known than a couple of days after january 6. this is i think a little bit of theater. elizabeth: might thanks very great thanks to chris bedford and kempster also. before we go i'd like to wish all fathers including 9102-year-old father out there, very happy and happy blessed father's day we can be thinkable very much for joining us i'll be back next week with more ♪ ♪ ♪ ♪. jack: welcome to barron's roundtable will relook at headlines in menu for the week ahead. i am jack otter. coming up is this stock market bottoms i will ask co how much further stocks can fall and what he is buying now. and later, what investors should and shouldn't do with the market is taking the top ranked wealth advisor on how to profit from a

turmoil. we begin the three most important things investors should be thinking about right now. the s&p 500 slid into bear market territory this week as the fed raised rates to counter inflation. is there more downside to come? pharmaceutical giants are dropping their sideline businesses to focus on biotech. which a drug company stocks will benefit? and rapidly rising mortgage rates are going down the housing market. what it could meet by your home and investments for my colleagues ben levisohn, and jack hough. it was a brutal week indeed. what happened that made investors even more pessimistic than they have been practically all year? it's the official bear. >> the fed happened. we came in expecting half a rate hike and we find out monday morning for a wall street journal article really, that it is going to be three quarters of

a points. the market had to adjust to that in real-time. and it did. it tumbled. this is really what is going on it's all about rates and that's all about bonded deals. those are really going to determine what the valuations are in the market. they go up, the valuation has come down. the fed has set a path the market can trust. there's going to be a lot of volatility. at the same time we are looking economic data that is starting to slow. this is a terrible combination with the rates going up, the data is slowing. elite leaves the market in a precarious situation. jack: you said rates are sending valuations and down. and the economy is slowing which means earnings will also go down. so run us through at the peak optimism of the market investors were willing to pay 21 times about $220 on s&p earnings. so, when you look forward now what valuation you think will be assigned and can you guess what

the earnings might be? >> i am looking about 14 times. that is work goldman sach's and put eight recessionary pe. i think that is about right. and maybe earnings go down to come in and around 225 in 2023, which would be a flat -ish from where they were with the expectations you were talking about. i hope the index down around 3100. that's probably a good expectation. we have to be realistic about what is happening here. the fed is working to so the economy. chances of a hard landing are there. we have to expect more downside even though it might not come immediately. spent a lot of people don't understand that the fed is trying to slow down the economy which sounds counterproductive but it is necessary right now. so where does this leave us? what should an investor do? she going to safe sectors think about utilities. those have been hurt by interest rates, staples and healthcare pretty also look for things like

low volatility stocks. the ones that do not move all that much. those are both been recommended by america and wells fargo recently. they seemed like pretty decent places too. craig: carlton let's get further into healthcare that ben just mentioned. why does barron see opportunities there right now? >> the industry is going to look a little bit different than what we are used to prepare used to being dominated by big pharma names. now the big pharma names are going to start to look like big biotech's. one example of that is a glass coat sitting off atlanta business. it does the drug store brands. it's going to be focusing on the complex medicines that treat rare conditions for the reasons it's doing purely speaking from a business perspective, it is more profitable for these drug companies to treat these kind of rare diseases. there is so much competition and treating the diseases that are more common in the u.s., heart disease, obesity, diabetes, things like that.

the other thing is these drugs are much more complex. even when their patents expire they cannot be copied by competitors. it gives some of these companies a longer durability. jack: i want to get to jacked you want to give us one or two mornings a stocks? >> of pfizer's when you to take a look at. the market is not appreciating the durability of the covid business. then of course to mount to take a look at lily, where it does have a drug to treat diabetes is showing efficacy for weight loss. jack: gotcha, thanks. jack, let's pivot over too real estate. if you wanted to find a canary in the coal mine that might tell us when this really hot real estate market could cool down, no better place to look than the real estate brokers appeared perpetually optimistic, right? now read sin and compass are growing so fast there now when people often. >> the airbags are about to deploy a rate that is how quickly the market is slowing. you have mortgage rates shot up 6%. applications for buyers, those

are slowing. and the broker layoffs. you might say wait a second, i seem to recall them talking about house prices jumping 20%. those are stale numbers but the most recent numbers we have for house prices are back in march. the more recent signs are quite negative. reds and ceo write blog post this week that demand in may was a 17% below expectations. he said the slowdown could last years, not months laying off 8% of workers. i would not however expect house prices to collapse. most homeowners, more than two thirds of homeowners that have mortgages are locked into rates well below these levels. below 4%. those people are going to do anything they can to avoid moving and taking on a mortgage. that is going to keep supply type for years. one analyst i spoke with said expect price growth dislodges your next year. giving income a chance to catch up. jack: warren buffett said to be greedy when others are fearful but that is what you are doing.

you actually like some of the stocks. >> i will tell you one to not even think about buying, the name as a mouthful. direction daily homebuilders and supply three timeshares pretty do not need leverage. i just lost 45% over five trading days. gives you an idea of some the carnage. do consider buying shares of lennar and toll brothers. two quality builders that are trading close to recession close to the book values. maybe hold off a little bit on shares of redken. wait for some stabilization there. the price arty looks attractive. that one is down 90% as we speak. jack: not much further to fall, thanks jack. do energy stocks meanwhile have more room to run? is big tech following barnette to start buying the stocks again? financial advisor richard saperstein has answers. that is next.

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jack: the volatility of the markets can be unnerving for vester's. better investors are fighting opportunities joining up treasury partners cio richard saperstein. richard, thanks much for coming on the show. >> my pleasure. jack: you have said the roots of the turmoil in the market right now actually go way back. can you sketch that out for us real quick? >> since 2008 we have not had a market determined level of interest rates by the fed has injected $9 trillion into the economy. witness the fact $16 trillion worth of negative yielding debt global negative yielding debt about 18 months ago. pursuing average inflation targeting about a year end a

half ago. we've got a combustible mixture. were saying it right play out in the markets. we are seeing what appears to be the bond vigilantes coming out from their caves. as well as stock market volatility. incredible volatility i am seeing right now. jack: so what are you looking forward to give you a signal may be we are near a bottom? >> this is the most common question that i am getting. if we go through the day that which is what we like to do, the current free cash flow yield on the s&p right now, figure one and a half a trillion dollars is roughly 4.5%. now, in our work the market of 5% cash flow yield just as a reference point in oh eight at the worst. it was 5.9%. i think we are at a point where the free cash flow yield get more attractive part i would not

be committing capitol right here too aggressively. jack: what area you do like it's been a great place to hide at least until this last week as energy. can you give us some thoughts on that space and what you like there? >> energy is interesting. because of the two sides of it. one is off to the geopolitical events. they have unfortunately driven the price of oil up dramatically. and that is on top of the last few years where the esg has a limited new exploration and production. at the same time, the oil companies have adopted some incredible financial discipline and the last few years. so headcount for employment in the industry is down by one third in the last four years. i what that has done is a combined effect of release skyrocketing the operating and

free cash flows of these companies. so right now you can look at anywhere from ten -- 17% operating cash flows. exxon is 13%. free cash flow is 10% and exxon pretty had that free cash flow you've got to do something if you're not going out in drilling. you got to return to shareholders bro that's the reason why we like that sector. smacking you give us two more names there? canadian natural resources there some interesting companies in canada that are outside the geopolitical fray. and they are generating incredible cash flow. cn q is being one of them. jack: you also kind of like a big tech here. that's really interesting because that of course dominated the market along with speculative names for ten years or so. are we at the point where those prices have fallen up they are attractive and that macro story

is still strong? >> i will give it equal parts to both of those points. but i think we have to separate when we talk about technology. the zero coupon tech companies, meeting those that are burning cash and do not generate free cash flow. and those that are generating copious amounts of free cash flow. that includes names like apple, microsoft and google. whereas you you just mentioned prices have come down. and right now the operating cash flow on these companies are anywhere from five -- 7%. now the interesting thing is that if we get into a recessionary environment where the fed really, really taps the brakes hard, investors are likely to look for companies with the attributes of this large cap attack. eating large boats around their business.

recurring cash flow. higher margins in the s and p. and to boot a growth story for. >> is a dangerous thing to say it's hard to see who can place apple and google lease on the horizon. richard saperstein thank you so much for coming on. >> it's my pleasure, thanks jack. jack: at time of turmoil it's easy to start to panic. next, what to do and what not to do with your portfolio. tip from top advisor holly newman kroft. you'll always remember buying your first car. and buying your starter home. or whatever this is. but the things that last a lifetime like happiness, love and confidence... you can't buy those. but you can invest in them. we believe that your investments should work harder for the future you imagine. and that's where our strategic investing approach can help.

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jack: rising interest rates, mounting inflation that there recession of some scrambling to protect their investments. in this environment what should you do and not do with your money? to find out where asking managing director holly newman kroft it was just name number two on the barron's ranking of top women financial advisors for thanks for coming and holly,

appreciate it. >> thanks jack night is nice to see you again. jack: we always tell viewers, don't panic. bear markets are perfectly natural things but they happen every three or four years. they are part of the investment cycle. but seriously, holly, should be panic? [laughter] >> you should not panic but it never fails in markets like this is very unsettling for our clients. you know, it's really important, jack tok, drummer 80% of the market does go up. it is critical in down markets not to have a knee jerk reaction. not to panic. not to sell, not to get out. in fact it's markets like this, that really highlight the importance of working with professional financial advisor because that sort of helps clients to take emotions out of their investment decision-making. spencer tell us what does top professional portfolio look like? if you had a client long-term

horizon taking willing for returns but sketch out the elements of that portfolio would be? >> what we are emphasizing today is asset allocation. both amongst and within asset classes. so today traditional classes were underweight, fixed income were underweight. equities were overweight alternatives. that sort of broad stroke within equities we are equally underweight. domestic and international equities. >> jack hough here i'm hearing a lot of underweight. are there any sectors of the market you were overweight and do i take this to meet you expect returns to be lower than usual to the next decade? >> if by usual reason the last decade of equity returns i would say those are pretty unusual. we experienced double digit annualized returns of the last

ten years. i think if you go back over the long-term, equity returns have around six or 7%. we are expecting equity returns to be slightly below that but below that on a forward-looking basis. again but those sub asset classes we like high quality companies. >> holly this is ben levisohn. i was that utility stocks were a nice safe place when markets get volatile. but the past few days, no up utilities go down paid what am i supposed to do these things now? there is no place to hide right now, ben that is what we are seeing. utilities do exhibit a lot of the characteristics we like in those high quality companies. however they do provide a lot of safety for us. rising rate environment there

may be not as attractive as they might be and we benefited from and a low interest rate environment. we do see a place we do like utilities we don't like to be so concentrated within one subsector or one asset class. we like diversification within the equity bucket. high quality, and companies that don't have a lot of interest rate risk, pricing power, that is what we are looking for. utilities play a part there i would not sink all of my money into utilities. >> holly, it is carlton. one of the questions we get a lot is somewhat looking to retire in a bear market like we are in our may have achish need coming up whether it's tuition payments for kids or maybe they are trying to buy a house. what type of advice do you give those two categories of investors for what to do now when they know they have an immediate cash concern?

>> expenses to anticipate within 12 -- 18 months, we can invest that money in cash management or in very short duration uni- bonds. and it can work a little bit for you. for what you see beyond 18 months i think markets are unpredictable. i would hate to see anyone leave too much money on the sidelines. because markets do change, expenses do change. but today we are able to earn that money on the short end of the spectrum and we might as well take advantage of that. >> that's rare to see this two and 3% yield of those short-term bonds. holly newman kroft thanks much and congrats to your place on the list to pay. >> thank you so much jack it's nice to see you all. jack: roundtable members will give their investment ideas for the coming week. jack sees afo cluster that might bode well for your retirement table. stay right i there. only pay for what you need. ♪liberty. liberty. liberty. liberty.♪

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jack: so jack, ben and i were talking earlier about the wall street trying to figure out how far earnings can fall as the economy slows. you looked into one interesting concept that suggests maybe they won't fall that far. >> they said they have good news. individual earnings estimates for companies are tightly clustered right now. nine out of 11 sectors have what is called low estimate dispersion. that is the opposite of what tends to happen before earnings tank. they're largely in agreement. if they are agreeing there may be good visibility. in that case they may be right it earnings estimates are reliable may beat stocks are a good deal here. that is the theory on clustering. if you are a cluster trust her. if they remain tight it earnings tank anyway, that is statistically what i would call

eight cluster flunked. jack you do not want one of those. spinrite know i don't i'm not going to let you use that word anymore but it will point out to investors there's a lot of academic work that suggest this also applies to individual stocks when all of the analysts are clustered around one particular earnings estimate might in the company is telegraphing good news but let's move onto actionable ideas but were to him the first one from carlton. >> not a surprise and take a look at a bank that is citigroup. city is standing out as a turnaround story. has traded below book about this a lot of negative news and baked the stock but is having success with plant divestitures that should help the company of buybacks in the future. >> hardly ever recovering the great financial crisis one of the days is going to bust out. what do you have for us, ben? >> i have ibm. nobody likes a stock but it remarkably well even us stocks like apple and microsoft have fallen out of favor.

it's also with at least volatile in the tech sector. think it's up 1% this year it has barely moved rate that might make it a good place to hide out from the market storm. but i have not heard that name for a while, ben, carleton, jack, great ideas read more check out this edition of barron's are comp recovered us on twitter at barron's online. that is all for us. we'll see you next week on barron's roundtable. street. maria: and happy weekend to all paid welcome to the program that analyzes the week that was it helps position for the week ahead. i am maria bartiromo. president biden doubles down on false claims about sky high inflation while targeting oil and gasoline companies we are look at the fax with congressman steve scalise this week and bird plus another volatile referee on wall street journal bikers the