Academy Securities Head of Macro Strategy Peter Tchir joins Yahoo Finance Live to discuss the impact of Elon Musk’s Twitter deal for markets, the outlook for inflation, and macro trends driving the energy sector.
Video Transcript
BRIAN SOZZI: Welcome back. High levels of inflation may be the new normal, as we’ve seen this week, with mixed earnings from PepsiCo, Coca-Cola, and 3M. Let’s dive into this with Peter Tchir, head of macro strategy at Academy Securities. Peter, always great to see you. Some of these earnings reports are really blowing my mind. Inflation, in some cases, is not only staying high, it seems to be getting even higher. How big a risk is this to the market moving forward?
PETER TCHIR: Yeah, I think inflation’s here to stay, partly as we combat all the supply chain issues, which are increasing again with what’s going on with China, but also as we rethink sustainable energy, as we have to build out sustainable energy faster than we thought we had to do, but also, we really have to reinvest in existing energy infrastructure. So I think we’re going to see a period of sustained inflation is going to be two to three years. I think food inflation is coming through. So this is something the Fed is trying to deal with. And I think it’s going to act as a big headwind to markets.
JULIE HYMAN: Peter, I want to pick up on something that we were talking about just a few minutes ago with regards to Twitter. We were chatting with Mark Mahaney, who says that tech valuations are really beaten down right now, and there are some good buys there. Do you see that group as being at all sort of inflation resistant? And do you think that, like Elon Musk, people should be coming in and buying tech assets?
PETER TCHIR: You know, I do want to like the sector. I think there’s a little bit more downside first, partly even when you look at this. Elon came and bought it. He’s really not buying it as an ongoing business necessarily, right? It’s not like he’s talking about how he’s going to drive revenue here. So it’s almost somewhere between a toy and an investment for him. So I don’t think we can read quite as strong of a signal.
The fact that no other buyers seemed to emerge despite reporting that they were looking for other buyers, yeah, I think the market rallied on that by yesterday. I think it’s a bit premature. We’ve got to see where valuations really settle in. And I think just with the Fed coming in, and not just doing the rate hikes, but the quantitative tightening– we’re seeing mortgage rates rise already– I think we’re going to see a little bit of a slowdown. And we’re going to see a further pullback in stock.
BRIAN SOZZI: That’s an interesting point there. So it sounds like the fact that we didn’t get, at least right now, there are– doesn’t appear to be any more bidders for Twitter in this Elon Musk saga. You think that’s actually a negative to the broader market?
PETER TCHIR: Yeah, I think you would like to see a bunch of people come in and say, hey, we’ve got this valuation. We can put money there. And the fact that you’re not tells me that this is more a personal decision for Elon, who is a very big person on Twitter. You know, love following him. He’s great. But that, to me, takes away some of this. You can’t quite say that it’s a real strong signal that valuations have become too cheap, and everyone should be buying, because otherwise, we would have seen more bidders at what is a discount to the average price of Twitter in 2021 was almost $60 a share.
JULIE HYMAN: So Elon Musk not going to come in and save the market, so to speak, you know, and light a fire under it, even though maybe he did temporarily yesterday. If you’re looking for silver linings here, if you’re looking for something to spur some buying, what would that be?
PETER TCHIR: No, I think you are going to see onshoring and reshoring, so you’re going to see a lot of growth in the US economy. You’re going to see Canadian growth. You’re going to see growth throughout South America and Latin America. I think Mexico is interesting. You’re going to see this real push for energy independence again. I think we lost sight of that for a little bit. So there’s going to be big opportunities in the energy spaces. And I know it’s very volatile day to day, where we look at the front contract of where WTI is trading or Brent is trading.
But I think over the next three to five years, you’re going to do very well in oil services, oil exploration. And you’re going to see some of the big cap oil companies or energy companies transition from being the energy companies of the past to the energy companies of the future. And what’s gone on with Russia vis-a-vis Europe in that energy shortage is really going to propel that forward. You’re going to see a lot of support for that growth here in the US. So I really like that area in particular.
JULIE HYMAN: Peter, good stuff. Good to catch up with you this morning. Peter Tchir is head of macro strategy at Academy Securities. Thank you.
