Managing Director of The Strategic Fund Marc LoPresti joins Yahoo Finance Live to discuss volatile markets, what to look forward to regarding monetary policy at the FOMC meeting, inflation, a disappointing earnings season, and technology sector fund data.
Video Transcript
BRIAN SOZZI: All right, we'll stay on these volatile markets here, Marc LoPresti is the managing director at the Strategic Funds and joins us now. Marc, nice to see you here. Look, you're going to get a lot of people out there on the Street and even the retail investor, wondering if now's a time to buy these beat-up tech names and increasingly, some names on the S&P 500, what say you?
MARC LOPRESTI: Well, it's certainly a plethora of pain for investors here this morning with markets deeply in the red. I would be, to address your question, I would be very reticent to look at getting in or adding to positions in just about anything, Brian, before we hear from an increasingly hawkish Fed on Wednesday. Look, this is really what has investors jittery, was plan A from Chairman Powell too little too late? And can we maintain confidence in the Fed's ability to effectively govern monetary policy in this challenging environment?
JULIE HYMAN: Hey, it's Julie here but with this happening in the market how is the Fed going to be more hawkish than it's already been? I mean, I just don't understand, like what really is the market afraid of? What is the Fed going to say that could cause more selling here? Come on.
MARC LOPRESTI: The additional as you heard from Goldman this morning the possibility of going from four to maybe four or more rate increases, possibly going from 25 bp to 50 bp and it's not even so much about the numbers, Julie, it's about whether or not there's a plan. The market reacted positively when Chairman Powell came out earlier and said you know, in the beginning of the year and said, look, you know, we're going to increase the rate of the taper, this is what we're going to do in terms of hikes. We think this is going to be an effective inflation mitigant. And guess what? Omicron, slowing the reemergence from this wonderful COVID pandemic we've been dealing with for two years, geopolitical concerns now coming on to the scene, Russia and Ukraine, missiles over Abu Dhabi reported this morning, there's just too much going on.
JULIE HYMAN: Well, but that's kind of what I'm saying here. Given all of that, how could the-- I mean, look at this Fed, look at the history of this Fed, and its reactiveness to prevailing conditions, including prevailing market conditions, do you really see Jay Powell coming out here and being more hawkish in the face of a NASDAQ and S&P 500 correction?
MARC LOPRESTI: I certainly hope not but I think that's where the concerns lie, right? Is that the Fed may become even more reactionary. And the hope is there will be consideration of what the market is doing, certainly, the market is telling the Fed right now, we don't like what's going on. So it's very hard to predict but that's where the concerns lie in my humble opinion right now. It's all around Wednesday.
BRIAN SOZZI: Well, Marc, let's say the Fed comes out here in March and drops the hammer with a 50 basis point rate hike, where do stocks go then? In fact, where do stocks go in the near term if that turns out to be the prevailing view from March just given what we're seeing with inflation?
MARC LOPRESTI: Yeah, I mean, listen, unfortunately, and I hate being a bear, I was saying this to some friends last night, I'm at heart a bull but between that and what is clearly a disappointing earnings season with all the names that already reported, most companies even resisting providing guidance. I think we're going to remain in bearish territory for a while here, unfortunately.
JULIE HYMAN: Hey, Marc, you were telling us during the break, you are at a hedge fund conference in Miami right now. Hope I'm not-- I hope I'm not giving anything away there.
MARC LOPRESTI: No.
JULIE HYMAN: This is supposed to be-- this is supposed to be your time, right? I mean, when the markets are down, this is what hedge funds are for. So I'm, you know, so I'm just curious what you're hearing from your colleagues down there, are people looking for opportunities here at a time when everybody else is running for the exits?
MARC LOPRESTI: Well, listen, this is one of those times where the proof lies in the pudding. And whether paying for that 2 and 20 that investors pay to be in hedge funds, really delivers on that protection or even that ability to find alpha in challenging environments. And it comes down to the strategy, right? I think macro managers are better positioned, they can pivot more quickly to actually provide some protection and to deliver some returns.
Hedge fund performance, of course, last year relative to the market rather lackluster, average around 11%, 12% by most estimates. So I think the mood here is definitely a little bit nervous as there's going to be a challenging environment, certainly for the first couple of quarters. And tech hedge funds, my god, if you look at Cathie Wood and ARK by way of example, just taking a pounding on this value rotation from tech and risk assets into companies that produce things and have profits and dividends and return to shareholders.
BRIAN SOZZI: Yeah, Marc, good point there on the tech funds. A lot of hedge funds had really strong allocations, they continue to these FAANG stocks, other tech stocks, software names, you name it. I mean, are we looking at potential tech fund blowups here just given all the pressure we're seeing on the NASDAQ?
MARC LOPRESTI: Yeah, I mean, I don't think you can rule that out, Brian. It depends on how much leverage these guys deploy but at the end of the day, it's difficult to pivot. If you're a tech-focused fund, hedge fund, or otherwise, it's pretty hard to pivot into a value rotation or into energy and completely change your mandate, right?
So I think you're going to see as the fund's report December returns, January returns, I expect to be fairly abysmal for the tech-focused funds. And as I said before, I think the macro guys, the managers who have the ability to pivot and to take advantage of the rotation into value. And even into energy, I think energy is going to continue to have a great time here certainly in the next couple of quarters of 2022, you're starting to see that play out even in the direction of stocks like ExxonMobil even here this morning.
BRIAN SOZZI: All right, well, enjoy your conference and hang in there. It could be an interesting week. Marc LoPresti, managing director at the Strategic Funds. Good to see you.