Regan Capital chief investment officer Skyler Weinand joins Josh Lipton and Julie Hyman on Market Domination to break down the factors top of investors’ minds including the Federal Reserve’s rate cuts, the Chinese stimulus packages, and the upcoming US presidential election. Weinand tells Yahoo Finance that he’s closely watching the Fed lowering interest rates and the remarks from officials like Fed Governor Michelle Bowman, the sole dissenter to the last cut. As financial services stocks (XLF) trade lower, Weinand explains what the rate cuts mean for the sector. “It’s kind of counterintuitive, but these big Fed drops actually hurt these banks in the short term…financials get hurt because they’re not earning as much on their cash, and they’re not able to lower their deposits that quickly. Yet they still have these loans and investments out there that are still only earning 2 to 4%.” The strategist says, “People have been talking about the curve D inverting well that’s only two year [treasury yields] to ten year. Whereas the front end of the curve, one-month [treasury bills], three-month bills, where deposits go, overnight repo, that needs to come down a lot more a couple hundred basis points to like 3%, which is where they’re scheduled to go in a year from now.” He explains, “That front end needs to get below 4% real quick before these banks are in the black in terms of where they’ve already lent money versus where they’re borrowing money.” The Chinese central bank announced stimulus measures to combat deflationary trends and boost the economy. Weinand says “Stimulus is great for the market no matter whether it’s coming from China or the US, whether it’s coming from lower interest rates or stimulus, whether Kamala or Trump get elected, we’re going to see further stimulus vis-à-vis deficits in the next few years. All that adds up into the market continuing to roll along and that’s, broadly speaking, worldwide.” “The end goal here on the China front is to keep the economy humming and keep the populace not protesting, not coming into the streets, not worried about losing their jobs, not worrying about the unemployment situation. And the Fed is in a very similar boat.” In the current economic conditions, Weinand says “you’re not getting compensated really for generic fixed income. That’s boosting stock market values” though he notes “To say we’re going to go up another 5% to 10% between now and the end of the year is hard. Maybe over the next 12 to 15 months. Sure.” Looking forward to the US presidential election, the strategist believes the market sees Vice President Kamala Harris and former President Donald Trump as “ one and the same.” He says “if Harris gets elected, maybe that affects taxes. If Trump gets elected, maybe that affects the currency situation between us and Europe or us and China, whether when or where tariffs get put down. But the market really looks at them as one and the same." "They’re both going to be stimulative. They’re both going to run deficits. And you know, so we’re going to have to wait and see I think what is going to turn the tables one way or the other is if there’s a sweep. So if you have a Democratic president and both houses of Congress or vice versa, then we’re going to have some some microscopes on how is this really going to affect the market. But the jury’s out on that sweep happening.” For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
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