Reading the Bond Market – Eddie Ghabour on YAHOO!! Finance

Is there a risk the Fed will be too aggressive? Where should investors be? Eddie discusses his play of full defense; utilities, consumer staples, gold, healthcare and cash. Will the 10 year bond rate go down? View Eddie’s appearance on YAHOO for the 2022 Market Forecast. February 8, 2022

Let’s keep it on the markets bring in our next guest eddie gabor key advisors group author of common sense bulk eddie great to have you here just want to get your reaction first to the 10-year breaking out touching 1.96 what is the bond market telling us look i think the bond market is letting you know that higher rates are here in regards to what direction the fed

Is going to go into uh you know we think it will probably hit two which probably isn’t a crazy call at this point in time but we are a little bit under consensus in regards to the direction of the 10-year we think once it hits two or potentially hits two that is that once the fed starts raising rates that inter 10-year bond rate will actually go down i know that’s

Not consensus but that’s because we believe that the rate of change on gdp is going to be slowing down at a pretty rapid pace and the bond market is usually forward-looking in regards to that so we think once the fed starts going into that more tightening mode that the 10-year bond will probably stop going up or have less upside in our opinion and then the path to

Least resistance will be down so when do you see it hitting two do you see that sometime in march well that’s where we think the fed is going to start raising rates i think that’s pretty much consensus and i think that they’re going to raise rates so i would assume by march when you hit that two percent level uh or maybe even by the end of this month because again

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The bond is forward-looking uh and then again i think you’re going to see bond the 10-year bond rate actually go down which won’t be good for financials so financials are doing well right now because of the 10-year i think that’s going to be short-lived so now i know when you were in november you said the fed had to accelerate its tightening but i want to ask you

How much room does the fed actually have to hike rates because usually that happens when you’re growing in going into a growth period we’re going into a period of deceleration so you know is there a risk that the fed is going to be too aggressive there’s a huge risk to that and that’s why in november when i was on your show i was talking about that was our biggest

Fear for 2022 and now they put themselves in a lose-lose situation i know there’s a lot of people out there saying they’re going to raise rates five times six times i’ve even heard some crazy calls of seven and eight there’s no way in my opinion this market can handle more than two rate hikes let alone four or five if they do four rate hikes in 2022 when this economy

Is slowing down at the rate that it’s going to slow down then a 15 correction will look like recess and we will wish that it’s only 15 because if we get that then i would look for the indexes to be a minimum 20 to 25 percent down how healthy is a consumer right now because cpi comes out on thursday expecting a consensus handle of 7.3 so people are shelling out more

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To get the goods that they want but real wages are actually lower so how long does a consumer you know keep paying these prices before they have to put their hands up well that’s our concern right this is why we feel like it’s going to be very hard for this economy to do nothing but slow down at a rapid pace because again the consumer’s been holding on as long as

They can they had a lot of extra cash last year i mean their balance sheets are healthy but look let’s face it when you look at food cost you look at housing costs rents everything fuel uh this consumer is in a really tough spot and again when you’re tightening during that slow down is usually when you have a lot of problems and that’s what we’re faced with here

These first six months so jp morgan is saying for people who are investing that right now one should be tilting towards value in international stocks what do you say to your client so we’ve actually gone full defense starting in november when i won your show we started doing that rotation we’ve been buying utilities consumer staples we put gold into portfolios for

The first time a few weeks ago and it was under 1800 we have a little bit of health care exposure that’s in our opinion and cash that in our opinion is where investors need to be because those areas have a tendency to hold up better in a slow down so you want a boring portfolio right now and that’s why we’re playing defense i think gold could perform extremely well

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Here in this environment and what are you most looking for as far as earnings season i know peloton is reporting after the bell a lot of people want to see what happens there do you think that the markets are shaken up by what comes out of peloton today and then just as far as earning seeds earnings season more broadly what are you looking most closely at is it the

Margins so there’s a couple of things the number one thing that we really want to take a look at is forward guidance right we know earnings should be pretty good because of the fourth quarter last year was one of the best quarters that we had so that should be strong it’s the guidance moving forward and in regards to revenue growth these and we think they’re going

To be decelerating and moving forward we think the outlook is not going to be very positive and so investors in our opinion need to play defense going into the second quarter because second quarter comps are going to be even harder than first quarter comps to beat from an earnings standpoint uh so it’s going to be a very challenging market for high risk assets

Okay we will leave it there eddie gabor key advisors group and author of the common sense bowl thanks for your perspective today

Transcribed from video
Reading the Bond Market – Eddie Ghabour on YAHOO!! Finance By Eddie Ghabour