Lead-Lag Live
Market Volatility Decoded with Jay Hatfield
May 1, 2025
Jay Hatfield, Chief Investment Officer at Infrastructure Capital Management, shines a light on market dynamics and investment strategies amidst volatility. He delves into the 'small cap tariff problem', exposing the technical factors behind small caps' underperformance. Hatfield challenges the notion that tariffs drive inflation, arguing they are one-time increases misunderstood by the Fed. He remains optimistic about market targets, suggesting a range of 5,000 to 6,000 for the S&P, and highlights the potential of undervalued funds in today’s economic landscape.
46:48
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Quick takeaways
- Jay Hatfield highlights that small cap stocks, perceived as less exposed to tariffs, demonstrate greater volatility during market downturns due to their high beta nature.
- Hatfield critiques the Federal Reserve's misunderstanding of tariffs as inflationary, asserting they are one-time price increases rather than ongoing inflationary pressures.
Deep dives
Market Reaction to Tariffs
The bond market's response to tariffs and related trade policies indicates a disconnect between market perception and actual fundamentals. Despite the Treasury Secretary's assurances, foreign investment in U.S. Treasuries, particularly from China, has significantly declined, which raises concerns about the stability of the 10-year yield. Analysts suggest that while small caps are generally perceived to be less impacted by tariffs due to their domestic focus, recent sell-offs have shown they are in fact more volatile and susceptible during market downturns. This volatility leads to a perception that small caps are more exposed to tariff implications than they truly are, exacerbating their decline in a challenging market environment.
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