'The market is playing this collective game of chicken right now': CIC Wealth EVP

Malcolm Ethridge, CIC Wealth Executive Vice President joined Yahoo Finance Live to discuss why he thinks the market is playing a 'collective game of chicken' and what this means for the rest of 2021.

Video transcript

SEANA SMITH: Let's continue the conversation here, as we're looking at gains of all three of the major averages, and for more on that, we want to bring in Malcolm Ethridge, CIC Wealth Executive Vice President. Malcolm, good to have you. I guess, what do you make of today's move? We saw a bit of a rally yesterday, after we got the huge sell-off on Monday. Today, we're posting gains at the Dow of just around 270 points. What do you think is behind today's move to the upside?

MALCOLM ETHRIDGE: Yeah, so the really interesting thing is, like, the market is playing this collective game of chicken right now, is the way that it looks, where nobody wants to be the one to jump out before anybody else, but we all collectively agree that, like, we can't go on this way for much longer. There's no obvious catalyst for why things are happening. And so, like, Monday showed us that there are concerns still about COVID. There are concerns now about Delta. And then yesterday and today's snapbacks, basically to even, have shown us that, like, nobody wants to be the one to say, it's over, is probably more than what we're getting than any one catalyst that actually makes any real sense.

ADAM SHAPIRO: But wouldn't the contrarian view be that this economy still has a lot of runway, even if it's not going to be the dramatic growth we've seen in the first half of the year? And we're on the verge of a potential funding from Congress, through the reconciliation, if they get that through, that would actually give this rally, perhaps, even longer legs. Wouldn't now, perhaps, be the time not to be afraid?

MALCOLM ETHRIDGE: Maybe, but I can make the argument that that's already baked in, right? President Biden came into the White House pounding the table and promising that there was going to be an infrastructure deal, and it was going to be the biggest infrastructure deal we've seen in a long time. And so a lot of people have been buying, especially materials-related and industrials, based on that fact. And so it could be that the positives for that story have already been baked into the market and the gains have already been made, on the anticipation that we would get the bill that's finally seeming like it's going to make its way through.

SEANA SMITH: Malcolm, I think investors are trying to make sense, or are really trying to, I guess, best estimate the threat of the Delta variant and what that means for the market here, at least in the short term. Has it at all, the developments that we've gotten over the last couple of days, has it changed your outlook on the markets here, at least in the short term?

MALCOLM ETHRIDGE: Not really. I think what's happening right now is the government is doing a very good job of keeping us happy. They're doing a really good job of moving the conversation beyond Delta and kind of telling everybody, nothing to see here, everything is all right. But I think Monday really showed us just how sensitive we collectively, the markets, are to bad news around Delta and any other variants, and the likelihood that we'll see more shutdowns to come. And so I think, you know, realistically, we have to at least plan for what if, you know, it is as bad as India has shown us, that it is as Europe has already shown us that it is, because we sort of are trailing what happens in the European markets, which is why, Monday, the market open, we had a chance to see what was happening in Europe, and that told us, that forecasted what the day was going to be like on Monday, and then same thing with yesterday and today. And I think that, right now, what's happening is the messaging coming from, like, the CDC and folks in the know from the federal perspective is they're trying really hard to walk this fine line of keep everybody calm, and cool, and collected, so that we don't have a similar reaction, all of a sudden, one day, like we had back in March of 2020, where, you know, the fear got real, and the markets reflected it.

ADAM SHAPIRO: You know, looking for some opportunities here, one of the things you've suggested that people should consider is Lincoln Financial, LNC. I'm thinking, and this goes back more than 10 years, but during the great financial crisis, and I'm thinking of the insurance side, they had some real-- it was sketchy there for a while. So why now, do you think, they're a positive equity to look at?

MALCOLM ETHRIDGE: So, the interesting thing about Lincoln, from what we've been seeing, is that they're going through this transformation where they're getting away from doing things the old way, right? They're one of the few insurers, because you've got to think about insurance, and even banking, as sort of the slower, more conservative industries to change, and in Lincoln's case, they're moving more, to use, once again, the most overused phrase in finance, they're moving to where the puck is going, and not so much staying where it is. And so, in Lincoln's case, we can see where they're really revamping a lot of what younger consumers, millennials, Gen Xers, even, don't like about the insurance industry, and they're streamlining things, and stripping out some of the the, quote, unquote, "bad habits," if you will, that have gotten a bad taste in a lot of people's mouths when they think about the insurance space. And Lincoln seems to be on the forefront of leading some of that change, and so we can really see where there's going to be an opportunity over the next two, three years, while they're still transforming things, but other insurers are staying put, that Lincoln, it seems like. is going to have a really good opportunity to the upside, where not a lot of people are thinking about insurance as a good place to invest right now.

SEANA SMITH: Hey, Malcolm, what do you make of this whole inflation debate, because we heard from the Fed, and Jay Powell insisting that is transitory, some out there that are a little bit more, I guess, skeptic as to whether or not that will hold true? It sounds like you might be on the case that maybe it's not as transient as we initially thought it was. Why is that the case?

MALCOLM ETHRIDGE: Yeah, I feel like the resident skeptic now, as we've gone on with sort of what's not happening versus what we're being told. But I think that falls into the same camp as the federal government, the Fed, doing everything they can to keep us calm, and one of the ways that they're doing it is by pulling down everyone's fear around inflation, where they're saying, it's transient, it's transient, it's not going to be here forever, we don't really have to adapt and react to it the way the Federal Reserve normally is supposed to, because we don't expect it's going to last here forever. But ask anybody who's bought gas recently, or groceries recently, or any of those kind of staples, we've all seen the pressures of inflation already, Right? And at the same time, we've got cash piles that are at historic highs, right? Everybody's hoarding cash right now. That's constantly dominating the news. And, also, employers can't get workers' butts to fill seats, right? So, at a time when we have not enough labor, we also have way more supply of cash than we actually have goods to meet that. And so that's kind of the challenge that the market is trying to work its way through, and I think calling it "transient" is really underselling just how much cash is sitting on the sidelines and has the buying power to really drive these prices up in the near term, sure, but also more in the intermediate term, 12 months plus.

SEANA SMITH: Malcolm Ethridge, CIC Wealth Executive Vice President. Thanks so much for taking the time to join us.