Cardillo says that the markets have “gotten ahead” of themselves.
FRED KATAYAMA: Investors bidding up shares of tech stocks Monday in a busy week for earnings reports. Also, the Fed is starting its two-day meeting. For a preview of that, we turn to Peter Cardillo, Chief Market Economist at Spartan Capital Securities joining us from Manhattan. Thanks a lot, Peter, for joining us.
PETER CARDILLO: Thank you for having me.
FRED KATAYAMA: Peter, we got the two-day Fed meeting starting Tuesday. What can we expect to hear from our central-bank officials?
PETER CARDILLO: Well, I think they’re going to stay pat. You know, I don’t think they’re going to change their monetary policy one iota. And they may touch on the balance sheet, you know, that perhaps maybe they have relented somewhat, and that’s due to the present situation.
Obviously they’ll be talking about the coronavirus and perhaps a new impact, and once again they’ll reassure the markets that they will do whatever it takes to continue to add liquidity to the markets. And I would suspect that they are going to welcome perhaps a new stimulus package, which should be forthcoming.
FRED KATAYAMA: Investors seem to be bidding up shares today in anticipation that they’ll have a positive outcome from that meeting. Do you think they’re expecting the Fed to take any particular measures?
PETER CARDILLO: No, I don’t think so. I think the reasons why the market is going up– as you know, there are several major events this week. There are over 1,400 companies that are going to be reporting and about 10 major tech companies that are going to be reporting this week. Apple is one of them. And as you can see, you know, it’s reversed course from last week where they got the downgrade, and now it’s leading the market higher.
So I think it’s, you know, investors are looking forward to a new stimulus package, to the Fed, to the slew of earnings that are coming out, and they’re keeping a very close eye on the geopolitical situation, which seems to be expanding with China. And, of course, we see that with the sharp rise in gold prices.
FRED KATAYAMA: And we’ve seen, as you point out, that sharp rise in gold prices, which means some people are very cautious about the prospects for the economy. Does that mean that stocks have gotten ahead of themselves at this point? We’ve seen tech stocks take a step back, but then on the other hand, value stocks came back up.
PETER CARDILLO: Well, look, you know, one of the– I think one of the reasons why the market has acted the way it has is because it’s the only game in town right now. People are looking for value, and people are looking for returns. And so that’s one of the reasons why the market continues to move higher and obviously the Fed. There’s no question about that. That’s basically the main reason.
And so, you know, has the market gotten ahead of itself? Probably. There’s no question about it. Should investors be cautious? Absolutely. You know, as the coronavirus continues and we get new cases the way we got last week, there’s a good chance that this market could pull back, and it’ll pull back because the economy is faltering.
Well, I know you can make a good case for all the good– not good news that we received over the past few months. In fact, we saw durable goods go up by 7 and 1/2%– 7.3% today. But that’s a reflection of when the economy opened.
But now we have another problem, and the problem is that some of the states may need to close down. And if they do, that’s going to hinder the recovery.
FRED KATAYAMA: All right, thanks a lot, Peter, for sharing your thoughts with us.
PETER CARDILLO: My pleasure.
FRED KATAYAMA: Our thanks to Peter Cardillo of Spartan Capital Securities. I’m Fred Katayama in New York. This is Reuters.