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00:00JOANNE FEENEY JOINS US NOW. WE HAVE GOT THE LIKES OF WILLIAM DUDLEY TALKING ABOUT THE TYPE OF RECESSION AS TO WHETHER WE WILL SEE ANY TYPE OF RECESSION. HOW DO YOU TRADE THIS RISK AT THE MOMENT? JOANNE: GOOD TO SEE YOU AGAIN. VERY CHALLENGING, PARTICULARLY BECAUSE WE ARE STILL IN AN ERA WHERE UNCERTAINTY IS ELEVATED AND LIKELY TO REMAIN SO, WHETHER IT IS GEOPOLITICAL RISKS, ANY UPCOMING MIDTERM ELECTIONS, THERE IS A LOT TO BE CONCERNED ABOUT AND THAT IS THE REASON VALUATIONS ARE COMING DOWN SO HARD. THERE ARE VERY COMPLICATED SUPPLY CHAIN DISRUPTIONS, PLUS THE WAR IN EUROPE. I THINK IT IS RISKY RIGHT NOW IN TERMS OF THE FORWARD OUTLOOK ON THE GLOBAL ECONOMY. RECESSION RISK HAS RISEN FOR A LOT OF REASONS. MARGINS ARE AT PEAK LEVELS AND COULD COME DOWN. WE ARE HEARING ANECDOTES OF FIRMS DOING LESS HIRING. THESE ARE REASONS TO BE CONCERNED AND ONE HAS TO BE CAREFUL ABOUT HOW TO POSITION PORTFOLIOS IN THIS ENVIRONMENT. BUT THERE ARE THINGS THAT WE CAN DO FOR CLIENT TO PROVIDE SOME BUFFER TO THE VOLATILITY WE ARE ALL EXPERIENCING. HAIDI: CAP TO ME ABOUT THOSE BUFFERS AND WHERE YOU SEE THOSE OPPORTUNITIES -- TALK TO ME ABOUT THOSE BUFFERS AND WHERE YOU SEE THOSE OPPORTUNITIES? WE DO SEE THE ECONOMY CONTINUING TO EXPAND BECAUSE SUPPLY CHAINS ARE SLIGHTLY IMPROVING. WE KNOW THERE IS MORE SEMICONDUCTOR CAPACITY COMING ONLINE IN THE SECOND HALF OF THIS YEAR THAT SHOULD ALLOW FOR MORE ARTICLES TO BE PRODUCED AND APPLIANCES. LOOSENING RESTRAINTS ON THE HOUSING MARKET. THERE IS STILL A LITAN SHORTAGE OF HOUSES OUT THERE. ONE OF THE THINGS WE LIKE TO DO FOR CLIENT IS TO BUILD IN INCOME GENERATION . WE CAN DO THAT WITH MORE APPEAL AND THE FIXED INCOME SIDE, BUT ALSO ON THE EQUITY SIDE. WE CAN BUILD IN COMPANIES THAT PROVIDE INSURANCE AGAINST RECESSION, LIKE FINANCIALS AND REAL ESTATE WHICH OFFERED DIVIDEND YIELDS ABOVE THE MARKET. EVENT TECHNOLOGY, A COMPANY LIKE -- EVEN TECHNOLOGY, A COMPANY LIKE BROADCOM WHICH IS EXPOSED TO THE AREAS OF THE GLOBAL ECONOMY THAT ARE STILL GROWING, LIKE DATA CENTERS. YOU CAN GET A DIVIDEND ABOUT THE MARKET, PRICE BE POSITIONED FOR GROWTH OVER THE LONGER-TERM. SHERY: WHAT ARE YOUR CALLS FOR WHAT YOU ARE MENTIONING AS SMART CYCLICALS? WHAT ARE THOSE? JOANNE: THEY ARE TYPICALLY ASSOCIATED WITH THE BUSINESS CYCLE. HARD TO APPLY IN A SITUATION WHERE YOU ARE STILL RECOVERING FROM THE PANDEMIC AND YOU HAVE A WAR GOING ON. IF CONSUMERS CONTINUE SWITCHING THEIR SPENDING HABITS, GOING OUT MORE SERVICES AND STORES -- FOR EXAMPLE, T.J. MAXX IS SOMETHING WE LIKE. IT IS LIKELY TO BE RESILIENT IN A RECESSION. AND IT DOES REQUIRE PEOPLE BEING WILLING TO GO OUT OF THEIR HOUSES AND DO THAT TREASURE HUNTING THAT A MARSHALL ' S AND T.J. MAXX ARE SORT OF FAMOUS FOR. AND IT DOES SERVE HOUSEHOLDS THAT ARE TRYING TO SAVE MONEY. RECESSION COMES ALONG, YOU WILL TEND TO DOWNGRADE YOUR SHOPPING FROM MACY ' S AND NORDSTROM, AND GO OVER TO T.J. MAXX AND MARSHALL ' S. SHERY: HOW DO YOU DIFFERENTIATE BETWEEN FINANCIALS. RECESSION FEARS CAN HIT THEM BUT AT THE SAME TIME, THEY BENEFIT FROM HIGHER RATES. JOANNE: EXACTLY RIGHT. THE BIG BANKS, HAVE TWO THINGS GOING FOR THEM, HIGHER DEBT INTEREST MARGINS WITH THOSE RATE INCREASES, PLUS MORE TRADING WITH HIGHER UNCERTAINTY, MORE TRADING VOLUME, WE SAW THAT WITH CITIGROUP ' S COMMENTS RECENTLY. BANKS ARE A GOOD PLACE TO BE, PLUS THEY PAY SOME NICE DIVIDENDS. ANOTHER AREA IS REGIONALS, WHETHER THAT IS TD BANK OUT OF CANADA, OR FIRST REPUBLIC BANK. THESE ARE COMPANIES THAT HAVE A CLIENT BASE THAT IS VERY LOYAL, RELATIONSHIP-DRIVEN. THEY TEND TO BE LESS CYCLICAL AND WILL BENEFIT FROM THE HIGHER MARGINS. HAIDI: WE SAW FED CHAIR JAY POWELL REALLY CONCERNED ABOUT THE INTANGIBILITY OF INFLATION EXPECTATIONS -- THE ENTRENCH OF RECESSION EXPECTATIONS AND THAT HITTING THE CONSUMER. JOANNE: IT IS A TALE OF TWO CONSUMERS. THAT IS WHAT FED CHAIR JAY POWELL WAS TALKING ABOUT. HIGH INFLATION, GAS, ENERGY, FOOD WILL REALLY HURT FOLKS LIVING PAYCHECK-TO-PAYCHECK AND THEY WILL HAVE TO CUT BACK ON SPENDING ELSEWHERE. SOME OF THEM ARE GOING TO PULL BACK FROM LONG VACATIONS, FOR EXAMPLE. BUT THEY MIGHT SUBSTITUTE INTO SOMETHING LIKE A CLOSE-BY TRIP FOR THEIR KIDS LIKE GOING TO SIX FLAGS. SIX FLAGS HAD GOTTEN HURT IN THE RECENT PULLBACK. THIS ONE IS PRETTY RECESSION-RESILIENT, IF YOU LOOK BACK AT THE HISTORY OF THE COMPANY. THEY TEND TO DO WELL IN RECESSION, AND THEY ARE ABLE TO PASS ON PRICE INCREASES. ANOTHER AREA IS WILLIAMS-SONOMA. THEY SERVE THE HIGHER END OF THE CONSUMER MARKET, WHICH WILL BE LESS AFFECTED BY THE HIGH INFLATION IN ENERGY AND FOOD. AND WITH ALL THE HOUSES THAT HAVE BEEN SOLD, A LOT OF FOLKS WILL BE OUT THERE FILLING UP THOSE HOUSES WITH DISHES AND

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Advisors Capital Mgmt's Feeney on Markets and Strategies

JoAnne Feeney, Advisors Capital Management Partner & Portfolio Manager discusses markets and strategies. She speaks with Shery Ahn and Haidi Stroud-Watts on "Daybreak Asia". (Source: Bloomberg)

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