Mornings With Maria: Heightened Interest Rates & Inflation Concerns

ETF Trends’ CEO, Tom Lydon, takes a look at the markets after last week’s hit on Nasdaq and what this means with interest rates increasing on Fox Business’ “Mornings with Maria,” with host Maria Bartiromo. It’s “a bit of a pain,” Lydon explains, given the exceptional run last year. With that in mind, it was the work from home stocks, FAANG stocks, and anything related to technology and innovation, which did very well, thanks to a lack of capitalization requirement.

“We’ve seen this shift over value-oriented companies in the energy area, as oil’s touching $70 a barrel, as rising rates are moving, with financials and banks really doing well, with banks able to charge more for their clients,” Lydon explains.

These are indicators that a shift is on. Still, the market will hear from Jerome Powell, Chair of the Federal Reserve, in eleven days to determine whether inflation may occur. There is a commitment to wanting to see lower unemployment numbers, which is, of course, what the country is looking for.

Bartiromo points out how Oxford Economics predicts the economy to grow 6% in 2021 thanks to the vaccine rollout and state reopenings to help push economic recovery. Additionally, the U.S. is looking to lead the global growth story for the first time since 2005, surpassing China.

Is Inflation Coming?

Switching gears, when asked about the market underestimating inflation and higher interest rates, Lydon does agree it’s a possibility but notes how there are surveys with financial advisors every week. With that in mind, they’re having a feeling about this inflation trade when it comes to the Fed stating it’s nothing to be concerned about.

So, while there are shifts into those areas, there are sectors like infrastructure that will be receiving a lot of money. At the same time, however, Lydon clarifies that it’s important not to disregard technology, which has been on a huge run. Even with Zoom taking on a downward trend to put it back where it was in August 2020, it’s not as though these various forms of technology are going to go away.

As Lydon notes, “We are the tech country of the world. Our indicators, like the S&P 500, are very tech-heavy. So, with that, our markets are more effective towards technology slides. Europe, for example, is only at 8% technology in their market indicators. So, we’re going to see more diversification as value starts to come back. However, any correction that we’ve seen in tech over the years surely was a buying opportunity.”

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