's your timing on that.
02:44 It's not good news for equities and they're they're cutting for a reason typically.
02:49 So, look, I'm not sure we're going to move a whole lot lower on rates.
02:55 I'm not sure we're supposed to move.
02:57 OK, and that's based upon the economic fundamentals we have right now.
03:01 I like I think the labor market's going to continue to deteriorate.
03:05 That's what the Fed wants.
03:07 I think discretionary spend is going to start to pull in.
03:09 I think this sequencing of all of the post-COVID economic realities have been much slower to play out.
03:17 And so but but from a market's perspective, and this is what you guys do every morning, it's the market you have.
03:25 And the market we have right now tells me that I still think that there's a fair amount of cash on the sidelines.
03:32 I think there's I don't even think we've really seen a blow off top.
03:36 I know this is crazy.
03:38 But but I think we're going to go higher.
03:40 But I think it's it's you know, I think you do need to be dancing by the door in a handful of trades.
03:45 I think there's some great setups for next year.
03:47 We all know there's parts of the real economy that have really underperformed and have underperformed this move.
03:54 So I think there's different places to be looking that I think, especially for a lot of your audience,
04:01 whether it's an advisory community, self-directed investors, people that are looking longer term.
04:06 There's people who love to trade the market every day, pick whatever part of your portfolio and of your net worth you want to do that with.
04:13 But if you're investing in allocating over the long term, there's there's some really interesting stuff to do with the market that we have right now.
04:20 And so it's been it's there always wild years.
04:25 This one seems like it really has been a little crazier.
04:29 I'm looking up at my screens and again, I mean, I think this this this breakout in gold should be telling you something.
04:37 And I think it should be telling you trends that have been you know,
04:41 we started talking about why central banks were buying gold and why people are buying Bitcoin.
04:46 We could have had this conversation five to 10 years ago.
04:50 We all know the US doesn't lose reserve currency status overnight.
04:54 But we also know that some of these trends and the foundations for change are well in place and they're not going to change.
05:01 And so, anyway, I think the move lower rates is, you know, three eighty five, 10 year right now is probably a place that feels like a sweet spot.
05:12 I think the the dynamics for the housing market, I don't think get a whole lot better.
05:18 The financial conditions out there have gotten a lot looser and that's not going to help the Fed's job.
05:24 I think we you know, I think we have a lot of there are structural elements of inflation here that aren't going to get a lot better.
05:32 And in fact, probably hold here, maybe get a little worse.
05:35 If the Fed wants to hold the line at 2 percent, then I don't think we're going to get there.
05:40 What about China? And I mean, overnight we get hit here again.
05:44 I know Tencent was getting whacked here overnight on more gaming online gaming restrictions here.
05:50 I mean, regulation has just been an issue for China stocks for a very long time.
05:55 But, you know, just quietly, the FXI is trying to make a new 52 week low here.
05:59 I mean, it is the complete opposite of what we have over here in North America.
06:04 I mean, other emerging markets have done fairly well, but China just cannot catch a bet.
06:09 PDD has been OK, but all the other ones like Alibaba, you know, and you can just go through the list.
06:14 JD, Baidu, they're all just hanging out not that far from 52 week lows.
06:19 But a really tough trade. Is there a catch up trade for China in 2024?
06:24 Well, there's certainly a again, a counter trend dynamic here.
06:29 There's there's sentiment on China is as low as I've seen it.
06:33 And I think you guys know and your audience knows that for some may or may not know,
06:38 I spent a lot of my career investing internationally and I think the setup in China is is not great.
06:46 But I think sentiment is worse than I've ever seen it.
06:49 But but look, they think about Tencent and think about Alibaba and think about the pressure that's coming from within, not coming from US investors.
07:00 And this is part of the problem. We had these moments where we thought, OK,
07:05 Jack Ma has been returned from his weekend at Bernie's.
07:12 Joe Tsai is a really credible guy and a guy I think Western investors know and can get comfortable with.
07:17 And he's he's kind of put into a chairman's role that looks like, OK, you know, they've kissed the ring.
07:22 It's time to move on. They're going to spin off assets. Some of the parts make a lot of sense.
07:26 Like I own Alibaba and I've traded it, but I haven't traded it as well as I should have,
07:31 which means you trade every 30 percent rally, which you've had five in the last, you know, in the last 18 months or so.
07:37 It seems maybe it's two and a half years. But but right now it's it's hard to truly believe that,
07:44 especially after they they've called off a couple of the IPO and a couple of the spin offs that were part of this catalyst.
07:53 But I think the good thing for markets here is that we do live in a world where China GDP of eight to 12 percent is is not what the world needs.
08:04 And China's GDP was driving our market at one point.
08:08 I do think you're you're in a place where China is is also making changes in terms of how they approach monetary policy and fiscal policy.
08:18 I do like emerging markets and I do like international. So let's be clear.
08:24 I think if you if you look at what's been going on in Brazil and Mexico, those are the two biggest economies in Latin America.
08:30 And at least in terms of both some of the political changes, some of the dynamics, I think, on where the central banks have already made fiscal adjustments.
08:41 I think the real is cheap. Typically, when you're investing in emerging, the currency can be 50 percent of your return profile.
08:47 You know that dollar chart that Dixie double top, you know, kind of going into this year, which have now led to me.
08:55 People are not I mean, maybe they are. Maybe you guys are talking about it, but but people are not taught.
08:59 They should be talking just as much about the move in the dollar, which is five and a half percent in 32 sessions as they should be talking about rates.
09:08 I mean, they they are they are extraordinary. So the setup for international and also multinationals is fascinating.
09:15 You know, I think you guys know I'm a research advisor on a ETF called IDVO.
09:20 IDVO is the ticker. And it's seeking to find companies that are increasing their payout levels, dividend yields,
09:29 covered call strategy, active strategy and something that has outperformed the equal weighted S&P from its inception.
09:37 And and when I think about international, I think about these great big multinationals that a lot of people either just haven't invested in,
09:44 don't know a lot about, but we're not necessarily you're not reaching deep into China to take risk.
09:49 You don't have to invest in China internationally to make money.
09:53 And so, you know, whether it's a Tokyo Mitsubishi Bank, you know, the JP Morgan of Japan, which trades at, you know,
10:01 point eight price to book, which is not cheap relative to itself.
10:05 Although, again, this is a company that's growing its payout levels.
10:08 We all know that at the end of YCC in Japan will be good for the banks.
10:12 It'll be great for the banks. But there's also a lot of pressure on payout levels there from the T.
10:18 From the excuse me, from the Tokyo Stock Exchange and where they've actually forced this governance dynamic.
10:25 So companies are, I think, more aligned with investors like the breakout in the DAX to all time highs before the US hits all time highs.
10:32 Why is that? It's not that I think the macro backdrop in Europe is that extraordinary.
10:37 In fact, I think they probably have more headwinds than we do. But I do look at the pressure that's been on a lot of their kind of old economy stocks and the industrial side of it.
10:46 And I say you you you you've actually relieved a lot of that pressure.
10:50 I think the inflation trends there obviously have changed, especially around the energy sector.
10:54 I think AI and some of the technology pixie dust that that has been driving our markets and our tech sector.
11:01 But really, if you think about a lot of these companies are going to benefit more from AI than without the exception of the chip producers in AI, NVIDIA and Co.
11:11 I mean, this is really where you're going to see the productivity gains in the profitability gains, probably.
11:16 And why it makes some sense to me that some of these stocks are really rallying.
11:20 Look at the move in Siemens. I mean, this is 10 percent of the DAX almost.
11:24 And I think you've got some interesting stuff to talk about. So yes, about China.
11:28 I gave you my quick sketch on the world. I mean, I think it's interesting times here, even though most investors that are listening to you guys are saying, you know, why do I need to invest internationally when I've got great opportunities here?
11:45 Don't worry about internationally. I got an interesting question right here, Tim.
11:49 Of course, in late August, we got the Department of Health and Human Services recommending to reschedule marijuana from schedule one to schedule three substance.
11:59 Of course, all eyes are on this situation because this could lead to massive investments in the cannabis space.
12:06 What are you thinking? And any thoughts on when this could possibly happen, Tim?
12:12 Well, Mitch, those of us that have been following the macro in cannabis for eight years or so or more know that a headline is not a legislative follow through.
12:24 And in the case of rescheduling cannabis to schedule three and be clear, if you get a schedule two, it's not going to be as attractive for at least the multiples of the companies.
12:39 But and what at least has been proposed in the letters we've seen, even if there's a lot of redacted text to what was really sent, which is also kind of absurd.
12:52 People that are following cannabis know this. I mean, we've been all spending times looking at our microscopes in our computers and seeing where we can see.
12:59 Did they cross out that word? Because we're seeing a redacted letter now that was part of that original. HHS to DEA recommendation from FDA.
13:10 But this this is an administrative act seemingly. Right. So to some extent, it's it doesn't have to fall into the black box of Congress right now.
13:19 It might. And and I still think that there's a lot of reasons for progress here.
13:24 I still think that if we can avoid the teeth of the political cycle that's coming up and get something done here, then then it is in the hands of this administration.
13:34 And this administration has been very inconsistent on cannabis policy.
13:39 And and yet that announcement in August, August twenty ninth, twenty eighth of this summer was really follow through from the previous momentum of late October of twenty two,
13:52 when the Biden administration really did start talking about all of this and said that they were going to have HHS do some research, bring the FDA in and recommend what to do with cannabis.
14:04 So I, I, I, I believe cannabis should be scheduled for you. I think it's a no brainer.
14:09 I think it's obviously it there's so much inconsistency in how we socially and from even the pharmacological, the efficacy dynamics of cannabis.
14:22 There's no question that this has medicinal value to me. There's no question.
14:25 This is so much different in terms of can people have behavioral issues with with anything in life?
14:31 I mean, you know, I need to have my Starbucks every morning.
14:34 It probably at its worst means, you know, I get worked up when my kids change the channel on me when I'm watching the Ranger game more than I should.
14:41 I've got my caffeine. But the reality is, you know, and so in leaving that aside,
14:48 what you saw in third quarter numbers for the cannabis sector is that the biggest companies have spent the last two years with a Fed.
14:56 That's and so so with cost of capital getting worse with less capital coming in with greater risk dynamics going on for global markets,
15:03 these companies who have not been able to raise new capital have been become much better operators.