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.
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INSIGHT

Small Caps' High Beta Explained

  • Small caps underperformed during tariff fears despite lower tariff exposure because they are high beta stocks.
  • Market sell-offs hit high beta stocks harder, creating a "momentum market commentary" that misattributes causes.
INSIGHT

Bond Market Technicals Matter

  • The bond market reaction to tariffs involves technical factors like foreign buying, not just fundamentals.
  • China's reduced treasury buying impacts yields, but the 10-year yield has stabilized and isn't highly dislocated now.
INSIGHT

Tariffs Are One-Time, Not Inflation

  • Tariffs cause one-time price increases, not inflation, and reduce consumer spending, which is deflationary.
  • The Trump policies are pro-savings and lower rates, opposing popular stagflation fears.
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