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Josh Brown: Bear market isn't going to end with this 75 bps rate hike - YouTube
Channel: CNBC Television
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joining us now with more reaction rit
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holt's wealth management ceo and a cnbc
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contributor josh brown jb it's good to
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see you uh what now where do stocks go
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from here do you think
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uh i wouldn't be surprised if we have a
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similar outcome as what we had during
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the last fed meeting if you recall how
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that went down uh cnbc's steve leesman
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asked the fateful question were you
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considering 75 basis points after a 50
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basis point rate hike and the chairman
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demurred and the stock market took off
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to the upside today looks like a similar
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setup night is not as big of a rally but
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certainly being led by some of the
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trashiest highest multiple
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scariest uh former growth stocks
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imaginable those were the leaders today
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never a great sign
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and tomorrow there could be a really big
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rethink and i i i can't imagine
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that the bear market we've been in now
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which is the ninth longest in the last
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80 years in the entirety of the
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post-world war ii history of the stock
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market this is now the ninth longest
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bear market it's hard for me to imagine
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it ends with a fed rate hike of 75 basis
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points so i don't think we've seen the
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lowest prices that we will see
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uh and i don't think much really changed
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today
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given how rapidly the bond market had
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already gotten here before the fomc had
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a chance to put out a statement
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so what changes the game then
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uh nothing you probably need a recession
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i don't think you can ring the amount of
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stimulus that's been put into this
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economy over the last couple of years
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out with just like a soft landing where
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everybody gets a happy ending um one of
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the questions i would have asked jeff
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and i guess i'll ask him some other time
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but
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i would ask as a bond manager is now the
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time to shift from from being worried
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about
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duration and that being the biggest risk
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to credit and i j i generally think the
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answer is yes uh we haven't had an
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environment where anybody had to worry
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about the solvency of really anything or
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anyone whether we're talking about
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municipal governments or we're talking
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about newly public companies or we're
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talking about fallen angels there's
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really been nothing to worry about and
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spreads have reflected that
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that seems to no longer be true and this
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is not just going to be a u.s phenomenon
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in europe they called an emergency ecb
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meeting to look at what was going on
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with southern country bond yields i
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don't know when the last time was that
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we had to worry about that issue but now
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italian bonds relative to german boons
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of the same duration uh we're seeing
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spreads widen and that often is the
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precursor to a lot of headlines in the
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financial times the wall street journal
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so
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if we have to pivot now
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just let me finish the thought if you
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haven't pivoted now to this new risk
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so so look if
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terms of looking for something he's
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expecting
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something i think you know
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something to blow up someone to blow up
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uh as a result when i asked him about
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this idea
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that central banks are not going to be
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able to do qt to the degree that they
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want to or at the speed that they think
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they can
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because of of credit spreads widening
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and he fully said
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to that question that he expects
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something somewhere to break
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we had about uh 1500 companies come
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public over the last two and a half
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years
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and
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a lot of them were not built for a world
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where there's a cost of capital and and
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it's a it's a positive cost of capital
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they're not built for that our present
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housing market is not built uh for for
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what what's gone on in the mortgage
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market in just the last week things have
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gotten so extreme that purchase
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applications have crashed by 40 percent
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compass and redfin two of the largest
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brokerages or brokerage platforms um
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announced proportionally pretty big uh
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layoffs there's a whole leg down in
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housing that could occur that would have
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significant ramifications uh for for the
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economy and that's not withstanding the
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damage that we've already seen in equity
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market capitalization you've got over
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nine trillion dollars in losses
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uh for for the u.s stock market i don't
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think that's been felt yet in the real
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economy there's a lag uh from from a
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negative wealth shock like that but it's
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coming so this is where we are i i i
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like the idea that stocks will have
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these temporary reprieves they shouldn't
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go down five days a week of course
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and some stocks might be done going down
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period
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but it's going to be a difficult
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environment the fed is not a position
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judge to supply us with a new bubble to
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get excited about think about how many
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bubbles we've had come our way to enjoy
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over the last few years the fang bubble
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the growth stock bubble the spat bubble
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the crypto bubble the venture capital
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unicorn bubble it's been one uh
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amusement park ride after another the
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fed just can't do it right now they
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can't supply us with one and that's why
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i think boring stocks are gonna win
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i think companies that are high quality
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balance sheets fortress balance sheets
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if you will
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companies that have pricing power that
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have the ability to raise prices
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i think dividend payers over
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non-dividend payers show me the cash
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flow and i think return of capital is
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the new byword and we turn on capital
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becomes significantly less important at
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this stage in the game and if you can
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process those things mentally and look
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at your portfolio you will rapidly come
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to the conclusion that you still have a
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lot of stuff that you bought during a
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very different environment that no
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longer makes sense in in the morning
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light
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yeah it's a it's a great point that you
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make uh and a good way to finish josh i
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appreciate it we'll see you soon josh
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brown joining us there
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