Alexis Christoforous and Yahoo Finance Scott Ladner, chief investment officer at Horizon Investments, discusses bitcoin’s prospects and what stumulus can mean for markets.
Video transcription
ALEXIS CHRISTOFOROUS: I want to talk more about the markets now with Scott Ladner, he is Chief Investment Officer at Horizon Investments. Scott, it’s good to have you here. Before delving into actions, we like your opinion on what you’re seeing in the cryptocurrency space, specifically with Bitcoin. Is it now a legitimate place for investors to turn, perhaps even as protection?
SCOTT LADNER: You know, I think it’s not clear now whether Bitcoin will be a good hedge for the stock markets or for something like inflation. It is too volatile now to really be considered a protection for anything. Bitcoin and cryptography are, in general terms, we don’t really have a position in them at Horizon Investments. This is not really within our reach. But we think they can be challenged in the long run. In fact, it is not in any government’s interest to allow these things to really thrive. So, we think we will have to get official government adoption before these things, before the cryptographic space really does, really does. But in the meantime, this brings some wild walks.
ALEXIS CHRISTOFOROUS: Yes for sure. So you’re thinking, from what I’m hearing, you think regulation is close. If and when that happens, would you take a second look at Bitcoin?
SCOTT LADNER: Certainly. I mean, if it became something that had a slightly longer price history, that it was easier to trade, if the futures markets really took off. There are other instruments that you can use to gain exposure to them and retail accounts or in some of our fund accounts. It is something that we would certainly see. We cannot ignore this. We think the space is a little new and does not agree with what our investors need from our products.
ALEXIS CHRISTOFOROUS: Okay, let’s get to the stock now. And what is your outlook for the next three to six months and will all of that be driven by the stimulus and the virus, Scott?
SCOTT LADNER: You know, we think it is. I mean, you know, when you think about the past nine months, it has been a spur against the type of virus market. And the stimulus, frankly, has been kicking the butt of viruses. We think it is likely to continue, especially given the dynamics of, the political dynamics around the new stimulus agreement that is coming. It is not really a question of obviously whether it will happen or even when it will actually happen. We’re just– now we’re discussing whether it’s 1.5 trillion or 1.9 trillion. That kind of stimulus, in the face of a declining virus, a virus that will be withdrawn in the coming months, is something that is really fueling mortgages now and will probably be at least in the first half of this year.
ALEXIS CHRISTOFOROUS: Let’s talk about what you like now. I know the small caps were having their moment in the sun. In fact, you called them in your note, said that they are the Lehman Brothers on the market today. This does not look very good. What is your opinion about small caps? [LAUGHING]
SCOTT LADNER: Yes. I think I said it affectionately because, as small caps are highly leveraged entities. Therefore, they are the most leveraged on the market at the moment. And then, when I was talking about Lehman Brothers in the stock market, what I was really talking about is just the leverage you can get in small businesses. And then, obviously, in February and March, the reason why small caps got so hurt is because if you’re a highly leveraged entity, the most dangerous thing you can have, in terms of the company’s characteristics, is leverage. If revenue reaches zero, debt is a really dangerous thing on the balance sheet.
However, when you were going to get 7% to 9% of nominal GDP growth in this country this year, you really want to be focused on, for companies with leverage because they may fall further in the financial result. Operating margins are getting better and with an economy that will really grow a lot in the first half based on stimulus, in the second half based on the consumer. That is, you want as much exposure as possible to high growth companies.
ALEXIS CHRISTOFOROUS: And we are still in the middle of the earnings season and the earnings have been very good. What are your prospects for this quarter and will profits be the next big catalyst for this market?
SCOTT LADNER: You know, I think we probably will be, Alexis. When we think of profits, we are mainly already in the middle of the earnings season, at least this quarter, and the results have been spectacular. Very, very strong first-line numbers. Very strong bottom line numbers. Like 80% of the S&P 500 companies that won in the top line. This kind of thing, this kind of dynamic is what we are going to expect going forward. But what has not yet reached analysts’ estimates. So analysts are a little late for the game in terms of updating their year-end forecast for S&P 500 earnings. We think that – we think it can reach $ 180, $ 185 and that will provide a little more space for the positive side.
ALEXIS CHRISTOFOROUS: And what are you telling customers now that they may be very concerned, about the virus, about the slow implementation of the vaccine? What are you saying to them?
SCOTT LADNER: I tell them to really keep going now. In terms of finances, consumers in the United States are in a really exceptional situation. So we know that the headlines are going to be scary. They are probably not going to be good. The numbers are, in the United States, in terms of viruses, they are not particularly good, although they are going in the right direction. But in the coming months, with all the stimulus packages coming in, this will really excite the markets. This will boost the economy, in general terms. And so, in fact, we just have to go through these next few months until the weather gets warmer, until the vaccines get a little stronger, and not only will we have very, very strong markets, but we will have a strong economy to keep up with it.
ALEXIS CHRISTOFOROUS: All right. We can hope so. Scott Ladner, Chief Investment Officer at Horizon Investments, is delighted to have you with us today.
SCOTT LADNER: Thank you, Alexis.
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