Thanks to Paul Sweeney & Matt Miller of Bloomberg Markets on Bloomberg Radio, for hosting our own Brett Ewing, Chief Market Strategist. Brett shares his take on the 3rd quarter winding down and looks into the 4th Quarter of 2023.
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Conversation Transcript Automatically created by TVEyes. Please pardon grammatical errors.
Brett is a chief market strategist at First Franklin Financial he joins us via zoom Brett thanks much for taking the time here again kind of a tough correction we’re in here for these markets over the last several weeks what’s your outlook? yeah I mean we’ve been through I think a pretty rough august and September here I think we’re down over 5% in September already but look I think a lot of the market got a little bit of ahead of itself going into early August and I think we’re in a pretty normal correction right here. I look back over the last 3 years and it’s kind of interesting you know September of 2020 the market was down 4% September of 21 down 5% September 22 down over 9% and in all 3 of those instances we ended up with a pretty significant fourth quarter rally averaging about 9.8%. and that’s the camp I’m really in I think we’re about to go into earnings and I think we’re to hit a new high for the year in the fourth quarter. So what drives earnings I mean is the consumer still the strength I think the consumer is holding up tremendously better than anyone expected to coming into this year I think there’s a lot of headwinds for the consumer right here in the short run I mean look at oil we’re hitting a 52-week high as we speak. We have the student loans coming back online here this month which is going to pull some money right out of the economy and inflation is still pretty hot so the consumer is definitely in my mind going to cool off a little bit but still maintain a pretty good presence out there.
So, what are parts of the market that you guys like right here, Brett, if you think we got this market moving higher. How are you guys’ kind of playing it well I think I think the sum of large cap tech stuff is means had a nice cool back here. It actually as of yesterday had O of wood into correction territory with the 10% correction we are working a little bit in some of those areas but mainly we’re looking at the small cap index. So nice, you know, the Yeah there’s a lot of value out there. I think, you know, the average stock right now on the Russell 2000 is you know 30% off its 52-week high and I think that’s the area that we’re really focused on right there. All right. one of the names that I know you guys like floor & decor FND is the symbol what you call their Florida cores are just one of the best retailers out there in the market. I mean, think their stock prices really is proving that over the last decade they have compound it all revenue and earnings over 30% and going forward, we expect the next decade to be close to 20 to 25% as well but they have around 200 stores and they are the largest wood floors supply out there. They sell more than anybody, you know, the tile and wood flooring areas are very fragmented with mom and pops out there and they’re going in there have been very thin margins. They go in, they spent about 8 million dollars opened a store in these fragmented market areas and they’re just taking market share not only from home Depot and Lowe’s but they’re putting the mom and pops have a business very much like home Depot did in the early 80s because I didn’t you know, you think about that more I didn’t know about this country Florida Yeah you got to have it right 9 and half billion-dollar market cap companies up 27% year today.
Another one that you like is Alarm.com it provides interactive security solutions and I think that public did you take them home and office owners but Dotcom on and I just want OK so software as a service it’s a SAS company new kids that are doing but it’s been called a monopoly by Honeywell and I don’t think you could get any finer complement and then Yeah, it’s a beautiful compliment. No doubt about it again under the radar. Small cap, mid cap company hiring what a frame it but a billion-dollar company right, so I mean they’re just dominant. They have there we call this a moat company. If you look out, they distribute so if you think about the security market is super fragment it out there as well with a lot of smaller regional firms but really alarm Dotcom isn’t background of all these security companies. So, when you pulled your app it may say, you know, X, Y, Z security company but its Alarm.com that’s really running that and they’re not only do they do this ask service but they do provide products as well. Are there parts of the market. You feel more comfortable with right now. I mean are you mentioned small caps I mean are you in the point your kind of trying to look for maybe some of these names that maybe not as well known as a Florida coral you like fragmented markets where somebody can go ahead and take a big share, I do like that. I’m not going to disagree we like companies was a good moats around them. I think look, I think we’re probably I think the longer into the you curve has moved very quickly up here is putting a lot of pressure on all these markets really spooking the market right here.
We’ve got to inflation numbers coming out on Friday. The PCE I think that’s one of powers favorites of was Yep indicate Here’s when he looks at that focus on the core were expected to come in at .2. We also have all of October inflation data come out and I think we’re going to switch away from whether to debt know Government shutdown stuff which we will navigate through that I’m pretty comfortable that we’ve got to strike one on that all hidden. I think all speaking out right here. I think that I think the Treasury yields are peaking out right here. I think the dollar peaking out right here. And I think all these trends are going to reverse year in the short run, leading to a massive rally going into the year that because yeah, I would say the as you can probably imagine the feeling out there is really kind of kind of gloomy in a context of you know, the SPX is higher this year. But the sense that there’s more gloom feels like, you know, I I love that sentiment right it makes me feel more comfortable and the new bull market and this bull market started back in October of 22. And we rallied up 27% from the lows there. Yeah, I’ll give you a really good stat for your listeners. There’s no time to prevailing index in history has ever rally 25% straight all of a low and that are not the low set in for the new cycle and so going for I believe were enough new bull market and I think we’re just in a normal correction right you’re going into the seasonality of September and plus, you have those rates and like I said, oil and the dollar pushing up.
Brett, you’re based in Tallahassee. We are based in Tallahassee, I have to ask the question is Florida State back? Florida state is back, let it be heard we have an incredible Coach Norvell is doing a wonderful job with the team he’s doing excellent with recruiting. We just have a good makeup going on right now for state football and it seems like you guys for such a long time you and University of Florida and Miami. At the same time, none of those Florida kids got out of the state but so I think the challenge for anybody is to kind of keep that talent in state right that’s right that’s right there’s a lot of competition. Lot of coaches fly down to Miami recruit, no doubt about it. So right. Speaking of just Florida in general. Everybody has left New York. Matt and I are the only ones left. I mean, are people still coming down to Florida. Is it is Tallahassee House economy down in Tallahassee? The economy is here in Tallahassee, Florida, just as it is all over Florida. Unemployment rates when a lowest in the country Yes. Housing is through the roof. People are moving here still in droves and believe it or not. Tallahassee is picking up some of the transplants around the country. There’s zero even I mean, there’s just a lowest in the dormant ever seen and real estate in Florida right now. And I guess the call is you guys don’t pay state taxes down there. We do not. We are very plus why don’t we have that we have that Yeah mean we’re getting tax through the nose right. Brett, thanks so much for joining us.