Jimmy Lee, The Wealth Consulting Group CEO, joins Yahoo Finance Live to assess the outlook for the market, bank stocks, the financial sector, and the overall economy.
AKIKO FUJITA: Let's bring in Jimmy Lee, the Wealth Consulting Group CEO. And, Jimmy, good to have you on, on a day where we've seen a pretty big sell-off here. I'm looking at the NASDAQ, the biggest laggard on the day down about 1.9% now, nearly 2%. And you've been talking about this rotation out of tech back into the cyclicals, back into the values. How much of that you think is going to accelerate as we go deep into earnings season?
JIMMY LEE: Good to see you, again, Akiko. And great to see, Brad, at Yahoo. I think we will potentially see this accelerated, Akiko, out of tech. It depends on if rates tick up quicker than expected, but that's the big question. Will investors sell off the high valuation large tech companies with interest rates going up on a valuation concern?
And my guess is that we'll continue to see that rotation happening. So I think that while this era started out a little bit ugly, with any meaningful correction, a real correction of 10% or more, I think investors buy on this dip. And I do see this rebalancing of portfolios going back into value stocks and some of the economy reopening stocks, such as cyclical sectors that have sold off, the travel-related sectors, financials, energy. I think we have opportunities with industrials and materials. So I think those sectors will hopefully do a little bit better than they have in the recent months.
AKIKO FUJITA: Let's hone in on the financials then because we did get Goldman Sachs out today. Clearly shares down today on concerns about profit here, something we heard from Goldman today, about rising expenses. We heard that from JPMorgan as well. How are you playing that space and where do you think the biggest opportunities are?
JIMMY LEE: We're overweight financials. And I think this sell-off represents some opportunity. Now, financials had a nice run prior to last Friday with JP Morgan announcing their earnings. Wells Fargo was actually up as you know. And with Goldman today, I mean, they still had record profits a little lower than expected, but, of course, wage inflation we had it. And I don't see that going away. But I'm not worried about financials. I think with rising rates financial sectors will continue to do well.
And, again, I'm not surprised that we're getting a little step back after a nice run in financials prior to last Friday. So I'm not worried about that sector at all. And like I said, it's one of those sectors I think does well with interest rates rising. And I think rates will continue to rise as we continue on this year.
- You even as we get deeper into earnings season, and we start to see where, especially considering the economic data that we got that signaled exactly what some of the major sectors, such as the consumer-related sectors more on the retail side, even into the travel side, what they were experiencing and incurring at the tail end of 2021 even as we get deeper into earnings season where are you intend to or expecting rather that may actually hit on some of the profits that we were looking to potentially getting after a what was going to be a year over year significant growth for many of these companies?
JIMMY LEE: Brad, I think in Q1, I mean, earnings are going to be a little lighter than what we've had. But I still think they're going to be very healthy. And I'm sorry in Q4. Q1 I expect those earnings to improve. So I think we're going to be going into an improving area here even though that everybody is concerned about inflation, where consumers really see it as prices at the pump are absolutely higher. And so there's less money in the bank accounts because of that. But people are getting paid more.
And I know that there's an argument that wages aren't going up as fast as inflation. But I still believe that we have a chance that inflation will be transitory. I'm not quite as concerned that it's going to be a high double-digit number multiyear like it was in the late 70s and early 80s, like a lot of people are. I'm actually more concerned about after the boom of reopening the economy from the virus situation and economy slowing down, how are we going to get growth again? And so more actually concerned about that long term.
So, as far as on the short end, I think companies are still healthy. The US economy is 2/3 driven by the consumer. I think the consumer is healthy. I think loan demand for the banks is going to be strong as consumers try to borrow as much money as they can and lock in rates while they're still low and not after rates go up later on this year. And I think the Fed has signaled what they're going to do. And it's not going to be surprised when they eventually do raise rates. And, of course, I think the speed of that happening is going to be what we're going to be watching for.
But certainly, it's going to be a choppier market this year. The direction is not going to be as accommodative with the government not printing the trillions of dollars, and the Fed actually tightening. And so that's going to be a headwind. But overall companies are still doing great. A lot of jobs out there that still need to be filled. And I see people going back to work. People that were unemployed. So I'm very positive about the potential for this year, for stocks and the economy.
AKIKO FUJITA: Yeah. That points to some of the challenges investors face. On the one hand, you've got a strong economy or that continues to grow, and yet the fear here is how things could get a little more volatile with the Fed raising those rates. Jimmy, it's always good to have you on. Jimmy Le-- Jimmy Lee, the Wealth Consulting Group, CEO.