McClean: Brace for "A Lot" of Headwinds, "Patience is Key" for SPCX & MRVL "Incredible" Business

**SPEAKER_1** (0:00)
We're coming off of a strong month, fifth month in a row of gains for Wall Street, September Notoriously Week. We welcome in Jeff McClean, CEO of Solidarity Capital and Solidary Wealth, joining us here at the Big Board. So Jeff, fifth month in a row of gains for the market. So we are still in a bull market, September Notoriously Week. We're already starting off sour.
What's your take on seasonality, and is this the time for investors to be more cautious?

**Jeff McClean** (0:25)
I think so. I mean, September, as you said, statistically is a bad month, but it's starting off in a not a good way, right? We're seeing bond yield rides, we're seeing some additional flare up in the Middle East with Iran war. There is a lot of headwinds coming, and I think it'll be interesting as traders come back from the summer here, and focus on where we go from here to end of year, is what kind of market do they see?
Is it a time to capture gains while you have them and pocket those, or is it time to continue to fight through what's going to be a lot of volatility?

**SPEAKER_1** (0:57)
Okay, we've been paying attention to expectations for the Fed and the path for rates from here. Going into Jackson Hole, expectations for a rate hike were on the decline. Coming out, we started to see them become elevated. As of yesterday, as a coin toss, now we're seeing the expectations elevated for a rate hike. Where do you sit in your viewpoint on that?

**Jeff McClean** (1:23)
Yeah, and so I think Fed Chair Warsh did a great job of showing his independence. I think that was the biggest thing he had to do. He had to check that box to show, hey, I'm my own man. I'm separate from the administration, which helps both the administration and him to show that independence. But yet, he still gave himself an out on the data. That's been the thing that's lacking. Although inflation is still a bit higher, a lot of it is due to what's happening in the Middle East, which we know is temporary. Hopefully not going to what I should say, temporary. And so I think there's still a lot of opportunity for them to stay where they're at. That's my expectation. I think the jump to a rate hike for this month is overblown. And I think it's a better chance that that's going to happen later this year.

**SPEAKER_1** (2:07)
Yeah, it does feel like, for views on that, we moved from one side of the boat to the other because the last CPI print that we had, expectations for a rate hike were elevated. Then we got the CPI report and everyone was like, no, we're not, we're not going to hike. And now after Jackson Hole, we're back to the other side of the boat. Why does that keep happening?

**Jeff McClean** (2:29)
Yeah, I think it's because the pain of inflation that is sticky remains for consumers. And you see this in consumer sentiment. They feel the pain of their credit card interest rates, their auto loan interest rates, and the fact that we had 40 to 50 percent inflation over the past five years. But more likely than not, their income didn't grow that much. And so there's still a lot of consumer pain. So I think it's kind of baked in, everyone's like, oh, here we go, we got inflation again.
It's not really showing up in the data outside of energy, especially when you look deeper beyond kind of the traditional numbers that you look at.

**SPEAKER_1** (3:03)
You work with high net worth and ultra high net worth clients. What's their top concern?

**Jeff McClean** (3:08)
Yeah, their top concern is, hey, what's going on? Do we have an AI bubble in the markets? Right? Is this the.com era where we're going to have this pop at some point? And so that's where we go through the tale of two cities argument. Yes, at the AI side, there is a significant bubble associated with that. Some of these companies are trading at unrealistic values from a long term perspective.
But with that said, if you're not AI, there's a ton of value to find in the market. There's incredible opportunities from evaluation to find companies on the cheap because they have nothing to do with AI. So right now, the markets are ignoring them. And some of it's incredible opportunities.

**SPEAKER_1** (3:48)
What are those opportunities that you're thinking about?

**Jeff McClean** (3:50)
So there's one that's specific. It's a very small cap stock, just IPO GMR solutions. It's a great example I use. Just IPO'd earlier this year and nobody cared. It is trading at two times free cash flow right now. That's an insane type of valuation because it's not AI related. It's still getting its feet underneath it from a public markets perspective. It's a spin out from KKR. It is emergency medical services throughout the country, the biggest provider. Think of LifeLite in particular.