Eddie Ghabour, the co-founder of Key Advisors Group LLC, explains why he believes markets have yet to bottom as US stocks plummeted.
Eddie Ghabour, the co-founder of Key Advisors Group LLC, argued Thursday as US stocks plummeted that the market has not yet bottomed out.
The wealth advisor provided the insight to “Varney & Co.” on Thursday, as US stocks gave up almost all gains from Wednesday’s Fed-driven rally.
The Dow Jones Industrial Average fell over 1,000 points, or 3%, while the NASDAQ Composite fell 4% and the S&P 400 fell over 3%, a day after the Federal Reserve cut interest rates by half a point for the first time in two decades Chair Jerome Powell signaled the economy could avoid a recession.
| ticker | security | Last | To change | To change % |
|---|---|---|---|---|
| Me: DJI | DOW JONES AVERAGES | 32898.96 | -1,162.10 | -3.41% |
| SP500 | S&P500 | 4136.98 | -163.19 | -3.79% |
| I: COMP | NASDAQ COMPOSITE INDEX | 12281.496197 | -683.36 | -5.27% |
The Fed raised interest rates to a range of 0.75% to 1%, the highest level since the coronavirus pandemic two years ago.
Late last month, Ghabour told host Stuart Varney that he believes the market will fall 20% in Q2, potentially leading to a crash.
He clarified his definition of the word “crash” on Thursday as “a drop of well over 20% in the broader market.”
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“If you look at a lot of individual securities, they crash,” he added.
“Last year’s favorites, a lot of them are down over 50%,” he continued, noting that “people keep trying to find the bottom” and that he doesn’t think “we’re there yet.” .
Former Council of Economic Advisors Chairman Kevin Hassett discusses the tech-driven sell-off, the chances of a recession and the Fed’s delayed response to inflation.
Ghabour said he believes the CBOE volatility index, or VIX, the most well-known tool for trading financial market volatility, “needs to reach the 40s before we can capitulate.”
Traders often refer to the VIX as the so-called “fear gauge” because it rises when fear prevails in financial markets.
The VIX was up more than 21% on Thursday afternoon to 30.81.
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When asked why he thinks the markets haven’t bottomed yet, Ghabour said one reason is that “mega-cap tech stocks still haven’t taken the hits I think they have.” should”.
Mega-cap stocks are those of companies with market values well above the rest of the market, with combined valuations in excess of $200 billion, like Apple and Amazon.
| ticker | security | Last | To change | To change % |
|---|---|---|---|---|
| AAPL | APPLE INC. | 156.50 | -9.52 | -5.73% |
| AMZN | AMAZON.COM INC. | 2.326.07 | -192.50 | -7.64% |
Ghabour noted that some of the larger tech stocks “are only down maybe 12% to 13%.”
He also noted that the S&P 500 is down about 13% in 2022, which “is not a bear market.”
“We need to get at least 20%,” he argued.
Eddie Ghabour, the co-founder of Key Advisors Group LLC, argued that the current inflationary environment will “really squeeze” the middle class. (iStock / iStock)
Ghabour went on to explain his rationale for why he thinks markets haven’t bottomed, telling Varney “the Fed was extremely hawkish yesterday.”
“I know the tale said they weren’t [but] you [the Fed] just told us they will raise [rates by] 50 basis points three times [and] the market can’t handle it,” Ghabour continued.
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Powell allayed some concerns about a looming economic recession after dismissing the possibility of an even bigger rate hike than that announced by the Federal Reserve on Wednesday.
During a news conference, Powell dismissed any suggestion that a mega-sized 75 basis point raise was on the table at future meetings.
“I think we have a good chance of getting a soft or soft landing or a soft result. If you will, I’ll give a couple of reasons why. One is that households and businesses are in very strong financial shape,” Powell said.
“It’s a strong economy and there’s nothing to suggest it’s close to or vulnerable to a recession,” he added.
Ghabour told Varney on Thursday he believes the US is “not in a strong economy,” contrary to what Powell had argued the day before — particularly given the impact of inflationary pressures on families.
Eddie Ghabour, co-founder of Key Advisors Group LLC, argues that the middle class will be “really squeezed” by the current inflationary environment.
“The narrative continues to be that the economy is strong. I don’t agree with that at all,” he said. “I think the economy is very fragile.”
“The economy is slowing down very quickly, and when you tighten monetary policy at the same time, you have these big falls in risk assets,” Ghabour said. “I feel for the people who drove all the way down, but sadly those who think it can’t get any worse will be badly mistaken.”
He also argued that the middle class will be “really squeezed” by the current inflationary environment.
FOX Business Host breaks down the growing inflation crisis on “Kudlow”.
Inflation accelerated to a new four-decade high in March and price hikes were widespread, with energy prices up a staggering 11% mom and 32% yoy in March.
Gasoline is on average 48% higher than last year after rising 18.3% monthly in March as the Russian war in Ukraine prompted a rapid rise in oil prices.
Last month, the Labor Department said the consumer price index (CPI) – which measures a variety of commodities including gasoline, health care, groceries and rent – rose 8.5% year on year in March, the fastest pace since December 1981, as Inflation reached 8.9%. Prices rose 1.2% in the one-month period beginning February, the largest month-on-month jump since 2005.
Inflation data for April will be released next week.
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