Sector Performance Year-to-Date & Rotation Opportunities

0:00I do want to welcome in our next guest for a broader look at the markets this morning joining us now Kevin rich the C O O C C O at Web's investment Kevin great to have you with us this morning. You were we're looking at another D risking Friday here as we don't have a lot of answers with the outcome of the situation in Iran. What are some of your takeaways of the market action that we've seen so far as this conflict has been continuing to develop with very little certainty about its end time. Yeah well thanks for having me and there's a song I listen to in college for the Boontown Rats saying I don't like Mondays but I think I don't like Fridays over the last few weeks because everyone's derisking into it and I don't I won't even tell you how I feel about the Netflix price increases but on the on the O of market yeah and everything's about energy right now in oil and I think you know if you look at gasoline prices they're up they're not up so dramatic the dramatically

1:00that they'll hurt you in the short term but it's a question of how sustained are they and and when you look at oil prices there's gasoline here in the US but you also have to look at oil globally and how those oil products are used in in fertilizers and a lot of products as people have been talking about on the news and and also it's not just oil it's natural gas to LNG shutdown which is really hampering the Asian parts of Europe and so neck gas is still pretty cheap in the US due to you know cracking you know cracking but you know in the other region of the world it's five to ten times higher so I think what's happening is it's just going to be a question of is this a short term event that we they can bring down at some point or it's it a long more longer term price increase in oil and we'll just have to see how it plays out over the next few weeks yeah certainly and I'm looking at prices this morning you know for WTI we're getting close to that hundred dollar mark rep almost four percent this morning

2:02Brent has topped 110 we're also getting reports of some Chinese ships were turned away at the straight up for moves sending prices higher you as far as you're looking at oil you know what's the tipping point for markets when we've been on this sort of roller coaster ride here but as far as the levels that you're watching you know we're all concerned but at what point does it become very concerning that we have real economic damage here and well I think if you look at the curve I think it's you know very high in the front end and then backwardated out the curve going down and but I think if we see the future months start to rise if we see expectations in the markets of an extended supply disruption then I think that that's a worrying sign and I think we're we're probably a few you know within a few weeks of seeing how how sustained the market feels that's going to be and you know as we think about the Fed here as a part of this conversation and they've been in wait and C mode the markets were pricing in one to two cuts now we're potentially

3:08pricing in hikes as I'm looking at the Fed watch tool pretty much throughout the end of the year but very little odds if any of a cut at this point how does that change the outlook from your perspective for equities going forward well that's a good question because I think your equities are reacting to to both you know a lot of the things of the Fed's looking at inflation has helped the economy and GDP labor and things like that and so far GDP and labor have not disrupted that equation and rates are real rates are going up so I think people are saying well the chances of the cut are you know lower and lower and the chances of a hike are coming you know more into the picture the thing about you know your first question about oil like getting oil back online in Iraq and Iran and place like like that that's a that could take longer after disruption that people think a change in the Fed that that could change before we're done talking here with

4:11announcements what's going on but I think I think the Fed you know they're still sorting out their their leadership change and you know whether Powell stays on until the the court actions are are dismissed you know I think there's still a lot of noise there but the Fed will react very quickly to what's happening in these other sections of the market yeah I mean we've seen sort of reactive behavior across the board here from everything from the commodities space to yields to equities but as we look at equities we've been just watching this rotation all of this churn under the surface particularly into energy and cyclical and cyclicals but my question for you is does that trade still have the legs if oil stays elevated yes I think in an answer I think you know energy has been you know the highest performing sector in fact of the 11 market sectors energy is going to be I think the only one that's going to be up in March everything else is down but if you look at what's happening in January and February with the sectors you know

5:14we saw six of the 11 sectors were up you are actually still up here today despite what's happened in March you know the energy utilities materials industrials corporate consumer staples in real state even real states up here today in those sectors it's been sectors like healthcare technology communications financials that have been really gotten hammered and recently in and I think are reprising and sometimes reprising is a healthy thing and Kevin as we you mentioned the sectors you know energy pretty much carrying the markets we could hit the end of the month with that being the only sector in positive territory there in this reactive seemingly head drawn headline driven market what does that mean for how investors should think about timing and risk and positioning knowing that we've had a month of nearly everything being beaten down except energy yeah I think again there are opportunities even though the you know the S&P 500 and the NASDAQ 100

6:18were down in January and February you saw certain sectors out performing and the sector rotators are I can still invest in sectors they have conviction in and those there's a lot of rotation strategies my my firm are actually working with Dorsey Wright and NASDAQ right now on a new sector rotation model that uses some of our products and so that should be coming out soon so I think they're even if energy stays high and the mark the broad markets don't react I think there will still be a lot of opportunities in sector rotation especially around rates I guess as rate direction becomes more clear you'll see some of these sectors break break out or break down you know depending on how sensitive they are to the rates Kevin it's been a pleasure talking to you this morning we really appreciate you taking the time out of your Friday to be with us today Kevin Rich the COO and CCO at Web's investment thanks again for being with us