In the midst of financial uncertainty from rising inflation to stock volatility, top investing expert, Bob Doll, joined The Influencers Podcast to clear the air on what’s ahead and how it will affect people personally.
“Even if we have to endure some short-term pain, in the long run it will be worth it, we do not want to have runaway inflation,” Doll said.
THE FED’S HARD RESPONSE TO INFLATION
While there has been tiptoeing around the word “recession,” Doll pointed out the FED is not as cryptic in how their hard response to rising inflation will affect the job and equity markets.
“People were hoping without a whole lot of evidence that inflation was going to come down quick enough that the FED wouldn’t have to raise interest rates all that much. Chairman Powell of the FED basically threw cold water on that hope. That’s created real concern for markets.” But, as Doll acknowledges, the cost of runaway inflation is much worse than the financial tightening that lies ahead as the FED reduces the size of their balance sheet.
MIDTERMS AND THE MARKET
Rising inflation is not the only thing Doll has his eye on this year as Chief Investment Officer at Crossmark Global Investments. “Politics absolutely matters for markets,” said Doll, “one of our ten predictions at the beginning of this year was that the Republicans would capture 20 to 25 house seats and narrowly win the Senate. The first part of that I think we’ll get right. The second part is questionable as the momentum has moved in the Democrat direction.”
He cited how the divisive Roe V. Wade decision and the decline in gas prices has shifted approval for President Biden and the current administration. If there happened to be a two-party Congress after midterms, Doll notes how that can actually help markets. “The likelihood of additional significant economic legislation is very low, which creates an environment good or bad for some stability.”
While rising interest rates, inflation, and the hit on personal finances feels difficult and unexpected, like all good investors Doll looks for patterns. “If you look at the presidential four-year cycle, the midterm election year typically has the biggest setback in the market with an average down of 19% at some point during the year. This year hit 21.5% from top to bottom. So, we have a fairly normal midterm election year, but it never feels like it when you’re living through it.”
IS NATIONAL DEBT A CONCERN?
Doll’s interview with The Influencers Podcast also covered the hot button topic of student loan forgiveness which seems even more controversial when observed with the backdrop of rising inflation. “That kind of activity only fuels inflation. I’m not sure it’s the wisest decision. Federal debt is something that many have been worried about for some time. So far, as debt has gone up so has the economy and the stock market. Every dollar we borrow is borrowing from the future, so at some point there’ll be a day of reckoning.”
THE FUTURE OF GAS PRICES
But, perhaps the most looming question in the people’s minds is if this reprieve in gas prices is here to stay. Many keenly remember only three months ago when prices were over $5 a barrel. While Doll shared how there is currently enough oil to maintain the lower prices, the future does not look as optimistic with two major producers lowering supply: the United States and Russia.
“In January of 2021, President Biden said we’re not gonna sell any more land for drilling. It’s economics 101. If demand goes up and supply is curtailed, the price goes up. So, while we’re in a temporary respite, I’m gonna emphasize the word temporary, I think at some point they’ll go back up sadly.”
The good news in that respect, as Doll predicted, the energy sector is performing well. Doll recommends not chasing them down on price. “I want to own energy and you can own the big integrated companies. You can find some good exploration and production companies, even some of the refiners. I want to have a broad base of participation in the energy sector.”
The gas price discussion raises an important question on the priorities of a healthy economy and protecting the environment. Perhaps they are not as mutually exclusive as people are led to believe. Pipelines are actually the safest way to move oil and gas. “Natural gas is a very clean, environmentally friendly way to supply energy. We have to recognize that we did move away from a position where we were a net exporter of energy for the first time in decades. We could, without a whole lot of trouble. ramp that up again. I wish the president would say, ‘look, I’m a green guy like you are, but I need a couple years to deal with the near-term problems we face here and around the globe,’” said Doll.
WHERE TO LISTEN
Learn more about what’s ahead for our economy and listen to the full episode with Bob Doll here.
Doll returns to The Influencers Podcast on September 14th to share surprising, personal advice on how to overcome financial struggles and the relationship between faith and money.