This Is A Really Difficult Market To Navigate | Lance Roberts

Lance Roberts (0:00)

This is a really difficult market to navigate, because one day, it is staples, defenses, and financials that are doing great, and technology is getting monkey hammered. The next day, technology is doing great, and the stuff that did great yesterday is getting monkey hammered today. So if you're trying to trade the market, well, I need to get, you know, tax down today, I need to get out, I better go over and get defensive, and then you buy a defensive, and then the next day you get slammed, and then you're like, man, what did I just do that for?

That's the market we've been in. So this has been one, there's one thing we talk about a lot is there's some times in markets the best thing to do is to do nothing until the market tells you what it wants to do.

And this is one of those times.

Adam Taggart (0:47)

Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart, welcoming you here at the end of the week for another weekly market recap, featuring my good friend, the Olympic portfolio manager, Lance Roberts. Lance, how you doing?

Lance Roberts (1:01)

I haven't been in a pool all week, so...

Adam Taggart (1:05)

Well, I may use that adjective as a tease. It's going to relate to the rant here at the end, which will be very short and sweet. In fact, folks, this week's market recap will be very short and sweet because I have to get out of here and it's all related to the word Olympic.

Lance, okay, so it's been kind of a busy week. And of course, the most notable thing that happened this week was the Fed hiked rates. Now, it was notable, but it was not a surprise. I think there was like a 93% expectation by the market that the new Warsh Fed would hike by 25 basis points. What maybe was a little bit of a surprise was that it was unanimous. There had been a lot of descents in recent year plus with the Fed, and this one was unanimous. So I guess anything to say about this, Lance, that people don't already know from just having watched the markets this week?

Lance Roberts (2:00)

Just about the rate hike. Like you said, the market gave them the green light to hike rates. So with the market going at basically, I was saying it was 92% to hike rates by one quarter point at this meeting. Pretty much it just gave the Fed all the room they needed. You had talked about last week, maybe they just need to do a PR hike.

That was really all this was. Again, it's important to remember why the Fed hikes rates. And that's not necessarily good for you. But from a market standpoint, if you're trying to appease the market, you do kind of what the market wanted you to do.

Adam Taggart (2:35)

And that's what they did.

And in terms of appeasing the market, bond rates have been going up. You've and your colleague, Mike Leibowitz, have talked a lot about what you think is driving that. But in a lot of people's minds, they think that the bond market is still worried about inflation. And the Fed hiking is sort of a sign from the Fed that, no, we're serious about getting inflation under control. We'll hike if we have to. It didn't slow the rise in bond yields. The 10-year actually cracked above 5 percent.

Lance Roberts (3:12)

Well, bonds actually had a pretty good day yesterday, rally-wise. They're up a little bit today. But again, just kind of digesting this. And again, this is just term premium. So a rate hike isn't going to move interest rates to any great degree, right? Because you're increasing borrowing costs.

Adam Taggart (3:27)

And to be clear, you mean bond yields, not interest rates, but yes.

Lance Roberts (3:31)

So when you increase, when you've hiked rates, bond yields are going to be a reflection of higher rates. And so it's not going to change just because they hiked rates. It's not going to cause a dramatic shift in the bond market overnight, right?

Adam Taggart (3:45)

I mean, I kind of guess so, but this was a change in direction by the Fed, right? It's the first time they had hiked since 2023 So one could think that that might actually have more impact because it's sending a different signal to the bond market than it had been for the past couple of years.

Not necessarily, but that's the logic that some would have, right?

Lance Roberts (4:06)

Yeah, and that's fine. But what's causing the rise in yields is not what the Fed's doing, and it's certainly not what the economy is doing. Because if you look at what's going on in the economy, that certainly wouldn't. We talked about this last week. If you take a look at the actual data, there was no support for a rate hike. This was simply a market narrative rate hike.