‘Investors need to be prepared’ for a ‘hard landing’: John Grace

John Grace, Investor’s Advantage Corp. President, joins The Final Round panel to discuss his thoughts on the market, what impact a new stimulus package could have, and where investors’ should be looking in such a volatile market.

Video Transcript

SEANA SMITH: But to help us square-- I guess square off what's going on with the economy versus what we're seeing in the stock market, I want to bring in our next guest. We have John Grace. He's the president of Investor's Advantage Corp. And John, just taking into account what Brian was saying from an economic perspective and then comparing that to what we've been seeing in the stock market, also with the fact that we don't have a deal in Washington, my question to you is can this market's momentum that we have seen-- can this keep up without more stimulus right now? John, you're muted.

JOHN GRACE: Sorry. I would say that you're all making some very good points. And we've got to work through the detox, OK? We've got a whole lot of debt. It looks to me like the Dow has had the best 100 days since 1933. And from here, it feels like this. Ladies and gentlemen, now's the time to put your tray tables in the upright and locked position because you need to keep your arms legs inside this vehicle. This plane is coming down. And it's going to have a hard landing, and it might not be on tarmac.

So a lot of buoyancy, a lot of people are being very optimistic. But fundamentally, there's just a lot of missing pieces to the equation. Markets typically do not like distractions, certainly do not like uncertainty, and we've got uncertainty everywhere you can look.

So this, I think, is going to be a hard landing. And I'm saying that investors need to be prepared and maybe what the first thing they need to do is not look at their quarterly statement. It can be very misleading. Look to see how your account did from February 19, the peak so far, versus March 23, the low so far. I think we're going to retest those lows. But people don't see it, so they're not prepared for it.

RICK NEWMAN: Hey John, Rick Newman here. Come on now. The Federal Reserve is not going to allow a hard landing, is it?

JOHN GRACE: Well, the Federal Reserve is throwing anything, including every kitchen sink it could possibly put in the equation, to make everybody not look at the man behind the curtain, to make everybody just spin, baby, spin. And in its own way-- [INAUDIBLE]. So they're doing everything they can to keep everything as lofty and lovely, particularly for the top one-percenters, which already-- who always do well, no matter what. But at this point, the music does come. We're going to have to come off this carousel.

And it's not just our Fed. The central banks around the world, which would have us all believe they have the capacity to simply put a little machine or a little gauge on the wall and the machines will do all the work-- cool the economy, heat the economy, everybody's going to be comfortable. Nobody is going to go through some pain. We're going to have to go through some pain, like winter, to get to spring.

SEANA SMITH: So John, let me just ask you about the economic data that's out this morning because I know you were saying that we have a lot more pain ahead. But when you take into account the numbers that we got on the retail sales front, also the consumer sentiment number, I think-- well-- [INAUDIBLE] It was OK. I think investors were pleased, to say the least, with that report. What do you make of it? I mean, are you a little bit more concerned then, I guess, that we are seeing the progress in the retail sales at least just slow down a little bit?

JOHN GRACE: Well, I mean, once you stop getting your $600 a week, what are you going to spend with, OK? That-- those were transfer payments, as far as I'm concerned. So you know-- and many people, thanks to the $600, had more money to spend, depending on their particular situation. But that's all come to a stop, and we do not yet see how this pandemic of epic proportions is upsetting the apple carts all over the place.

I do see that, you know, the folks who are maybe lower end may have been spending as well as they have before. Certainly, you can do that with other people's money. The folks at $100,000 and above level, I do see that there has been some retraction from spending. But at the end of the day, let's also recognize that spending is good for the overall economy. It's bad for those of us who are one paycheck away from being destitute because we have no resources other than the last paycheck.

SEANA SMITH: All right, John Grace, well, we're going to have you back on to see how this all shakes out here over the next couple of months. John Grace, president of Investor's Advantage Corp. Great to have you back on the program. Thanks so much for taking the time to join us.

JOHN GRACE: My pleasure.