Markets are waking up in the red on a busy week ahead. Joining me is Vincent Randazzo, Portfolio Manager at Tamarisk Capital Management and Founder of ViewRight Advisors. Vincent, thanks for joining us. Markets are showing red this morning in a big week. What does this mean for how we kick off?
The way I look at it, context is everything. My version of context, since my background is in technical analysis, is how healthy are the trends in the market — and specifically, how healthy is breadth. What do I mean by breadth? Breadth is how many stocks are going up at any given time. Think of it like a freight train. A mile-long train of cars is much harder to stop and reverse than ten cars. Right now this market is almost like Teflon. You can throw almost any headline at it, and because breadth is so strong from an underlying perspective, it might cause a short-term pullback. But it is not in a position to disrupt the bull market.
Treasury yields have been surging to multi-decade highs. How worried should investors be about what this means for stocks?
At least in the short term, it is a potential headline shocker — especially if we get toward that 5% mark, which would be a multi-year high. Psychologically, 5% is a number we have not seen in a very long time. That would be the number I am watching for the reaction. At the same time, 5% might cause investors sitting in cash on the sidelines to say that is not a bad time to move into bonds. It becomes almost self-correcting. The market seems quite resilient right now, so if there is ever a time for higher rates to be tolerated, this environment seems conducive to it.
Fed Chair Warsh is speaking at Jackson Hole on Friday. What are you listening for and could it move markets?
He can certainly move markets, especially as a new Fed Chair. The market is trying to determine how he communicates and what he means. The Fed has over-communicated for the better part of the last 15 years, stemming from the global financial crisis and needing to hand-hold markets through the recovery. Warsh seems to be moving away from that approach. So it will be interesting to see how markets take that. Beyond communication style, I will be watching for any guidance on rates — and inflation. With oil being quite resilient, that has knock-on effects for price inputs and consumer inflation. So those are probably the key things to watch from Jackson Hole.
Nvidia reports earnings this week. How much is riding on that number for the broader tech rally?
There is no doubt people will be watching closely. It is always about expectations. Context is one thing. Expectations shape reality. Expectations are quite high. So even if the numbers were good, it would not be surprising to see some initial disappointment. The question is how long that disappointment lasts and how it gets interpreted. My sense is that with breadth as strong as it is, even if Nvidia had a bad quarter and the stock sold off meaningfully, I do not see that derailing the broader market. When you have materials, financials, energy, healthcare, and communication services all participating, one stock — even a dominant one — is not enough to derail this kind of rally.
Is crypto having a real moment, or is the surge in Bitcoin and Ethereum just noise around last week's legislation?
In the short term it is probably noise around news. As suppressed as those assets have been, you would expect a reflexive rally, and given how high the beta is in those securities, the move is not surprising. On the other hand, meaningful new highs in Bitcoin and Ethereum — we have not seen those in almost a year now. This could be part of a reversal process from a longer-term perspective. Too early to tell. But I am encouraged by what I have seen over the past month. I think we are shaping up for at least a recovery. Duration and magnitude to be determined, but looking constructive.
Vince, thank you so much for joining us this morning.
Thanks for having me, Johnny. Take care.
