Elena: Well for more on how markets are moving today, I’m now joined by Greg Hahn, Chief Investment Officer of Winthrop Capital Management. Hi, Greg. Thanks for joining us. Let’s start by talking about the Fed. As the economy rebounds and prices of course rise, are you confident that the Fed will make the right call on inflation?
Greg: I just am convinced the Fed has the pedal to the metal with monetary policy, and they are going to keep as aggressive of a monetary policy as they can to support asset prices until employment is addressed. And we’ve got 8 million people still to put back to work post-pandemic here in the United States. So I think the focus is the labor market for the Fed.
Elena: Of course, we have results from Big Tech coming out this week, and some of them after the bell today. Can they keep exceeding expectations or are they just overvalued?
Greg: The answer is yes, and yes. These business models are phenomenal business models with recurring revenue and significant margins. The technology that they’re bringing out – they’re still bringing out new technology, so it’s not a saturated market. Microsoft has some amazing products that are coming to market, and I think that it’s going to continue to drive revenue. They’ll be able to sustain margins, so the opportunity for this company to continue to grow is amazing.
Elena: Are you concerned though, in the months to come, about bumps in the road with valuations so high all around?
Greg: Yeah, there’s a couple of concerns. One is how big these companies are within the indices that we’re managing towards. So, there’s concentration risks associated with these big companies. I mean, Apple at over $2 trillion is 10% of the GDP of the United States. It’s huge. You start adding up these companies, and they become the size of the output of the United States. That’s not going to change. I think it does change how we start to look at these big companies. As far as valuation goes, looking at these companies through traditional valuation measures is getting more and more difficult. Whenever we shift to new measures, we have to make sure we’re not rationalizing the valuation of the company when we do that. But we look at – these margins are really helping to support the growth and they’ve got the revenue to do it. And it’s recurring revenue. It’s not like they’re having to sell bagels every morning out the store kind of a business model.
Elena: Thanks so much for that, Greg Hahn, Chief Investment Officer of Winthrop Capital Management.
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