Yahoo Finance

Joining me now, we've got Burns McKinney, NFJ Investment Group managing director and senior portfolio manager. I got to know, how are you assessing this volatility right now and what seems to be like just a flood, more of tariff talk coming out of the White House?

A lot of what we're seeing in the markets, uh, you know, sometimes when we think about the policy environment, it's almost as though the president has, uh, you know, two angels, two angels on his shoulders. You have the, the good Trump, um, policies which are tax cuts and deregulation, uh, alongside what, you know, at least economically speaking oftentimes is the bad Trump, meaning the tariff news. And, you know, early on post-election, I think that, you know, you saw kind of the good angels winning out. And, you know, what the markets have been demonstrating of late is that, you know, really there's been an increased focus on the tariff side. And, you know, that's bringing the markets down, it's bringing in recession or even stagflation fears. And we think about a playbook for this, you say, well, okay, you know, first of all, you know, we think of trade wars, there, there aren't any absolute winners. It's just a question of, you know, who loses less relative winners. And so, you know, some of the things on a relative basis that have been doing, you know, more poorly would be some of the big tech names that are more trade-oriented versus, you know, names that are areas of the market that are more inwardly focused would be areas like, um, you know, small caps, uh, staples, utilities, health care. Um, and you know, really what we, you know, say to investors, the, the, the, the, the biggest concern on a macro basis is whether the uncertainty around trade policy, um, causes companies to limit capital spending and, um, you know, and limit hiring. It sort of, you know, we've had a lot of this on again, you know, you know, we're, we're having tariffs, we're pulling them back, you know, tariffs, giving a pause, you know, there I, I haven't seen this much on again, off again. It's sort of like Ross and Rachel on, on the TV show Friends. And, you know, companies don't really necessarily like that level of uncertainty.

You know, as we think about the uncertainty right now, a lot of it still stems not only from what are the policy announcements, but also what some of the retaliatory efforts might look like as well. And as that lingers and eventually becomes more known by the markets, how are you expecting this broader trend of what we've seen in the, the great reallocation or the great repositioning, if you will, as some of it, some of the economists and investment strategists have called it.

Yeah, the biggest thing and I think one of the, the, the area that we, we tell our clients to focus on more than anything is on a macro basis is how does this impact Fed policy. That's really the world we've lived in, you know, ever since the, the Fed put was accepted years ago. Um, how's it in fact Fed policy? And is the, the central bank going to focus more on the economic slowdown aspect of tariffs, which tends to happen over the longer term or their inflationary aspect, which tends to be a little bit near term. And to the extent that they do, um, look at it a little bit more on the inflationary side, that might cause them to maybe, you know, pause a little bit longer with respect to rate cuts. Now, as far as what the market's telling us, the market seems to be saying that, um, that it's really the economic slowdown, this is a bigger impact, given the fact that in the last, you know, month or two you've seen the projected number of interest rate cuts this year go from one to two to three cuts. And likewise, we've seen the 10-year bond yields come down. And so that's the market's way of saying that, um, as well as the rotation into, you know, more stable areas of the market, the market just says, okay, recession fears are starting to creep up a little bit.

So for a lot of investors out there that are trying to understand with this dip, if this is an opportunity or if there should be more caution ahead, what would you say to them? Is this a dip buying opportunity or is there more that you expect in terms of some of the declines given the volatility that we've been tracking?

It, it appears that, uh, investors should probably at least given the degree of uncertainty, um, brace for a continuation of that. And so that's one reason we've seen what may just be the beginning of a rotation into some of the safer areas of the market. Uh, you know, one rotation that could be a bit more sustainable would be, you've seen value stocks as well as dividend payers have been doing a bit better this year. And, you know, that kind of makes sense. You know, you look at dividend paying stocks, these are the kind of names for which, you know, where are you getting your returns from? You're not necessarily getting it all from capital gains, you're getting it from that cash that the companies are returning to shareholders. And so, you know, you know, capital gains can be positive or negatives, but, you know, dividends are always positive. And so, you know, that rotation could be, um, just beginning.

Burns, thanks so much for taking the time here with us today.

Thank you.