Selling the Stock Market: "Psychology is rotten now," says the strategist.

Selling the Stock Market: “Psychology is rotten now,” says the strategist.

Steve Sosnick, chief market strategist at Interactive Brokers, joined Yahoo Finance Live to discuss stock futures, retail sales, consumer spending, inflation, the Federal Reserve and the economic outlook.

Video version

Julie Hyman: Steve, I heard about some of what you were talking about. And I emailed you late yesterday and said is that it? Is this fatigue? Is this surrender? Is this the end of the sale? And I said, Well, I don’t think so. Tell us why not.

Steve Sosnick: Yes, good morning Julie. You know, I wish I could be more constructive about it, but yesterday was a really ugly day. And those tend not to resolve, you know, the next morning.

Now, does that mean we’ll see a lot of similar days in the short term? This is a bit difficult to say. I think we — I think we’re going to get some kind of psychological bounce if we get to the 3855 level on the S&P when the headline is, you know — when the title machine says we’re officially in a bear market. I think this is the time when people will step in and make commercial purchases. I think you’ll have chances, but there’s a lot of things here that don’t add up to the kind of thing that makes this market turn around, and not least, you won’t — the Fed isn’t coming to the rescue anytime soon.

Brian Suzy: Steve, right – the other problem here is that we may now be in a vicious circle of news where falling stock markets are fueling a decline in consumer spending and markets are further down?

Steve Sosnick: This is entirely possible. I think psychology is rotten now. Usually, you get sales. You get to give up when you kind of climax, and rot in feelings. But the problem is, you know, I’m looking at our customer data. We continue to see clients buying their preferred stocks, looking for that dip.

You really don’t get – you’ve heard the term surrender. And you don’t really do that – that’s really what you need to get at least a mid-term bottom. And we don’t see it.

You need to – unfortunately, you have to have people who are kind of throwing in the towel. So it’s a bit strange. What Brian is saying is that feelings are rotten and can get out of hand, but until you hit the peak — the miserable peak, you don’t get that — you don’t get that permanent bottom.

And when can this miserable peak reach, from your estimation?

Steve Sosnick: today. I mean, it could be today. It could be tomorrow. hard to say.

I don’t mean to be fickle with you, Brian, but this – that’s really the problem that you can’t appreciate. That’s why I just kind of get rid of things that might be triggers. You can only have a psychological state, oh, we are waiting for the bear market. And when you see this part of — when you see this big headline running across your screen, that’s often the time when people step in and say, ‘Aha, you see?’ We’ve come to a number.

What worries me most is that only men were talking about consumer confidence at the top of the show and consumers. Retailers, like merchants, are caught long and wrong. And I think people will see that their purchasing power doesn’t go very far. And when she starts hitting – if she hits the big guys, she’ll hit the young guys. This really affects the feelings. It’s – and I don’t know – I can’t – it’s very difficult to gauge when this psychological change will occur.

Julie Hyman: Yeah. I learned something interesting from your observation in response to yesterday’s massacre, that your father covered the retail sector as an analyst. So this was a fun background to get to know. And I think that kind of conventional wisdom is that technology is driving the market, right? But talk to us about the role that retailers play here. It’s not necessarily widespread for sure, like something like, technology.

But what role do they play? And could they be some kind of spoiler here? They were definitely yesterday.

Steve Sosnick: Yeah. you know what? I mean, that’s from a kid who had to like, count the shopping bags in the mall when he goes when he goes with his dad, just to kind of – because that was a canal check.

Here’s the problem. The consumer still accounts for 70% of the US economy. And how can this consumer write down his view of the economy – in the economy? This is how they spend it.

Now it’s not always in stores. It’s on the services, as you guys have noticed. But there is a lot of overlap.

Yeah. You could argue that Apple is a retailer like everyone else. But if consumers aren’t spending, that tells you bad things about the economy. The consumer is too big to ignore.

From a market point of view, tech stocks, in terms of March – for market capitalization-weighted indices, sure, tech stocks dominate. It could fit multiple retailers — it could fit right in with Apple right now, in terms of market capitalization. But when you start to think about the signs that a consumer is spending – dispatch, it comes through retail. And you showed the graphs earlier. They were in a state of retreat with great force. They did not confirm the January rise.

So you know – so this is – not a good sign. If people don’t spend money – well, they spend their money at Walmart, but they spend it differently. And if they don’t spend it aggressively at Walmart, if they aren’t satisfied with things at Walmart, Target, etc., that sends a really bad signal to move on. And that tells you that consumers — if they’re not taking advantage, they put a tight leash on their wallets.

Steve, are we at this point now that if the sell-off continues, as it was, that might scare the Fed, and we might hear less hawkish comments from them over the next week?

Steve Sosnick: that is possible. I mean, I think President Powell — I called him — so many times I called him Goldilocks in a suit. And so I think he might try to calm the market with rhetoric, and maybe soften some of it. Part of the problem is that I think the Fed was a bit aggressive with their rhetoric because they wanted to — because they wanted to flip the markets a little bit, not shock them when they actually do things. And so, yeah, maybe they water down a little bit of the rhetoric, but I can’t see them completely pulling back. economic inflation–

Steve, they have. Steve, just to interfere. They shocked the markets.

Steve Sosnick: This is correct. And that’s why – that – 100%. This is their goal to shock the markets. But I think they don’t want to shock the markets with a surprise on Fed Day. They want – they want it [INAUDIBLE]They want to shock the markets over time. And we need to shock.

We run 8% to 10% inflation, depending on your scale. And for that I think you might get — you might get a softening of the speech, I noticed. But I don’t think they’ll really do that – they won’t change any of their plans around Qt or raise prices.

2022-05-19 14:47:59

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