ETF knowledgeable Sylvia Jablonski of Defiance explains why she thinks marketplace doomsayers are mistaken

Q: In the past, when we talk about market downturns, at least some of the bigger shocks to that market turned out to be more focused around the financial system. Do you see any of the economic weaknesses that everyone’s pointing to today, whether that has any real material carryover into financial markets in the sense that it could cause some sort of destabilization in capital markets?

A: If a lot of the topics I just discussed were to go in a different place – for example, if the Fed hikes more aggressively and doesn’t feel satisfied with inflation falling, and you start to see a hard landing – then I do think that some of that will start feeding into the market. Banks are in good shape – this isn’t 2008, right? Credit is in pretty good shape, the consumer is in good shape, the debt-servicing ratios are stronger than they’ve been in decades. So consumers essentially have this $US2 trillion ($2.8 trillion) in savings, they have lower amounts of debt than they’ve ever had before. So I think that the market can be more resilient this time.

Q: If we are seeing a tradable bottom right now, what are you recommending people should be investing in?

It’s important to classify what type of trader you are, too. So if you’re looking for short-term returns, I think that’s trickier. The machines and high-frequency guys do a great job with that, but the average investor that was doing well with day-trading over the past year, it becomes a little more dangerous just because you do have so much range-bound volatility. But if you have an appetite to be a long-term investor and to really get the deal of a century, I think, take a step back and look at names like Apple, Google, Microsoft. You’ve got negative real rates, companies with strong balance sheets, pricing power, consumers willing to spend money, retail sales rising.

And then just the theme of cybersecurity, cloud, metaverse, web 3.0 – the future of all technology hangs in the balance of these companies. And even the semiconductors, like Nvidia and AMD, they’ve just been absolutely crushed. I just think the longer-term outlook for those names is going to be what buying Apple was 10 years ago. You’re going to see those compounded returns.

I also love the reopen trade. We know that spending is going from goods to services, and it is increasing. But lifting the mask mandates, this post-Covid getting-out-of-the-house thing – there’s just so much pent-up demand to travel. The Delta earnings call was pretty awesome. That’s a good trade – hotels, cruises, casinos, airlines. That’s a good place to look in the near term.

Bloomberg

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