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'We don't think we will' break the 30 level in the XLF, strategist says

Ryan Detrick, Carson Group Chief Market Strategist, joined Yahoo Finance Live to give his take on the latest movements in the financial sector, including the Fed's decision to raise rates and back the U.S. banking systems, despite banking fears.

Video transcript

SEANA SMITH: Turmoil in the financial industry sending many of those bank stocks lower. The XLF, the financial sector ETF, has fallen about just over 13% in just the last month. It's now approaching levels that we haven't seen since the great financial crisis. We want to bring in Ryan Detrick. He's Carson Group chief market strategist. Ryan, it's great to see you on this Friday. Lots to get into, but I know you're specifically watching the XLF, some of the movement that we've been seeing in the financial sector. What is that signaling to you?

RYAN DETRICK: Well, that's right. I mean, clearly, we know what's happened in financials and banks. But I'll tell you, that 30 level, nice, big round 30 level on the XLF, that was the pre-crisis peak in 2007. So there should be a good deal of support there. We found support there a couple of times recently over the last several years. So we're there again.

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Just put it like this. If we go below 30 on the XLF, I think-- we think that this is going to be contained within just a few bad banks. Yes, it's been volatile. We can get into all this stuff. That'd be more risk-- that'd be more risky, though, if we break that 30 level by a significant area. We don't think we will, but we're right there.

DAVE BRIGGS: And seasonally, you say historically this is just the March lows that we go through. Why so is that historical trend, and do you think it gets worse in terms of equities?

RYAN DETRICK: Yep. Yeah, we don't think it's going to get much worse here. That's right. You look at the last 20 years, right? March has been the low multiple times-- 2003, 2009, 2020. To be very honest, it might be a little more random than not. But think about those three times, right? 2003, war with Iraq, three-year bear market. 2009, financial crisis, stocks cut in half. 2020 shut the world down, COVID. Those were very negative times. Most people didn't think, you know what I should do? Go buy some stocks right now.

And we're not saying just blindly buy. But I'll tell you, when those expectations get low when you look at sentiment polls of different things, there's not a lot to be optimistic about. I can list some things for you, sure, but overall, there's a lot of worry out there. From a contrarian point of view, that could be a pretty good thing.

SEANA SMITH: So, Ryan, then, what do you like in this environment, given the fact that there is so much uncertainty and a lot of people are asking whether or not some of the selling that we've seen, specifically in Deutsche Bank today, initially, whether or not that was overblown?

RYAN DETRICK: Yeah, well, I'll just do this. I have to do this. I went to Xavier University. Got my X pin. I'll do an X on here.

SEANA SMITH: We see it on there.

RYAN DETRICK: They're in the sweet 16. So I like Xavier tonight, but I know we're here for a reason. When you think about it, I mean, we're sticking with industrials, right? Industrials, they've done really, really well. They're not that far from all-time highs here, as you have this weaker dollar. You can have a little bit more earnings growth.

Now we also like energy. Energy is getting hit hard, I get it. But I'll tell you, we don't see a recession. Look at just today's economic data that we saw. It doesn't look like a recession to us. And I know the credit crunch and things are potentially coming, so a slowdown, sure. But energy's been beaten up. That could be one that's nice.

And the third thing is have a barbell approach, if you hold gold. I know a lot of guests have probably talked about it. Gold went nowhere for 12 years. It went up for 12 years. They went nowhere for 12 years. That dollar weakens like we think it can, gold could be another area that if everything keeps spiraling out of control, that could be a place you could park a little bit in there. But we still like, you know, cyclical value, your industrials, and energy. I think those are still going to do pretty well the rest of this year.

RYAN DETRICK: You did mention the X, so I have to bring it up. Texas wins this game. I'm sorry, my friend. It is National Cocktail Day. Next round of cocktails, we'll bet on this. Fair?

RYAN DETRICK: That sounds fine. I hope you're wrong, but that sounds fine with me.

DAVE BRIGGS: Rodney Terry's team goes to the national final and loses to Alabama, but I'll leave that for another day.

RYAN DETRICK: There you go.

DAVE BRIGGS: You say there is a fundamental disconnect between the economy and the stock market. Why so?

RYAN DETRICK: Yeah, I mean, that's right. I mean, I kind of talked about it a second ago with industrials doing well, but look at, like, semiconductors, right? Semiconductors just a week ago today broke out to a 52-week high relative to the S&P 500. What in the world does that mean? Well, it means there's a lot of strength there. I took a look the last 20 years when that happens. It's happened eight times. A year later, you didn't have a recession. Two years later, you didn't have a recession. So we are aware of all these very legitimate worries that are out there.

But when you look at some of the areas that are leading and doing well, we're just not really buying the end of the world scenario that so many people are talking about. And from that contrarian point of view, it still could be an opportunity if we can avoid that recession, like we think we can. One more quick one, guys. On April Fool's Day last year was the 210 inversion. You can't make that up. That's when the yield curve inverted. So we've been about a year with this inverted yield curve. And again, look at the economic data. It's still hanging in there, thanks to a stronger than expected consumer.

SEANA SMITH: Well, Ryan, what happens if the Fed continues to raise rates? We heard from Jay Powell. He sounded like he wasn't afraid maybe to raise rates even further from where we are today. What happens to equities in that situation?

RYAN DETRICK: Yeah, we don't anticipate that. If they were, just stay aggressive. I mean, that could upset the apple cart. I mean, a lot of smart people have been saying what's going on with SVB and the fallout. That's equivalent to two to three 25 basis point hikes. That's kind of doing the job for the Fed. They probably have one more hike, but I'll tell you, the bond market pushes the Fed around. Just again today, what are yields doing today, right? The yield-- the bond market's saying, Fed, you are about done, and the Fed tends to follow that. So it's a really interesting situation.

But I'll just look at the inflation data, look at the supply chain data, time delivery, prices paid. Those things are coming back. The previous guest, the guest right before me talked about inflation, how some of these positives that are going to be here in 6 to 12 months. And we think that's the case as rents and things like that start to fall into the inflation data. So the Fed really probably doesn't have to continue to hike here. The Fed did a whole bunch, and then they slammed on the brakes. And that's kind of what they do, but we think maybe one more hike, and then they're probably done here.

SEANA SMITH: All right, we will see whether or not you're right. Ryan Detrick, always great to have you. And good luck to Xavier tonight.

DAVE BRIGGS: Longhorns, man.

RYAN DETRICK: Right. Go Xavier. Sorry, go Xavier.

SEANA SMITH: All right, Ryan, have a great weekend.