Microsoft Falls 4.6%, Declines Most In 21 Months | NDTV Profit
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00:00Matt Orton, head of advisory solutions and market strategy
00:03and chief market strategist at Raymond James Investment
00:07Management, joins in from Florida.
00:09Hi.
00:11Your initial thoughts, it's not looking very good, is it?
00:16No, it's never fun to wake up on a Monday morning
00:19and see the extension of the sell-off.
00:23Right, absolutely.
00:24So what is your expectation from the day today,
00:27the Nasdaq 100 futures already indicating perhaps
00:30what could be the index's worst open in four years?
00:34Now, also break down for us what is leading up to this.
00:40Of course, the jobs data was very, very poor apart
00:42from that.
00:44Japan didn't do too well as well.
00:47So is that a tailspin effect that we're
00:48seeing from that from the Asian markets?
00:52So I think when you take a step back from all of this,
00:54it's important to put the totality,
00:56to steal a word from Jerome Powell,
00:58the totality of all of the data and all
01:00of the different moves into context.
01:02Because I think what really started
01:05a lot of the jitteriness in the market
01:07really goes back a month ago to the big rotation
01:10that we had in the US moving out of mega caps
01:13into small caps, into more cyclical names.
01:16I mean, literally just a month ago,
01:17we were all enthusiastic that the growth story was intact,
01:21that the economy was going to have a soft landing.
01:24And now we've received some data points
01:26that I think has thrown that narrative into question.
01:29At the same time, you're seeing the unwind
01:31of a $10 trillion plus carry trade with the yen
01:34and the BOJ further spooked markets last week
01:37by increasing rates by 25 basis points.
01:40So I think a lot of investors have
01:42been caught off sides on multiple fronts
01:44of different trades.
01:45And you combine that with thin summer liquidity,
01:48it just is a recipe for really, really big moves in the market.
01:52When you see the NASDAQ down 4% or so,
01:56it's incredibly uncommon.
01:57It never feels good.
01:59But I think it's important for longer term investors
02:01to sit back and ask what fundamentally has really changed
02:06to justify these moves.
02:08I would say there hasn't been that much
02:10from a fundamental perspective that has changed my opinion
02:13with respect to a soft landing in the US.
02:17And so I'm looking for a little bit more calm
02:19to come back to the markets.
02:21And that's when I wanna start using this opportunistically.
02:23We haven't had a chance to put money to work in a long time.
02:27So for all of those investors
02:28who've been sitting on the sidelines,
02:30saying I need a better entry point to put money to work,
02:33this is it.
02:34So I'm telling investors they should really be getting
02:36their shopping lists ready
02:37because we will have a good opportunity
02:39to put money to work over the long term.
02:43Good morning, Matt, Murali here.
02:46We can keep the shopping list ready,
02:47but before that, I just want to,
02:49before I ask you a question,
02:51I think the US markets have opened,
02:52the cuts are very sharp.
02:54You can see them on the screen.
02:56Amazon is down about almost 10%.
02:59Apple is down 10%.
03:00Almost, I think the worst fall in four years.
03:03And you can see on your screen,
03:05multiple indices, stocks,
03:08whether it is Alphabet or Tesla, name it,
03:11they are all sharply down.
03:13My question is, it started in US,
03:16went to Asia, and then went to Europe.
03:19Now it's back in US.
03:20Is this a contagion?
03:24I don't think it is.
03:25I think, at least in the short term,
03:28there's been a lot of technical damage done to charts.
03:30And we're in that cycle where I think you have some algos
03:33that are driving a lot of the trading activity
03:35taking off of these hues,
03:37but there will come fundamental levels
03:39where investors and real money
03:41is going to come back into the market and say,
03:43some of these stocks, the mega caps being down 10 plus%,
03:47in a single day after already being down 10 plus%,
03:51one or two days in the last week,
03:53the forward multiples start to look
03:55really, really attractive.
03:56And again, I think there's a lot of money
03:59that's just been sitting and waiting.
04:00So I think a floor is going to come,
04:03but until the algos are put back into control
04:07and you have real money starting to guide the markets,
04:10I think you're going to see this whipsaw effect
04:12start to take effect.
04:14What I'm looking for most
04:16is do we violate the 200 day moving averages
04:18on some key charts?
04:20Is that going to be a harbinger of some further downside
04:22before money starts to come back in?
04:25But I don't think this is going to be a contagion
04:28where you continue to see sell-off after sell-off
04:30in global markets,
04:31because money's going to come back to work.
04:34Okay, so you seem to be very optimistic
04:36and hopeful that money will come back to work
04:38and it is not a contagion.
04:41Hopefully it is not,
04:42but what will it take for the markets to calm and come back?
04:47Do you think a good word from Fed or somebody,
04:51one of the Fed governors has also pointed out
04:54that Fed will do whatever it takes
04:57and the usual routine line.
04:59So what will it take for this relentless selling
05:05to calm down and investors to calm down?
05:09So I think any sort of good economic data
05:12is going to be helpful.
05:13Unfortunately, we don't really have too much of note
05:17until you get to August 14th,
05:19where you've got the CPI in the US.
05:21I think that's going to be really important,
05:23but we do have some points this week
05:25that are going to be worth following.
05:26You have ISM services.
05:29I think following the employment component of that
05:31is going to be important.
05:33We're going to have the senior Fed loan officer surveys
05:36later this week on Thursday.
05:38I think not seeing credit deterioration,
05:42willingness of banks to lend money,
05:43I think all of that might give a little bit more confidence
05:47to people that things aren't really that bad,
05:50or at least as bad as the market is signaling them to be.
05:53And I think if you get those little confidence steps,
05:55that will give some people the willingness
05:57to start to step in and start to put money
06:01to work in this market.
06:03Right.
06:04There are some very, very smart investors
06:06who have moved to cash.
06:08There were reports suggesting that Berkshire
06:12and Warren Buffett had moved to almost $290 billion in cash.
06:15What's your assessment?
06:16Are many people sitting on cash?
06:18And what we are seeing now is simply a speculative position
06:23cut that is bringing the fall.
06:26You know, that's a really good point
06:28because a lot of investors have been overweight cash.
06:31I've been telling a lot of our investors,
06:34at least over the past couple of months,
06:35that they should be using the current levels
06:37of interest rates to lock in income going forward.
06:41And that's been the right call,
06:42especially given the massive backup we've seen
06:44in treasury yields over the past few weeks.
06:46And I still think there's opportunities
06:48for investors to do so,
06:50because we know what cuts going to be coming.
06:52The question is just how big is that cut going to be?
06:55So remaining in cash is not the trade.
06:58Whenever you start a rate cutting cycle,
07:00cash unambiguously underperforms in every single case.
07:04So I think investors who are moving there
07:07are doing it more from a positioning standpoint.
07:09They're taking profit on some trades
07:11and looking for other opportunities,
07:13which isn't a bad idea in this sort of market.
07:16But I think a lot of that cash, to my point earlier,
07:18is going to need to find a home.
07:21And when you see some stocks that are down 10%
07:24that have rock solid balance sheets
07:26and just posted good earnings,
07:28that's a good opportunity to start
07:30to maybe redeploy that money and put it to work,
07:33especially if you do get a little bit of encouragement
07:36from the economic data.
07:38A quick question on the geopolitical side of it.
07:43Are we seeing an impact of the tensions
07:45between Iran and Israel, perhaps?
07:47And what's your sense of that?
07:49I think that's helped add some, dare I say,
07:51stability to the energy markets.
07:53You haven't seen oil completely roll over
07:55to the degree that you've seen
07:57the rest of the commodity complex.
07:59I think it just injects another element
08:02of uncertainty into this market.
08:03You have uncertainty coming from a lot of trades unwinding.
08:07You're heading into a very busy election season in the US,
08:10and now you have rising tensions in the Middle East.
08:14I think all of that just makes this recipe
08:17for more volatility, at least in the short term.
08:20But I don't think it, that I think is an aside.
08:23It's more related to just the energy complex.
08:25And I don't think that is what's causing,
08:28or at least it's very marginal to impacting
08:31the overall red we're seeing
08:32across the rest of the equity complex.
08:35Right.
08:36If I circle back to your point that you made,
08:39whenever interest rates are cut,
08:41so when will that cut come?
08:44You know, the Fed chair was not really very clear
08:46whether it'll come in September or November.
08:49We really don't know.
08:50But will the current, if I may call it crisis in the markets,
08:54force the Fed to call for an emergency meeting
08:57and announce a cut?
09:00You know, there's been some talk of that,
09:02but I think that would send a really dangerous signal
09:04because the Fed is having an emergency meeting.
09:07Things really must be worse than we think
09:09if that's actually going to happen.
09:12I think September, my base case
09:14before a lot of this data was December.
09:16I've pulled that forward.
09:17I do think we're going to see a cut in September.
09:20I don't think we're gonna see a 50 basis point cut
09:23unless there's really sharp deterioration
09:25over the next couple of data prints we're gonna get.
09:28In advance of that, I think Powell set the table
09:31during the FOMC last week to have a cut in September
09:36as long as the data cooperates.
09:37I think the data is cooperating with him on that front,
09:41but to get a 50 basis point cut,
09:44to get an emergency cut in front of that,
09:46that's going to require a massive revision
09:49to their summer economic projections.
09:51It's going to really,
09:53I think it would send a very, very negative signal
09:55as to the reasons of why we're cutting.
09:57And I think, again, that's why I would argue,
10:00I think the market's gotten ahead of itself
10:02in pricing 100 basis points of cuts
10:04before the end of this year,
10:06and a full 300 before the midpoint of next year.
10:09That's extreme.
10:10And I just don't see the hard or soft data points
10:14saying that things are that bad in the economy
10:17that we need to have that happen.
10:19You look at earnings,
10:20you look at what companies are telling us real time
10:23with respect to their results.
10:24We're getting double digit year over year earnings growth.
10:27We're seeing a broadening of that growth across sectors
10:30and guidance has been pretty good across the board,
10:33even in cyclical parts of this economy.
10:35So that gives me a little bit more solace
10:38that the foundation,
10:39the fundamental foundation still remains in place.
10:43So Matt, you think, of course,
10:45there's a lot of overreaction at play over here.
10:47Any final thoughts?
10:49So I would tell investors
10:51when we start to get a little bit of stability,
10:53start to look at some of the mega caps,
10:55because again, I would argue they aren't back defensive
10:58given their earnings stories.
10:59Look at some of the higher quality cyclicals
11:02like industrials that are levered to AI cap X spending.
11:06Those areas we continue to see increase
11:08from the hyperscalers.
11:10There's tons of opportunity across this market
11:12and investors should use this pullback
11:15to build a balanced portfolio going forward.
11:19All right, Matt Orton,
11:20appreciate your joining us on the broadcast this evening.
11:24Thank you, good to see you.