LISTEN TO EP.101

Bob Doll, CNBC Contributor and Renowned Investment Expert, Reveals What’s Ahead with Inflation, Jobs, and the FED’s Bullish Response, Pt. 1

In the midst of financial uncertainty from rising inflation to stock volatility, top investing expert, Bob Doll, joined us to clear the air on what’s ahead and how it will affect us personally. Doll, Chief Investment Officer at Crossmark Global, a regular guest and contributor to multiple media outlets such as CNBC, Bloomberg TV, Moneywise, and Fox Business News, brings more than 40 years of experience to the investment process. In Part 1 of our interview with Doll, he gives us an insider look at the state of the current market, what it means for investors, and how midterms will play a role in our economy. We also dive into the FED’s announcement of a hard response to curb inflation and what that could mean for jobs and equities in the near future. Whether you are an experienced or novice investor, this revealing episode will help you better understand what’s at stake and how you can prepare. Stay up to date on key financial insights by subscribing to “Doll’s Deliberations,” an invaluable weekly resource covering his latest predictions and commentary (link below).

Learn more about Bob Doll at www.crossmarkglobal.com and sign up for his weekly commentary Doll’s Deliberations.

Introduction

Welcome to the influencers podcast. And I gotta tell you, I’m a proud member of our special guest fan club. I’m an avid viewer of CNBC, especially when he’s on and Doll’s Deliberations. If you are not subscribing to it, do it today. It’s incredible. And also you can participate in the webinars that are put on by Bob, Victoria, their team, and it’s the best. I’m also pleased to report that our organization CityServe is a client Bob’s company, Crossmark Global Investments, and the CEO of that company is our chairman elect. And so Bob, we are already closely knitted.

It’s a privilege and a pleasure. Thank you for the kind words I hope I can live up to them during this podcast.

Nobody can help us better navigate the uncertainties of this market than Bob. And so, Bob, thanks again for joining us. My cohost Scott Young is going to share some of your bio
Well for some of our friends that are part of the influencers podcast family, you may not have heard of our very well known guest today, but Bob is the chief investment officer of Crossmark, which he is held since 2021. And he brings to that position over 40 years of industry experience in financial services, he especially helps large cap strategies. He is a strategic thinker and his wisdom is sought by many around the world. Multiple media operations reach out to him. He is a regular on CNBC, Bloomberg, Money Wise, Fox Business News, and he just brings wisdom and history. He’s not only been the chief investment officer at Crossmark. He’s also held that position at Merrill Lynch, investment management and the fund. And besides his extensive financial background, he is the choir director of his local church. Something I really love. His wisdom is sought on various and sundry boards as diverse as the National Christian Foundation and the Gordon Conwell Theological Seminary, Bob and Leslie make their home in beautiful Princeton, New Jersey. They have three children and we are so glad that he’s joined us today on The Influencers.

And Bob, I also noticed that you’re on the board of National Christian Foundation, which has been a great blessing to CityServe International, love that ministry.
It does great work. It convinces encourages people to give money away and the conduit NCF then pushes it out the door to those organizations. So billions and billions of dollars. It’s been wonderful to watch.

Where the Market is Going

Well, as I mentioned, I’m an avid viewer of CNBC, especially when you’re on and, you know, have quite a reputation for providing accurate financial predictions. Maybe we could kick off this interview with one of your deliberations. You said the strength of the summer rally caused by some momentum based indicators to suggest the worst of the bear market is over, but the macro backdrop of the yield curve and versions, money, supply growth decline, and further rate hikes argue for an unsettled period for equities. And we may test the lows. Bob help our listeners understand what that means.

Certainly. So we all know we entered a bear market the first week of January. That was the peak of the last bull market and success of declines by the end of June, took us down more than 20%, which qualifies quote as a bear market. And what we’re trying to say in that deliberation is we saw a rally. June 16th was the low and last week was the end of that rally up almost 20%, the biggest rally so far in this bear market. And it was caused by people hoping without a whole lot of evidence that inflation was gonna come down quick enough that the fed wouldn’t have to raise interest rates all that much. And last Friday, Chairman Powell of the FED, basically threw cold water on that hope and said, no, we’re here to fight inflation. And if you didn’t hear me, we’re here to fight inflation. And so that cold water has created quite a stir on the downside in markets over the last week or so. And that’s created real concern for markets. How long will the rates go up? How long will it take inflation to come down? How slow will the economy get and therefore earnings and my goodness, maybe I should sell a stock or two and that’s happened.

I don’t think people understand why would the FED want to hurt equities in the job market, help us understand that. Yeah,
Great question. Well, they don’t really want to do that, but their view is if they don’t in the short term, they’re gonna have to have more pain in the long term as FLA and inflation would run away from us. So inflation that we all know got ahead of steam in 2021. And if I can point a finger at the FED, they waited too long to deal with it. They argued that it was temporary or transitory and it proved not to be that at all. And so it got ahead of steam faster than perhaps it could have slash should have, and now they have to deal with it. So their view is, and I concur is getting inflation out of the system. Even if we have to endure some short term pain and the long run will be worth it, we do not want to have runaway inflation.

Forming Financial Predictions

So when you are looking at the future, you’re looking at industry markets, consumer behaviors, and you’re trying to advise people towards the future. What is it that you are looking for in those sectors to give wise advice?

That’s a complicated question, because it’s taken years to try to figure that out. And I wouldn’t claim that I have yet figured it out, but it’s a collection of observations about patterns that happen in the economy and markets. It’s understanding that money does create growth. That valuation matters, sentiment is absolutely key. When everybody’s bullish, you can read studies that show it pays to be bearish and vice versa. So this combination of, can I say monetary variables, sentiment, variables, valuation, fundamentals. They all come together to create an environment whereby it makes sense to own this and not own that. And that’s what we study and try to advise people on as we manage their money

Politics and the Market

And in the current political situation, how does that factor into your judgment and analysis?
Yeah, so I didn’t bring politics in it, but do we know? We always go there eventually here we are. Yeah, politics absolutely matters for markets. In fact, one of our 10 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. As Roe V. Wade has created some waves as the decline in gas prices has created a bit more hope and optimism and approval for the president and the current administration. Our guess is that if we have a divided as opposed to a unified Congress, that is two parties rather than one, that the likelihood of additional significant economic legislation is very low, which creates an environment good or bad for some stability. And we don’t have to worry about what are they gonna do to us in the middle of the night, divided governments off often are the best kinds of governments for the markets.

So you’ve been predicting, I would imagine midterm and presidential elections through your 40 plus year history. How’s your track record.

Yeah, thankfully we’ve done very well. There’s some elections that we called that didn’t look like they’re gonna happen. And they did. For example, the conventional wisdom was Hillary Clinton was gonna beat Donald Trump, as you recall. And January 1st of that year, we said Donald Trump will be elected president. Of course he was. So we’ve had a reasonably good hand when it comes to the political side for better words. I wish I was good at picking stocks.

Well, I think that you have some gifts in that area and that’s why people look to you for the wisdom that we’re here looking to you for. Is there difference between the midterm cycle, which we’re coming to in November and the presidential cycle, does that affect the markets differently?

It does, obviously the presidential cycle, when we also elect the entire house of representatives in one third of the Senate, it’s the same as the midterm elections, except there’s no president to be elected. So it’s always a bigger deal. We do know there are patterns. If you look at the four years of the cycle, the second year, the midterm election year is typically in the market has the biggest setback on average down 19% at some point during the year. And of course this round we’ve had 21 and a half from top to bottom. So we a fairly normal midterm election year. It never feels like it when you’re living through it.

Understanding an Uncertain Market

Bob, by yesterday, the volatility index dropped. Why in the world would it drop? When what you’re saying is going to happen, equities are potentially gonna test the lows. Why would the volatility lows it already baked in? What’s gonna happen? The 50 or 75 rate increase?

That’s a great question. And I scratched my head a bit. I would’ve guessed if you told me everything that was going on in the markets and in fact, the world, except you didn’t tell me what the VX was doing. I would’ve guessed a VX higher than where it is. Volatility is one way to measure uncertainty and we have a fair amount of uncertainty, but somehow that VX has remained relatively calm. One of the things I would say is before we finally do have the bottom in stocks, rather than a series of bottoms is we probably, at that point, we’ll need to see an increase in the VIX. As people vote with their feet and run for the Hills. We haven’t seen that kind of bottom yet.

Should investors be a little scared about some of these high, multiple high evaluations stocks like apple, Salesforce and Amazon?

So those stocks, as you know, have come down quite a bit, Apple being an exception, it’s done pretty well it’s down, but not nearly as much as some of the others look, the companies that have very high PE ratios or no earnings and therefore quote an infinite PE ratio. Yeah, I think they’re still vulnerable, but a lot of these mega tech stocks have come down a lot and while they could down go down further, I think the lion share of the decline is probably in the rear view mirror.

How do you think taking the forgiveness of debt and how it affects the market both individually to the individual consumer and then their psychology in working into the national psychology about how debt is handled and how will that affect the markets?

Yeah. So the forgiveness of the student loan debt is obviously very controversial. If I had a loan and I conscientiously paid it off, you’re telling me I shouldn’t have done it because you would’ve forgiven me. That kind of thinking is going around quite a bit as where’re in an environment where inflation to repeat is still a problem. And when you do that kind of activity, you only fuel the inflation. So I’m not sure it’s the wisest decision at this point more generally debt let’s say federal debt is something that many people have been worried about for some time. And I’m not saying I’m not worried about it, but so far as debt has gone up. So is the economy. And so is the stock market. So maybe the debt’s a good thing. I’m not so sure. Every dollar we borrow is a dollar or borrowing from the future. And that eventually will put a noose around our neck and strangle us a bit. So at some point there’ll be a day of reckoning.

Quantitative Tightening

What is quantum tightening? Your colleague? Steve Graso yesterday was saying that if there’s a 50 point increase, it’s actually 75 because of the quantitative tightening. What does that mean?

Yeah. Quantitative tightening is the opposite of quantitative easing. Quantitative easing is what we experienced when the FED was like the federal government throwing money to the system, mailing checks to consumers, that’s quantitative easing. They kind of build up their balance sheet by incurring these debts from the checks that were written. They not need to reverse some of that. And that’s what quantitative and tightenings about. And while we’ve seen a bit of it here in the month of September, it’s gonna pick up some steam and that has some people worried. We’ve not been through a period before where the FED has raised rates where money supply growth is shrinking and quantitative tightening. I.E. reducing the size of their balance sheet. So no playbook. That’s why some people are concerned.

The Future of Oil

A lot of people are concerned about the filling up their tank. And the joke is you gotta take out a loan to fill up your tank each week. So what do you see happening with oil, especially with the potential of Iran, putting potentially millions of barrels back into the market. What’s gonna happen with OPEC? Where do you see as headed?

So let’s answer that question in terms of the price of a gallon of gasoline for our cars is where you started. It obviously peaked as a nation, a little over $5 a barrel about three months ago. And we’ve been moving lower as of this morning. That number is around $3 and 80 cents a gallon. Most projections are there’s enough oil sloshing around that has a good chance to go down another, say 50 cents, but longer term, we still have the problem of the global economy being okay. People therefore demanding more gasoline for all kinds of things, including driving their cars. And there’s a curtailment of supply that has come largely by the marginal producer of oil in the world. And that’s the United States. When in January of 2021, the president said, we’re not gonna sell any more land for drilling. We’re gonna put a moratorium on new drilling. They’re basically saying we’re in a curtail supply and economics 101. Remember if demand of something goes up and supply is curtailed. What happens to its price? It 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,
Are there any particular oil companies that you would recommend?

So we are overweight the energy sector, one of our 10 predictions at the beginning of the year, the energy would have a good year and it’s way out in front. There’s no close second in terms of the 11 sectors out there while they’re up a lot. And so I wouldn’t go chasing them on any pullback. 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. So I wanna have a broad base participation in the energy sector.

How will these sanctions that they kick in for Russia? Is it in October or early November?
Yeah, we’ll see how that all pans out. But that’s part of Europe’s big time headache, how they’re gonna deal with high prices or worse, not being able to get supply at almost any price. So that’s a problem in front of us. There’s obviously politics involved with that. And of course that’s part of what the war is about. So hard yards ahead for the globe and Europe in particular,
People are asking though, we have all this oil and gas, why didn’t we get ahead of this? Why didn’t I, what we only have, what two or three refineries. I mean, we could have supplied the world and we wouldn’t have been at the beck and call of the Russians.

Well, I don’t wanna get political, but we have to recognize that we did move to a position where we were a net exporter of energy for the first time in decades. And the change of administration sadly has reversed that by the things I mentioned earlier. So we could, without a whole lot of trouble ramp that up. I wish we would. I mean, look at the environmentalists are on the other side of the coin. I just wish the president would say, look, I’m a green guy like you are, but can you gimme a couple of years so that we could deal with the near term problems that us and the globe has and worry about some other stuff a little bit later?

Well, my wife is from North Dakota, the Bach and Shell. So I know a little bit about oil and pipes. And the fact is to our environmental friends and I’m environmental friendly. I drive an electric car. Pipes are the safest in most environmental way to move oil and gas. Right, Bob?
So true and gas, natural gas is a very clean environmentally friendly way to supply energy.

This has been just the information that’s coming out and even some of the big words that are being used, we’re gonna have to break that down and help some of our influencers to just say, what should I do with my money? I’ve got a little bit extra. We’re gonna continue this discussion in episode two. And Bob, we just are so thankful that you’ve been here and are gonna stay for our next episode. Jesus said that where your treasure is, your heart is and they go together. So we wanna be wise with our head and we wanna be right with our heart. We’re gonna talk about some of the personal issues in Bob’s life and in his spiritual life. And we’re gonna continue our discussion on the next episode of The Influencers Podcast. I want you to join in with the discussion we want, of course, the influence of your life to increase so you can influence your neighborhood and expand that influence to the nations about changing the world as we become salt and light. Thanks for being a part of this episodes of the influencers podcast. We’ll be back with episode two. Next time.