This transcript is automatically generated
Much well our next guest expects a market pull back in the near term but nothing like we've seen the last couple of years this time of year.
Here to tell us why is Mike.
Aren't so tell us how much of a pullback are you looking for and then how do you determine an entry point.
It's it's hard to determine -- that the point knows the market -- back already when 9% down from the peak.
We saw heavy in the case and that the that the bottoming process is in yet.
That we do tried to to come up with some analysis to think about how low this -- could become like it was -- last year we went down 20% peak to trough.
The year before that we went up 17%.
And they were all because of the EU and we're back into the EU problems again.
So we think investors would try to got him in the format of thinking in terms of ranges and we think they've now currently.
That a twelve multiple on trailing earnings in this market should be fine on the downside it gets is 1211250.
Yet another 7% if it happens we're not saying it is.
But we also think that -- ups out of fourteen have multiple -- which gets -- well above fourteen hundreds so we think the risk reward is compelling despite the war is coming out of Europe.
So what -- what kind of warning -- a -- -- would make you think that your theory was wrong.
I think the most important thing investors should be watching his overnight lending rates amongst the European banks.
And what you what what she try to avoid MF financial crisis if the part of banks getting in trouble the banks they need to lend money to each other to keep the system working -- if you call last November.
There -- on the -- are collapsing and the overnight lending right spiked -- almost 1% were still down around forty basis points so.
We're nowhere near those levels and that's what we watch on a daily basis if it really starts to move up.
Then we might be in for a little bit more -- -- -- Talk the fundamentals more because it's really hard to ignore all of these headlines hitting us from every direction seems like it.
Make more psychological concerned decisions in our investment choices rather then.
You know being more reasonable.
Yes the problem we get we get caught up in the headlines we do forget the fundamentals we have to remember that that the goods continue to -- through the system we all have to continue to be we have to continue to do things and if you focus on corporate profits that we've seen -- -- back to record highs.
Corporate cash flows back to record highs.
The valuations are very -- unfortunately.
We're -- pulled into a political game now we have to let the politics globally.
Affect what happens in the markets now as an investor be aware of it and accept that it's gonna happen but -- be ready to re act.
When market prices do come down.
Because as we -- before that 17% correction in 2010 was -- about 33% rally last year's 40% correction 34% rally.
So it if you're sitting home on the sidelines.
Do you think that you are you looking for an entry point are you sitting -- and sitting on the sidelines until things get better what would you suggest.
Sitting on the sidelines waiting till things get better you'll miss the entire -- historically if you take the 2009 bottom.
The equity mark was up 30% thirty days you cannot sit around and wait and you also have to go ahead and accept the facts -- not been about a bottom.
You have to separate yourself from the headlines you have to think in terms of what the fundamentals are what companies you liked about it pick your points and take your time.
By numerous times during these pullback processes and when we get that in -- have a bull rally of 2030% whatever -- happens on the other end of this you'll make a good return on your money.
What's your advice for shopping stocks then.
Pardoning what's your advice for choosing stocks are you going cyclical low reversed cyclical.
Large -- ball cap how do you balance that out what's the best best course of action.
Which we actually are suggesting that people maybe take what we call Barbell approach -- -- what's -- doing fixed income investing that we kind of stolen that term and we think in terms of we want a -- a more defensive sector like health -- and in consumer Staples -- an economy that don't suffer even when you melt down.
And then we -- -- -- up with a more cyclical side of the economy.
That would give us more upside if we turn and run something like that technology the industrial space and then on the on the conservative side and be more like health -- and consumer Staples.
He protected yourself for what happens in the coming months.
All good stuff my kids of Raymond James thanks.