Courtney Dominguez Payne Capital Management Senior Wealth Advisor joins the Yahoo Finance Live panel to discuss the latest market action.
Video Transcript
AKIKO FUJITA: Our first guest for the hour, we've got Courtney Dominguez, Payne Capital Management Senior Wealth Advisor. And, Courtney, let's start on that topic that Brian was just talking about. I mean, it feels like we've gone from the economy-- the Fed's going to keep the rates low because the economy is still strong to potential tightening. Now he's talking about potentially going into negative interest rates, although that's still a ways off in terms of discussion. How are you seeing things right now?
COURTNEY DOMINGUEZ: Yeah, I think we've gotta look a little shorter term right now. And what we are seeing is the idea that inflation very well might still be something we need to consider. I know the Fed has been coming out and saying that inflation is going to be transitory or temporary, but, really, a lot of signs are showing that inflation is in fact there. We're seeing commodities prices and labor costs continue to go up. I think we're going to continue to see that too as there is a labor shortage right now.
And you're also seeing things like energy prices going up. And there's this snowballing effect where that's more cost for companies which needs to make its way back to consumers. So, eventually, if inflation does in fact rise, you are going to eventually see interest rates rise with it, and that would go with the Fed.
So I think when we're talking about negative interest rates, that's more like the next downturn, when they need to pull some tools out of their bucket. I think shorter term, I think we're likely to see rates rise as opposed to dip. And interestingly enough actually, rates did come down a little bit here recently, but they just actually bounced off their 200-day moving average, which means we could have actually seen a bottom in those. We'll have to obviously watch things, but that's really what we're looking at right now.
AKIKO FUJITA: And, Courtney, as we look ahead to earnings season, those factors that you just talked about, whether it's an increase in wages, costs overall, I mean, how do you think that's likely to be reflected in some of the balance sheets, especially at a time when expectations are so high for investors?
COURTNEY DOMINGUEZ: Yeah, I mean, banks are going to be the first to kick off earnings season this week, and I think this is something that we're-- you're likely-- if this idea happens and inflation rises, that's actually a very good thing for your banks. So I think that can be a really good way of playing this going forward, where you want to look at companies that are going to benefit from either interest rates rising or who have just some pricing power here, that they are able to raise their costs effectively for their consumers and continue to make that money going forward.
So I do really like the banks right now. I think they're really undervalued. If you look at even like the SPDR as a bank ETF, that's trading about 11 times forward earnings as opposed to the S&P 500 is at 22 times forward earnings. So it's basically half as expensive. And if these factors do in fact happen, that is a good thing for their bottom lines down the line.
AKIKO FUJITA: What are some of the other sectors you're looking ahead to? We had a guest on earlier who said that he expects a bit of a downside, and maybe not necessarily a correction, but coming into September; that that's not a bad thing, especially given the cycle and where we are right now. But how would you position yourself ahead of that? And what is your outlook?
COURTNEY DOMINGUEZ: Yeah, if there's any dips, I mean, it's something great to take advantage of. If prices go on sale, you want to make sure that you are ready to buy. And there's still so much cash on the sidelines and a lot of people who are in a position to do that, because they just sold out last year and never got back in. So just take advantage here of any dips you see.
I really like things like your banks, so the value sector in general. I've also really been liking your foreign companies, whether you're looking at your developed countries, like places in Europe, or even near emerging markets. They're actually expected to have faster growth rates than the US next year, and, again, they're cheaper valuations. They tend to be more cyclically focused. So as the economy recovers, I think we'll continue to see those do well. So that being said, I want to make sure you're well diversified. But if you're looking for opportunities, I'd still look in value and international.
AKIKO FUJITA: And in terms of international, I mean, what percentage would you say that investors should be allocated on that front?
COURTNEY DOMINGUEZ: Completely depends on your risk level. But for our portfolios, I mean, we have a good chunk in our international, I mean, anywhere from maybe a quarter to a third. I think you want to make sure that you have a good chunk in there.
AKIKO FUJITA: OK. And what about the growth stocks? I mean, I know we have talked in the past about sort of this rotation potentially back into growth, although there were concerns about inflation and sort of rate jitters that had led to a sell-off on that front. How are you looking at the tech sector, for example? And how do you sort of decipher which plays to make here, especially given all the variables?
COURTNEY DOMINGUEZ: Yeah, and, by all means, I am not out of tech. We still own tech, and we will continue to. And I think it is a good place to be. It's just not necessarily where I think there's good value.
So if I have new money I'm adding to, I don't think it's as good a value as somewhere like your banks, for example. But if interest rates do continue to stay lower for longer, that is a good thing for your growth stocks. You want to make sure you have that exposure in there.
We're definitely seeing an economy in flux right now, and you want to make sure that you have your growth sector in there, if that continues to outperform. But if inflation kicks in, you also want to make sure you have things like commodities, value, international. I mean, those things are going to outperform that way. So just make sure you're balanced right now, because we're really seeing this flux in here.
AKIKO FUJITA: Courtney Dominguez, Payne Capital Management Senior Wealth Advisor. It's good to talk to you today.
