The consumer has ‘tons of cash right now’ they don’t mind that prices are rising: Analyst

Ryan Payne, Payne Capital Management President & ‘Payne Points of Wealth’ Podcast Host joins the Yahoo Finance Live panel to discuss the latest market action.

Video transcript

ZACK GUZMAN: I want to shift back and take a broader look at the market here though, as we, of course, have seen the S&P 500 and the Dow hit new highs despite slowdown there in terms of the ad outlook from Facebook. I want to bring in Ryan Payne, Payne Capital Management president and "Payne Points of Wealth" podcast host-- joins us once again.

And Ryan, good to have you back on with us today. I mean, when you look at it, it's been a pretty strong earnings season relatively so far. And I mean, I know you focus more on the value side of the trade here. But how are you seeing tech, maybe, get dinged a bit, whether you look at Snap or Facebook, and what that might mean for how investors should be allocating now?

RYAN PAYNE: Yeah, I think it just kind of amplifies what I've been saying now for months, especially on my podcast, one of the fastest growing podcasts in the country, Payne Points of Wealth-- is just that cyclical trade. If you look at the last 12 months specifically, Zack, has dramatically outperformed. I mean, this year energy and financials are leading the way. And we own growth in our portfolio.

I don't want you to think we don't own in our portfolio. We own the tech stocks in our portfolio. But it's a percentage of the overall portfolio. It's not overweighted. And I think you're seeing why right now. Valuations are essentially a lot higher on those tech stocks. There's a lot of regulatory headwinds. Look at Facebook. You get one change on Apple's privacy policy, and all of a sudden, the stock gets hit dramatically, like, we saw Snap on Friday.

So I think, at this point, you've got to diversify that reopening of the economy of trade is still real. And I think about financials and energy and cyclicals. They're still relatively cheap on a historical basis and much cheaper than the market overall. But on the other hand here, look, we are literally in the midst of a melt up right now.

All markets are going up. You've got other more speculative assets going up like NFTs, Bitcoin. There's just so much cash in the system right now in the capital markets. It's just going to keep funneling itself into the market here. That's why you're not seeing a real correction in stocks like many of the, quote, unquote, "Experts on Wall Street were calling for." I was calling for the opposite. It's hard being right over here, Zack.

AKIKO FUJITA: I can sense the confidence, Ryan, coming from you. if you are, in fact, advising clients to rotate out of these big tech names, where do you think they should move their money to? I mean, you mentioned financials and energy. But are there any specific names that you think offer real value?

RYAN PAYNE: We buy the ETFs or the indices. But I think, if you want the pure play on oil-- and I got in a lot of trouble talking about oil on your show last time-- they're essentially putting the most into the production side. And that's one of the problems right now. Look, everything is going to move to ESG or more environmentally-friendly over the next 20, 30 years.

But the economic reality of it is we're still massively dependent on fossil fuels, and a lot of the money shifting away from the production side, which is going to give us, really, the undersupplied market in oil-- and Exxon's probably the best player on that because they're putting the most money into the production side. So it pays a 6% dividend. You get extremely cheap multiple.

And furthermore, what I would also mention here is-- one thing that most people don't talk about is growth overseas is going to be faster than the US starting next year. Our contribution to global GDP is going to start to diminish. And if you look at foreign stocks, emerging markets, developed markets, they trade at much cheaper multiples than the US does right now with much higher dividend rates. And again, the growth rates look fantastic going into next year.

Another way to diversify here so you're not just concentrating in those high-risk trades, whether it's crypto, whether it's growth stocks, is owning those international markets, which are a core component to our portfolios and very under owned here. And the best time to buy is when something's underinvested and under loved, and right now the international markets are. So you've got to have that in your portfolio. And I'm seeing a lacking in most portfolios we're reviewing right now at my firm.

ZACK GUZMAN: There is-- I guess, as you talk about those stocks getting hit that may not have deserved to have been hit. We talk about the FAANG names-- is kind of a monolith here. But they're all very different. And specifically, I mean, when we heard Snap kind of talking about advertisers not wanting to spend because they might not have the products to sell, it brings in a very real thing that we've been talking about when it comes to the supply chain and the issues around the pandemic.

So I mean, we're going to have more earnings here on deck from some big tech players here at Google, Twitter, Apple, and Amazon. I mean, is there one among those two when you're looking at the big tech opportunity there that might be less impacted by any of that?

RYAN PAYNE: Well, Microsoft's the only stock of the big five that's actually trading at its all-time record high. If you look at every other big five stock, Google is off its highs. Amazon's off its highs. Facebook is getting destroyed here in the short-term. And Apple as well has supply chain issues. We're seeing the shortage of chips worldwide.

So Microsoft, probably, looks like the only one through this earnings season that looks the best from a technical perspective. But I do think tech is going to be the most lackluster here. On the other side of the equation, it's just like every earnings call is, yes, supply chains are a mess. We know. Inflation is a problem. Labor costs are going up. But guess what? We're going to raise prices on the consumer. And the consumer's got tons of cash right now so they don't mind the fact that they're raising prices on us.

And that's the story right now. And that's why profits are going up. You've got a very price insensitive consumer, because we've got lots of cash. Wages are going up. And companies can keep essentially raising their prices as their costs go up. And that's why we're kind of in this Goldilocks economy right now-- another reason why the market's going to continue to climb higher here. No matter what those other strategists tell you, Ryan Payne is telling you the truth. And that's why you've got to get an investor right now.

AKIKO FUJITA: Ryan, before we let you go, I have to ask you about what's happening in the SPAC space. Only because you mentioned it in your notes, specifically former President Trump's digital world acquisition. Does he have your essay? You mentioned, I mean, jumping what? More than 800%. What do you think is going on here? Is this just the latest meme trade? Is it peak SPAC? How do you look at this?

RYAN PAYNE: I think it's a sign there's definitely no bubbles out there. If you think that, this is the exact reason you're wrong. There's too much money in the system right now and it's going into very speculative plays. And I'm just skeptic on crypto. I'm one of the few skeptics, probably at this point on crypto. But it looks to me like just a massive bubble of some massive casino. And these SPAC stocks are the same.

And it's just the fact that the Fed has been buying those long-dated bonds. So you've got a yield curve that's kind of flat here. So it's hard to lend money out and make money on lending. And that's why the banks haven't been as profitable as they will be as rates go up. But it's just so much money in the capital markets right now. They've got to go somewhere. And of course, naturally, human nature is inclined to put in the most speculative places. And that's why you're seeing SPACs like the DWAC-- I think that's the short-term name for this Trump's SPAC-- going up just, like, exponentially here. You know why.

So I think that just speaks to-- There's a lot of bubbles being formed. Another reason why we want to make sure you're spreading your money out, because at some point, valuations will matter. And that's where those boring value stocks are going to give you comfort when eventually you do see some of these bubbles burst. And I'll remind you of it on the show later on when it actually happens.

ZACK GUZMAN: All right, Ryan Payne. We let you refer to yourself in the third person. I think once in an interview is fair enough. So we'll let that one slide too. Ryan Payne, Payne Capital Management President and "Payne Points of Wealth" podcaster, I appreciate you coming back on. We'll talk again soon.