Now, stocks slightly lower in midday trade and yields falling yesterday and leading support to the Treasury Department's move on long-term bond buybacks.
Now, while analysts and even Secretary Scott Bissett's old mentor are calling this decision into question.
Right now, yields sit lower than where they were before Besent's announcement.
But one thing that's for sure is that his big toolkit lit a fire under the debasement trade.
Now, with precious metals and crypto spiking in the aftermath, so helping to break this down is Chris Ward, founder and portfolio manager for Entry Point Wealth Management.
Chris, thanks for joining us.
Definitely.
Thanks for having me, Johnny.
I appreciate being here.
One of the things that I've been talking to clients- So Chris, let's start with the Treasury's plan.
So Chris like one of the things that a lot of you have been talking about is this Treasury plan for the long term debt buyback.
So yields are lower since that announcement.
So what do you think of this move.
And can it calm the bond market.
Exactly.
I think I think this should be a big focus for what investors should be looking at especially those that are working to grow wealth through their investing cycles.
When you think about it, Scott Besant, obviously the Department of Treasury, really going at odds with some of the most recent dissenters at the Fed to say, hey, we need to bring rates lower.
This morning, we just saw the PCE inflation number come out at higher than what was expected.
And so whenever we see lower interest rates or an activist government policy, that's going to trigger more inflation.
And really, I think what we're seeing right now is, you know, stocks, gold, real estate, cryptocurrency, you know, those are areas where you can go to protect your capital.
And frankly, gold and Bitcoin is really just trying to get your money out of the U.S. dollar so you can protect its value.
All right, so let's talk about the debasement trade, gold hitting its highest level since May.
How much of the rally has to do with debt buybacks and how much is crypto also a part of that trade?
Yeah, I think they're both pretty much linked.
I mean, you know, as an investment manager, I take a tactical approach to building client portfolios.
And when you think about it, you know, a lot of that has to do with recognizing trends and recognizing different impacts to the market environment.
You know, Bitcoin really kind of broke out two or three weeks ago, kind of front ran this, you know, policy change, but really the last week, you know, gold's up 5%.
In the last month or so, Bitcoin's up almost 25%.
So this is a simple way for investors to think about how do you maintain purchasing power?
How do you maintain the value of your savings?
Go back and look at the value of a dollar chart going back 80 or 100 years.
The government's just going to debase our currency on a consistent basis.
One, they have to keep rates low because of the debt.
Two, their public policy is that we're going to have only moderate inflation.
But really what we've seen since the pandemic is we've seen a significant amount of inflation and purchasing power that we all feel either at the restaurant or the grocery store.
And so we have to be taking an active role in making sure that our wealth is protected.
And I think that making gold and if you're comfortable with it, making Bitcoin a part of your portfolio is an excellent way to do that.
All right, Chris.
So I want to turn to individual stocks now.
What are some of the names that you're watching currently?
Yeah, so we've at the firm level in our tactical investment approach, we've kind of shifted away from an overweight in the Magnificent Seven and even technology over the last two or three years, we've kind of shifted towards dividends, looking to maybe protect against some of the valuations that have been created.
And just the kind of extended tech trade, you know, the market moves in cycles.
And so One of the things that we're looking for is established companies, we're looking for good balance sheets.
And really, we're looking for a little bit of protection, right?
One of our names was in the news last week, you know, we've held Merck for the entire year.
We do that through an ETF, Schwab Dividend Equity.
It's a major position.
But when you think about our economy, when you think about where money is being spent, health care costs continue to rise, but we all are concerned and we'll spend more to make sure that we have the best available medical care accessible.
Well, we see a company like Mark with their vaccine announcement last week with Moderna.
You know, it's been a great holding for us.
It's up significantly this year, and it also pays a dividend to our retired clients.
You know, in January, the dividend was three and a quarter, but given the price appreciation, it pays 2% today.
And so being able to find companies that aren't necessarily attached to the growth in technology and being diversified, you know, allows us to help our clients to kind of insulate from some of the semiconductors decline that we've seen over the last couple of weeks.
All right, Chris, and with NVIDIA posting after the close, what are investors paying attention to and how critical will this be for the AI trade?
Yeah, exactly.
I think we all have exposure to NVIDIA in our portfolios, whether we like it or not.
It's really incredible to see a company that over the last year, each of its earnings announcements, you know, whether it's beaten earnings or not, the stock has sold off. off, you know, 5% or so on average.
And so I really feel like the company is going to double their revenue from the previous quarter last year.
And there's still probably a good trend that a good chance that that trend continues.
So I wouldn't look for the next week or two for this stock to be up.
But I think over the next one to two years, you still want to have exposure to Nvidia and kind of let this, you know, kind of AI bandwidth kind of work itself through the market.
And then you're going to hopefully it's going to turn the corner and reestablish its uptrend going forward.
Definitely.
And Chris, to wrap up, what's your outlook for the major averages for the rest of the year?
Yeah, I really feel like we could be at the S&P 500 around 8,000 going into year end.
I like the fact that the equal weight S&P 500 is starting to broaden out.
It's actually ahead on a performance basis versus the traditional market cap weighted index.
And I think that's a good sign for, you know, stocks and investors to where if it's not just one sector leading the way, but if we can have a broad rally coming into year end, I think we can all benefit from it.
No, definitely.
And it's something that we are definitely going to be eyeing on for the rest of the year.
Again, Chris Ward, founder and portfolio manager for Entry Point Wealth Management.
Thank you so much for joining us today.
Thank you, Johnny.
