PreMarket Prep is the #1 go-to source for everything you need to know before the market opens! Join our expert hosts as they break down the latest market trends, analyze key indicators, and provide actionable insights to help you navigate the trading day ahead.
Category
🗞
NewsTranscript
00:00Jonathan Corpina, working at home today,
00:03Senior Managing Partner at Meridian Equity Partners.
00:08Let's get right to the most recent data, Jonathan.
00:11Let's get your take on it.
00:13Gentlemen, good morning.
00:14Thanks for having me on.
00:15Just to clarify, working from home for now,
00:18we'll be going into the stock exchange soon after
00:21on this beautiful Friday,
00:22but stay at home.
00:25Use this as an excuse to stay home
00:27and spend some time with you guys.
00:29But yeah, looking at the economic data,
00:32pretty much comes in line of what we were expecting.
00:35I think this is what we really needed.
00:37The activity that we've seen in the market,
00:39the pressure that we've seen in the market,
00:41all the headwinds that we've had,
00:42I think we needed to take a little bit of a breather today.
00:46I'm in the camp of Dennis.
00:47I don't know if this holds on all day today, right?
00:50We've seen a lot of risk off recently.
00:52We've seen risk off come on Fridays.
00:55There's still a lot that we're gonna have
00:56in front of us next week.
00:58So we might see a quick pop in this market,
01:01but as we get to the last trading day of the month,
01:02I don't know if we exactly
01:04we're gonna be able to hold on to that.
01:05Sometimes, I know it's not quarter end,
01:07but we do see window dressing at the end of the month.
01:11There's not enough muscle in this market today
01:13to window dress any of what we've taken off
01:17in the last five or six trading sessions.
01:19So I think today's number was more of,
01:22let's try to stay out of trouble, which we did,
01:25and let the market kind of do its thing for now
01:28because we certainly have seen a lot of pressure
01:30on this market recently.
01:33So what are you feeling,
01:34like what is the institutional trader?
01:36Like again, I just saying, we're a retail show,
01:39talk to a lot of retail traders here,
01:40but you're talking to the big boys.
01:42What are they feeling on this market right now?
01:44Because it's been a tricky market.
01:46Like we see the S&Ps very near highs,
01:48the Qs very near highs,
01:49but the IWM has underperformed here
01:51for three years here now.
01:52China's still a mess.
01:53And then you've got cloud stocks starting to roll over.
01:56It's like, if you're in the right stocks,
01:57you're a hero right now,
01:58but if you're in the wrong stocks, you're a zero.
02:00It's a tough market.
02:02You can't just buy anything blindly here.
02:04What's your institutional customers?
02:05Where are they focusing and what are they saying?
02:07You're right.
02:08I think it was you who tweeted out yesterday
02:10that you're happy NVIDIA's in your portfolio
02:12to help all your other longs that aren't performing well.
02:14Oh yeah, I got some bad ones in there.
02:17So I think what we've seen overall on the market
02:20is that you are gonna be either right or wrong, right?
02:23But in the longer term scope of things,
02:25we've done this two steps forward, one step back mentality.
02:30And I think talking to the institutional clients
02:32that we have, they look at this
02:33as opportunities to buy on the dip.
02:35Now, you're not gonna time it perfectly.
02:37There's still a lot of momentum
02:39and volatility that's out there.
02:40But when you see some of these sectors
02:42and some of these stocks that have had the performance
02:45that they've had,
02:45and you get these consecutive pullback days
02:48like we've had over the last six days,
02:50there is some attractiveness
02:52to the overall market that's here.
02:54We have a lot of economic data coming up next week.
02:57We continue to talk about interest rates.
02:58We've got political headlines that came out
03:00after the close yesterday
03:01that's going to potentially have an impact on our markets.
03:04So yes, there's not a lot of rosiness in front of us,
03:08but it seems that the market always seems
03:10to kind of power through these negative headlines
03:13because it has plenty of time to digest it.
03:16There's plenty of runway running into
03:19some of these negative headlines
03:21or negative dates that we have on our calendar coming up.
03:25So from an institutional point of view,
03:26we continue to see strategic buying
03:29and we don't see panic selling.
03:31There has been zero panic selling
03:33in any of the customers that we talk to.
03:37It's more of, you know what, let's just get to the summer.
03:40Let's see how things play out.
03:41If the market pulls back,
03:42we're going to start buying a little more.
03:44If the market swings down,
03:46we're not going to feel like there is this panic to sell
03:49because as we've seen in the past,
03:50the market will move lower
03:52and bounce back up again and bounce back even higher.
03:55Look at the charts in the S&P.
03:56You did point out before,
03:57IWM has been lagging behind for the last few years.
04:00It has been, right?
04:01Like that really needs a significant push behind it.
04:05I don't know what that's going to be at this point
04:07to get it more in line with some of the other indices
04:10that we've been, that we track.
04:12You look at, you know, the VIX.
04:13I like to kind of throw the VIX into that mix of things
04:16of really showing, you know,
04:18if there is a correlation in our market,
04:20I think it's a very good indicator.
04:22We've seen some pretty good volatility in the VIX
04:24even this morning as that number came out.
04:26But VIX is probably trading exactly where it should be
04:29considering what we've seen in the market activity so far.
04:31So I think the next few weeks as we get through June
04:34is going to be interesting.
04:36Boy, you used an interesting term there, panic selling.
04:40When's the last time you've seen some panic selling
04:44and has there been a lot of panic buying lately,
04:48people, managers that are missing this market?
04:52We certainly have seen more FOMO panic buying
04:56than any panic selling.
04:57Last time we've seen panic selling,
04:59we got to go back to the end of what, 20,
05:02well, September of 23,
05:04when the markets really started to kind of take a turn
05:06and we were getting towards the end of the year
05:08and people were really uncertain
05:10how the year was going to end.
05:12We started to see that then, but then again,
05:14that turned very quickly.
05:16We do see a lot of, you know,
05:18we do see a lot of volatility in this market
05:22and when stocks move higher, they move quick.
05:24They're starting to move quick.
05:26So I do think institutional customers,
05:29they are price sensitive, but not overly price sensitive.
05:33They've made the commitment to own a stock.
05:35They've made a commitment to add to their positions
05:38and within some price parameters,
05:40within some percentage points,
05:42they certainly want to get back into it.
05:44So I definitely have seen institutions try to grab stock
05:49as it's on the upward move
05:51I'll go back to it again.
05:52We've seen this market performance.
05:54Every time there's been a pullback and we talk about
05:56what is the catalyst?
05:57What's going to be the pullback?
05:58We see the pullback.
05:59We get the three to 4% pullback
06:02and then the market takes off again.
06:04We've kind of conditioned ourselves to try to wait this out
06:07and pick the perfect timing.
06:08You're not going to pick the perfect timing.
06:10So when you start to have that feeling, that conviction,
06:12that this is your price where you want to get in,
06:15you got to grab it when you can.
06:18Okay. We also have an event going on today
06:21that you mentioned you have the MSCI rebalance
06:25not quite as big as, you know,
06:27some of the other rebalances that are going on.
06:30You're coupling that with like the end of the month, right?
06:33Which has been a surprising month so far.
06:36Tell us what traders and investors
06:39can expect from that rebalance
06:41and then squaring up the books at the end of the month.
06:44Yeah. So I think, you know,
06:45the rest of the day now is going to be pretty quiet.
06:48And, you know, Dennis, as we said before,
06:50I think we might see a trail off in the market
06:52as we get towards the end of the day.
06:55But at the end of the day today,
06:56there is a large MSCI rebalance,
06:58almost about $70 billion moving back and forth
07:02on the close today.
07:03And some of that starts to get priced in a little bit early.
07:05This is one of the bigger ones that we've seen
07:07over the last four quarters.
07:09And this gives an opportunity for some of the global indices
07:14that are out there to change positions, right?
07:17They are additions to the index.
07:19There's deletions to the index.
07:21We've had some corporate takeovers.
07:23We've got some price changes.
07:25So you'll see a significant amount
07:27of volume on the close today.
07:29I think what we've seen in the past
07:32is that this gives portfolio managers an opportunity
07:35to buy or sell large chunks of stock
07:39with having little to no impact on that stock, right?
07:42So conceptually, if you've got a position
07:44in a stock and you wanna sell a million shares,
07:46it's gonna take you some time,
07:47depending on the float and the volume ADV of that stock
07:50to get in or out of that.
07:52But when you have an event like today,
07:53it gives portfolio managers opportunities
07:55to really move a size chunk of stock.
07:58So we do see a lot of momentum.
08:00We see a lot of volatility.
08:01We see a lot of volume today.
08:03And then it's kind of interesting to see
08:05when the filings come out in a month from now
08:07of who's sold what and who owns what,
08:09you'll start to see a lot of significant changes there
08:12because they use these opportunities.
08:14Next month, we've got an S&P rebalance,
08:16which is a pretty big one
08:19that we get towards the end of the half year.
08:21So that'll be another opportunity.
08:23But today should be a real interesting close.
08:25And that's why after this,
08:26I'm gonna keep my golf shirt on and go into the city.
08:31Okay, all right.
08:33Just coming up on end of May, beginning of the June,
08:39six months will be the halfway of the year.
08:42What's your biggest surprise so far in the markets?
08:47The way AIs grip things
08:49and then kind of what's something
08:51that is your biggest disappointment thus far?
08:55So yes, I mean, AI has been a hot headline
08:58and I think everyone's trying to grasp onto that
09:03in some way or form
09:04and try to hold onto those coattails there, right?
09:07We're talking, you guys are talking about Salesforce
09:10and what type of company are they
09:13and are they becoming an AI company, right?
09:15So I think everyone's trying to find their niche
09:16within that and that clearly has helped many companies
09:21that are out there.
09:22I think from an overall point of view,
09:25you look at the technology sector,
09:27technology sector has performed well so far, right?
09:32We've had a pretty good sell-off
09:34the last few trading sessions here,
09:37but I think overall technology has done well.
09:39We've seen some surprises in there,
09:41we've seen some stocks that have underperformed,
09:43but I think we're gonna continue to see technology
09:47to be on the upside there and that one too,
09:50when you see that pullback,
09:51that's a great opportunity to get in.
09:54The one that I think might have some trouble in front of it,
09:56if you look at XLF, you look at financial sector,
10:00has had some pretty good momentum to it,
10:03had a little bit of a pullback,
10:04bouncing up close to the highs now.
10:07I think with interest rates uncertainty,
10:11we talk about how these larger institutions
10:13are how they're able to make money.
10:15We continue to talk about exposure to commercial real estate
10:19and loans that are out there.
10:20We talk about mortgage rates and who's getting what rates
10:26and what loans are being given out to who.
10:29I think we're gonna start to continue
10:31to see a little bit of more, well, not continue,
10:33we're gonna see some pressure in that sector there.
10:36So as that gets towards the highs there,
10:38I think that's one to keep an eye out
10:39as we get head towards the summer.
10:41Jonathan, can we get to a market eventually
10:43where everything starts going higher,
10:45where everything starts to work?
10:46Is that possible?
10:47Because it doesn't feel possible in the last year.
10:49It's like something's working, something's not.
10:51Talk about ETF effects here too,
10:53because I've challenged this as well
10:54with so much concentration in from the ETF market,
10:57obviously in just the number of names.
10:59How much effect does that have on the underlying stocks?
11:01Like I've argued that it has a significant effect
11:04that ETFs, because when they're launching,
11:07no, China's not sex anymore.
11:09You don't have launching Bob on Baidu,
11:11but it's all the time they're launching something
11:13with Nvidia, something with Microsoft, something.
11:16How much does ETF effects really affect this market?
11:19Yeah, I think there's clearly an attractiveness to ETFs
11:22from a retail investor, from a institutional investor,
11:27from a hedge perspective.
11:30There's definitely attractiveness to that.
11:32What it has done is it's gotten individual investors
11:36away from investing in individual stocks, right?
11:40And they're focusing more on sectors.
11:42We understand how the institutions
11:45then have to buy the underlying stocks
11:47to own that within the ETF
11:48and how that structure works there.
11:51But I think we've gotten back to kind of like bundling
11:56your cable, your internet and your phone into packages here
12:00where we've gotten away from owning individual stocks.
12:04I think it has hurt the industry.
12:06I think it's gonna continue to go in that route, right?
12:09We're gonna continue to see launching of ETFs
12:11just because they are so popular
12:14and it continues to work from a launching perspective.
12:18And it's clearly making money for the institutions
12:20that are launching these.
12:21But I think from a focus point of view,
12:24individuals have lost focus on individual stocks.
12:27But again, back to my original point,
12:29it's attractive because it's so easy, right?
12:31When was the last time you were able to own gold
12:33without owning physical gold?
12:35When was the last time you were able to short gold
12:37without having a retail investor be able to short gold, right?
12:40So there's opportunities
12:42that have never been out there before
12:44that does attract additional investors
12:46who have been on the sidelines into the market
12:48to make it easier for them.
12:50And as even cryptocurrencies now, right?
12:52You can start owning ETFs and cryptocurrencies
12:55without owning cryptocurrency.
12:57So it's become a lower threshold for people to get in.
13:01I think it has somewhat watered down
13:02our overall investing strategies in the market.
13:06Jonathan, I'd be remiss if I didn't ask you
13:09about this being an election year and a presidential cycle.
13:14And I know with a lot of recent events
13:16that we don't cover that closely,
13:18but I mean, you have historical precedents
13:21with presidential election cycles.
13:24This one, I don't know if they have a script
13:27but just from the institutional viewpoint, standpoint,
13:32election year, election year cycles.
13:34I mean, usually the market's up in the year of election.
13:37What's your take?
13:39There is no historical correlations
13:43to what we're going through now.
13:45And I think that goes back to, was it, you know, 2016
13:51when Hillary Clinton was a shoo-in to win
13:55and the polls had it all one way
13:59and it all went the other way.
14:00I think all credibility and polls went out the window then.
14:04Heading into this year now.
14:05Yeah, this can go either way.
14:08This can go any way, you know,
14:11after the events of yesterday,
14:15you know, try to put your finger on it.
14:17Is this going to, you know,
14:19take Donald Trump's chances off the table
14:22or is this just gonna strengthen him?
14:24We continue to see, you know, on Twitter,
14:27the fundraising records that are occurring overnight
14:30for former president Trump.
14:33There's a lot of uncertainty that's out there.
14:35We've got a incumbent president
14:38who is losing in some polls,
14:40which is not one that we've seen before.
14:43And then historically the way the market performs
14:45during election years,
14:46throw interest rates on that right now.
14:48Like what is the Fed gonna do?
14:50When are they gonna do it?
14:51Are they gonna be forced to be sitting on their hands?
14:53Is there a unwritten blackout period
14:56that we're gonna come up to?
14:58There's a lot of uncertainty
14:59that's going around this presidential election.
15:01I have no idea how this is gonna turn out.
15:04I don't think anybody does.
15:05And I think if I could have my wishes,
15:09I would just like to fast forward the calendar
15:11to November 6th and just move forward
15:13because there's gonna be a lot of movement
15:18between now and then.
15:20All right, Jonathan, again,
15:20thanks for hopping on Pre-Market Prep.
15:22Always a pleasure to catch up with you.
15:24We'll talk soon.
15:25Enjoy the exchange today.
15:28Gentlemen, have a great day.
15:29Have a great weekend.
15:30We'll talk soon.