The global selloff that began last week intensified Monday morning, with U.S. stock futures plunging further after Japan’s Nikkei 225 had its worst day since Wall Street’s “Black Monday” in 1987. Following a 611-point loss on Friday, the Dow dropped over 1,000 points before the market opened. The S&P initially fell over 3.5%, while Big Tech stocks were among the biggest losers, causing Nasdaq futures to lose almost 5%.
The panic subsidized after the markets opened, however, and investors like Infrastructure Capital Advisors CEO Jay Hatfield remain bullish on the overall state of the U.S. economy.
In an interview with Fortune, Hatfield noted that the Nikkei had probably been overvalued due to an excessive monetary stimulus from the Bank of Japan—but that the index's dive was “basically irrelevant,” besides being the latest catalyst for hedge funds and other short-term traders to sell.
“There's always an excuse in August,” he said, “whether it's the Nikkei, a fantasy recession, Warren Buffett selling Apple—there's always some excuse.”
As earnings season winds down, Hatfield said, hedge funds are hesitant to stay long on stocks. The selloff gained momentum late last week, however, after a series of negative reports on the economy, particularly in the manufacturing sector, and was punctuated by a weaker-than-expected jobs report on Friday that reignited recession fears.
Hatfield doesn’t share those concerns. Overall job growth, he said, remained consistent with a decelerating, not crashing, economy. Mortgage rates falling to their lowest levels in over a year bode well for the housing market, he added.
“The U.S. is not in recession and not likely to be in recession,” he said, “but it’s normal for the market to go down in August.”
There were signs other investors shared Hatfield’s sentiment after the markets opened as the panic appeared to subside. The S&P was down about 2.5% midday Monday, gaining over 50 points from its open of $5,151.14 and back up around 10% year to date. The Nasdaq 100 and Dow Jones were also trading above their open prices, with the former gaining about 500 points, and remain up for 2024.
Hatfield believes the $5,000 mark is a reasonable level of support for the S&P, which hasn’t fallen below that threshold since April. The now virtually guaranteed Fed rate cut in September and certainty surrounding the outcome of the U.S. presidential election come November, he said, are positive catalysts contributing to his firm’s price target of $6,000 for the S&P by the end of the year.
But in the near term, more inflation data next week could again wobble the markets if it comes in hot, according to a recent note from Bank of America, fueling fears of a hard landing. Hatfield, though no fan of the Fed’s decision not to cut rates last week, isn’t as worried regardless of the results. He wouldn’t be surprised, however, if short-term investors again find a way to spook the markets.
After all, “selling breeds selling,” he said.
