JD Durkin: Let’s bring in Jay Woods, chief market strategist at Freedom Capital Markets, my very good friend. Okay, so I’ve got topics to ask you about, but more broadly, this is really the first time you and I are talking on camera since the midterm elections. Wednesday’s big pop, Thursday’s big selloff, today’s big action. Big Apple earnings.
Jay Woods: Oh yeah, that was this week.
JD Durkin: Well, what do you make of everything top of mind this week?
Jay Woods: How much time do we have?
JD Durkin: As long as you want.
Jay Woods: It’s been crazy. Let’s put it in perspective, because I think that’s important. We had a nice little rally after the election. Because of what? Because we had certainty. Certainty that it wasn’t a contested election. Then what happened after that? Cooler heads prevailed. The analysts went to work and said, wait a second. Texas flipped, and data centers were one of the biggest factors in why a lot of these elections were focused on what they were. It’s not that the data center story is over by any stretch of the imagination, but it’s going to be slowed down, because people want to regulate. They want answers as to what this is going to do to the environment. What we have now is a nice speed bump, but this speed bump in the data center build is going to cause some angst in the market, and we’ve seen it. The semiconductor index broke down. Maybe it’s the technician in me, but we’ve been watching this crack. Finally the dam broke. Now the question is how far will it go? Yesterday the breadth was horrible, with all 11 sectors down. Today, not much of a rally. I’d call it a slight relief, but we’re going into a weekend with more questions than answers, and next week should shape up to be interesting.
JD Durkin: We know the president oftentimes treats the stock market like a scorecard. What are you looking for in terms of a potential sharp V-shaped recovery? And does that mean stocks need to fall a little bit further first?
Jay Woods: We do have history. He was president 2016 to 2020, and during that midterm, the worst part of his tenure was right after the midterms. We had the Fed hiking rates. We had a trade war with China. Now we have a real war with Iran, which I think is a little more ominous, to be honest with you. It’s not over. We kind of put that on the back burner. So next week, let’s see what happens. And no one’s really talking about this, but we could have [unclear: “a rowdy crowd”; crowd noise]. I can’t even hear myself talk. But we could have a government shutdown on the horizon. That also happened in 2018, and after the midterms, we sold off 10%. So I think we have a few headwinds to get through. But the good news is, [unclear: “we’ve shared this that many times”], six months later after midterms, 19 out of 19 times we’re up, and 12 months later, 19 out of 19 times we’re up. But right now, the next few weeks, going into the holidays, it’s going to be a rocky road. Let’s just put it that way.
JD Durkin: Outside of tech, do you like what you see out of energy, health care? Let’s tick through a few of these names: UNH, ConocoPhillips, Humana.
Jay Woods: Okay, let’s talk energy. Energy was the worst performing sector this week, down almost 12%, but it [unclear: “came in the week to key support levels”]. Old resistance becomes support. ConocoPhillips had great earnings, Exxon and Chevron the same. Right now I think these are areas we want to nibble in or stay in and then add to, because they should probably rally if there’s no resolution quickly to this conflict, and I don’t see how there’s a resolution quickly. As far as sectors to go to, health care has been one of those sectors of safety. I look at CVS, I look at Humana, I look at Cardinal Health and UnitedHealth as safe places to be, and they should rally into year end. What was the other one I gave you? Dow. Dow broke out on strong earnings. It’s kind of flagging, so we’ll see where it goes. And then Unity Software, I’ll give you that one. Nice stock, had great earnings, went on Thursday. What happened Thursday? The S&P 500 sold off 4%. Unity rallied today. It broke out. Going into next week, watch for a continuation rally in Unity or an opportunity to buy the dip.
JD Durkin: This is one of those names [unclear: “from the apocalypse”]. You remember this?
Jay Woods: I remember that whole thing.
JD Durkin: Yeah, we lived through it. We lived in that time. We survived.
Jay Woods: But Unity is coming back, like many of the other names in that sector.
JD Durkin: Well, speaking of unity, or maybe a lack thereof, you’re a fan of history. The last time the New York Giants beat the Eagles in Philadelphia, [unclear: “Jay Woods was going all the way back”] to October 27th, 2013. Do you know what the S&P was at that time?
Jay Woods: I do not.
JD Durkin: 1770.
Jay Woods: Wow, wow. It’s been a while now.
JD Durkin: Here’s what I love. First of all, you gave me this tie. We are sporting each other’s teams’ ties. We’ve got an Eagles tie and a Giants tie. A little wager, we’ve got a big game on Sunday. So next time I am here with you, you will either be wearing my Eagles tie or I will be wearing your Giants tie.
Jay Woods: When we first started, your chances, I don’t even know who was on my team anymore, [unclear: “when we’re all in the infirmary”]. When we first had this idea, I was very bearish on it, and now the season has kind of taken an interesting turn. We’ve got a really fascinating game coming up on Sunday.
JD Durkin: You’re very confident. I like this.
Jay Woods: I love that I’m playing with house money. I have a quarterback I can’t name. He wasn’t even on the team three weeks ago. We’re on our fifth-string running back, and we have no offensive line.
JD Durkin: Good luck to the Eagles. They’re going to need it against you guys. There you go. Next man up in the National Football League. The great Jay Woods, always grateful for your time. Thank you for being here for really, truly wrapping up an absolutely wild week down here on Wall Street.
Jay Woods: No one I’d rather talk to.
JD Durkin: Best of luck for the birds.
Jay Woods: Much luck. I don’t know, you look good in a blue tie.
JD Durkin: I was going to say, well, actually, green brings out my eyes.
Jay Woods: Green brings out my eyes, too.
JD Durkin: All right, here we go. Enjoy your weekend.
