“The Fundamentals Are Still Strong” — Biggest Market Opportunities Right Now

Joining me now is Tiffany McGhee, CEO and chief investment officer at Pivotal Advisors. Tiffany, great to have you back. Good to be back, Caroline. All right. So, Tiffany, the jobs report came in worse than expected today. The economy lost more than 20,000 jobs last month. Yet the market is higher. Is Wall Street getting ahead of itself or is bad news officially good news here? No. Listen, you know, bad news is not necessarily especially good news when you think about the labor market in general. You know, it's cooling, but I think it's, you know, kind of in a bit of, like, a healthy way. Right. So we look at the, the data that we got earlier on this week, initial jobless claims are really below 200,000. Layoffs are really historically low. And then, you know, those we also got those, challenger job cuts, which also, remain low. And so when we think about hiring has slowed, but companies are still hiring. So I think overall the fundamentals are still are still relatively decent. So the economy is still on. Absolutely. What's the single biggest takeaway from all of this economic data that we got this week then. Yeah. For the retail investor I should say. Yeah. I think that, you know, we always get these, these, huge data points. And I think it's very unscientific, but I think that, you know, this is the cycle, right? You know, we're we're going to have this news and we're going to be tracking all of this data. I really think that, at the end of the day, the fundamentals are still strong. The economy is still believed. You know, wages are still decent. So I don't think that this is going to hit us really, really hard. But, you know, there there is that bit of like a shock value when we hear news like that. So as well as shock value except for the market's higher. So I think we should just make it clear that the market and. Retail investors mind sometimes. Right. Sure. Yeah. Yeah. So so the market's higher because the expectation is that the fed won't have to hike rates if the economy is actually weakening to obviously combat inflation. Are you in that camp. Do you think that the fed will just remain on hold, or do you think hikes still need to be in the picture? Yeah. So I think that the fed is is is very much looking at you know, inflation of course. But then also jobs. I think that there's a very good chance that they might still be on hold. But we're just going to have to wait and see. But I think that this is what the fed was waiting for, you know, really that that, that, employment data I think was really important because there's been so much talk about inflation. So I think that they were really just kind of waiting to see about the, the, the, the jobs data. When we think about investment strategy. Last time you were on, which was the end of June, you were basically saying, don't abandon the Meg seven, but broaden and diversify. Since then, we've had another earnings season still going on. Things like financials and industrials have hit new highs. And then we've also seen economic data like this jobs report. What's changed about your outlook now. Yeah nothing's changed. So you know technology has kind of dominated for for several years. And, you know, last time I was on, I was talking about how leadership is broadening and broadening, in terms of sector broadening in terms of size and style. We're seeing, you know, value outperform growth. We're seeing small caps outperform large, large caps. And so and we're seeing those sectors leadership broadening in those sectors. So, you know, so that it's just really a continuation of the theme that I was talking about. Okay. So as we think about actual opportunities, let's go sector by sector. Tell me if it's still a buy or if it's a hold or if it's in a void. Yeah. And if it is a buy tell us some stocks that you like in that space. Let's start with tech. Yes of course. Definitely still a buy. Okay. What names do you like in the space. Yeah. So I so you know, when we think about, everybody talking about I of course. And so I'm really more so interested in the I infrastructure. Right. So not necessarily what I is doing but who is building it. Right. I talked about last time, the, the creators, the builders and the adopters. So so we're focused right now on our infrastructure. But I also want I want to encourage investors. So to think about the I trade not as a trade but as, a portfolio in and of itself. So, you know, I pivotal we do a core and satellite approach. So if you were going to do that, if you were going to build a portfolio of I, what would you have in there? You would have all of these different, different types of companies. So Nvidia is in there. Broadcom is in there. A verdict is in there. Eaton is in there. Constellation energy is in there as well. So all of. Those are buys right now. I would yes. Yeah. Especially Constellation Energy because it is down a little bit. So I think it's on sale okay. Moving on. Industrials still an opportunity there. Yeah definitely not an opportunity. So you know again there are companies that are benefiting from AI as well. Right. This I theme really just spans. It's it's huge. It's not just limited to tech. So names that I would like in that area. So aerospace caterpillar there's one up. Parker Hannifin it's up 22% year to date. Also Trane Technologies, I mentioned that before. It's up about 23% year to date okay. Yeah. All right. Financials. Yeah. So of course your usual suspects I we own and I like JP Morgan and Goldman Sachs. But again thinking about that core and satellite approach. What else can we own. Two names that I like KKR and also Apollo. So you know, typically, you know, retail investors really can't get in on private markets, but this is actually a way that they can. Right. And so, you know, these two names are very strong in the alternatives category. And so kind of rounding out that, the financials part of your portfolio with these two names I think would be great. Utilities is the worst performing sector year to date. Is that an opportunity? It could be. I mean, listen, we are talking about staples. So it could be I think, you know, it really comes down to the diversification of your portfolio and seeing if, if there's an opportunity to kind of like, broaden, exposure. What about health care? Yeah, I love health care. Right. So, healthcare is is great. It's just I think it's overall long term a resilient sector. One of the things that, you know, always comes up is like, Lily, so, you know, GLP one's great. I think it has the opportunity to, transform the entire health care industry. But yeah, I'm definitely bullish on healthcare. Okay. With Eli Lilly being your top pick. Okay. And, how about energy? Actually the best performing sector still year to date. Yeah. Yeah. So, NextEra energy is a company that, that, that I like again, thinking about how you can diversify that segment of your portfolio. Constellation Energy I mentioned, I mentioned earlier, I definitely think that, energy companies in general, really stand to benefit from, from I infrastructure spend as well. So, yeah, so NextEra Energy and Constellation are my two. So out of that list. None were avoids. Is there an area of the market that you are avoiding right now? So I don't like to, to paint. To paint, a broad brush. So no. And so, you know, what we tend to do a pivotal is, you know, really kind of you go from like, bottom up, top down and bottom up all at the same time. Right? And so, there isn't one sector that I would completely avoid. But I would really be looking at, you know, companies with lots of leverage, companies who maybe have a lot of I spend that, if not really kind of like delivered on that in a, in a, in a, in a very clear way. And with no hopes of that, you know. So, yeah, I think that that's. Yeah, it's just about, looking at the fundamentals of each company and making sure that they have strong balance sheets, making sure that they have, we also like, pricing power. Those two things are very important. Okay. So stocks have had a huge week. I was taking a look at the week to date performance. Still have a few hours left in today's session. But the Dow is up nearly 3%. The Nasdaq is up 4.5%. S&P up more than 3%. Russell up about 3%. Yeah. Is this a rally that investors should chase or should they wait for a pullback as they're thinking about what I should do today or maybe on Monday. Yeah I mean I think that there are always opportunities to chase. But again you've got to kind of peel that, peel them off and kind of pick them off one by one. I always look at where you are in your portfolio right now. Have you rebalanced, do you need to take some money off of the table? And so starting with, you know, their individual situation, if there are names that, that, that they see are kind of running up and they have high conviction around, I would definitely buy those. So I am not a always buy the dip kind of girl. I'm, if I have a lot of conviction around it and it has great momentum, then I am probably going to buy it and I'll hold it for a longer time. Okay, so two part question here. What's a stock you would feel comfortable buying today Nvidia. And what's one that you would wait for a pullback to actually buy Apple okay. What's the biggest risk to investors over the next six months. Concentration. That's it. And I know I talk a lot about diversification, but I think that that is really the main the main risk. It's so it's so easy to get caught up in hype and not that I is hype, but just excitement and suspense is kind of tend to stay with like the same 4 or 5 names. And that is exactly what investors should not be doing right now. What's the biggest risk to the rally? I think potentially, inflation. But I but, you know, I think about, you know, the second quarter and, earnings growth has really, kind of pushed, markets, right. More than multiple expansions. So when you think about the difference and making that distinction between earnings growth and multiple expansion, earnings growth is the actual revenue growth of the company, that multiple expansion is like the hype and what really what investors are willing to pay for, whatever those names are. And so this this past quarter earnings growth really, really did a lot of the heavy lifting. And so, you know, I think that we've got a really healthy market right now. So current earnings justify current valuations. I think so for mostly yeah. So you wouldn't look at this is a market that's too expensive here. I wouldn't because I look at some of these stocks and I say you know do I want to own them. And if I don't own them, I'm going to buy them. And it really doesn't matter what the prices for me. And I know, I hear, you know, the peanut gallery going, but, so I think it's a matter of. Do you own them already or do you want to add to them? So I wouldn't add to to things that are, that are, you know, kind of pushing up against their they're 52 week high right now. But if I don't own them, I would certainly get into them right now. I just read about. What's one thing investors should do differently today than the beginning of summer, when you were on. I think that, you know, looking at their portfolio, to see, you know, if they are invested in small caps, if they're invested in value. Again, those two, those two areas have really kind of, like led, led growth this year. And I think that, it's very common to have this, you know, this S&P 500, just like ETF and then maybe add a couple of stocks to it. And that's great. But I'm also a really big fan of kind of breaking that out. Right. So using that core and satellite definitely using some ETFs but also kind of going into the Russell right now going into small and also the Russell value I think kind of capturing that is is just really important. Not just kind of sticking with like the broad market like SB So not too late to add international exposure or small cap exposure? I don't think so. And especially emerging markets. So, you know, if people have not gone on that, they're on that bandwagon. I think it's a good time to do that. Okay. All right. I think that's a great place to pivot to our rapid fire game of this or that. You've played many times before like quick questions, quick answer is no hedging. Are you ready Tiffany. I am. Ready. Right. Here we go. Jobs report cooling or weakening labor market cooling. Fed rate hike on the table or off the table. Ooh, that's a hard one. I'm going to say off the table. Economy slowing or stabilizing. But you're asking me very hard questions, Caroline. So, so I'm going to say stabilizing because I'm not worried. Okay. Recession watch real risk or yesterday's story yesterday story. Stocks too expensive are still attractive, still attractive. Add risk or reduce risk. Depends on what you mean by risk. So I am I know that I have a very high risk tolerance for, you know, most things. So, you know, it's selective risk. I infrastructure or software, I infrastructure chips or power. Oh. Oh power one chip stock that every investor needs to own. That's not Nvidia. So how I would do it and you're not gonna like this answer is I would be investing in, an actively managed tech ETF. That's what I would do. A top power stock. Conflict and injury. Software, a name you'd add here. But Microsoft. Almost that software name you'd add here, that's not Microsoft. Again. So I would I don't know. You're making it hard for me right now. I have a brain freeze right now. Would you play that as an ETF though, too? Like I would be here. So, so I, I what I really like in terms of strategy is, like I have my favorites, but what I really like is to diversify within the sector, within the theme, all of those things. So I would take whatever ETF is, is investing heavily in tech. Right. And there there are so many of them. I would probably do I would again do that for in satellite, I would do a passively managed one and then possibly like an actively managed ones with if they can kind of like lean into those opportunities. Mag seven or everything else. Everything else. Mag seven name you'd buy first. I mean, I'm not going to say Nvidia. So I'll say meta. Nvidia or Broadcom Nvidia moving away from tech industrials or financials. Ooh I want both. But I'll go with finance with financials. Big banks originals. Big banks. Both picks JP Morgan or Goldman Sachs. I mean now you're forcing me to choose. Actually I do like both. At this point I would just go into me my eeny meeny miney mo. They're both in my portfolio. But I think it's really more of, you know, JP Morgan and Goldman. I think they do a lot of the same things. But then I also like that idea, of having, like, an Apollo or having a KKR because that is, adding something different to the mix. S&P above or below 8000 by year end. Well, I mean at least to 8000. I'm going to cross my fingers and hope that it's above. I'm I'm positive. Yeah. How much above? Just by a little bit. Maybe, you know, maybe 81. One word to describe the market heading into the fall. Opportunities to. Finish the sentence. If I had $10,000 to invest today, I'd put it in. A diversified portfolio. I would have. I would lean heavily into small caps, into value, into emerging markets, and having into tech. All right. So thanks. Sorry. Health care. All right. Tiffany McGhee we'll get that in there. CEO and chief investment officer, pivotal advisor is always a pleasure. Thanks so much. Thanks so much, Caroline. If you enjoyed this street talk, check out our full interview with Matthew Tuttle. He says the lows are in and reveals which stocks he'd buy right now.