How to know which type of investor you are

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Retail investors are trading smarter than ever with pro-level strategies.

In this episode of Stocks in Translation, Robinhood chief investment officer Stephanie Guild joins Markets and Data Editor Jared Blikre and Producer Sydnee Fried to discuss retail traders and how they are investing in today’s market. Guild breaks down strategies for individual investors, including maintaining cash reserves, building diversified positions, and using technical analysis like moving averages and RSI. The trio also discusses mortgage rates and why they remain high despite Fed rate cuts.

Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes here, or watch on your favorite streaming service.

This post was written by Lauren Pokedoff.

Video Transcript

0:05 spk_0

Welcome to Stocks and Translation, Yahoo Finance's video podcast that cuts through the market mayhem, the noisy numbers, and the hyperbole to give you the information you need to make the right trade for your portfolio. I'm Jared Flickery, your host, and back with me is the voice of the people, Sydney Freed, who's here to ask the people's questions and keep things simple for you, the viewer.Today we're going to be talking about the outlook for stocks, given the influence of Jay Powell and the Fed, President Trump and his team, company earnings, and even generational spending patterns. We've got the baby boomers. They are in spend mode. And today we're going to do all of that through the lens of the retail trader, which happens to be our phrase of the day.And this episode is brought to you by the number 6.58%. That is the 30 year mortgage rate reported by Freddie Mac. Why this key rate in the housing market will not necessarily be going down just because the Fed is lowering rates. And today we are welcoming Stephanie Guild. She is the chief investment officer at Robin Hood. She's a CFA charter holder, that's chartered financial analyst, and a two decade JP Morgan veteran. She also leads Robin Hood's market outlook and research for retail investors. It is great to have you here.Thank you for having me. Well, thank you. And uh let's just start with your current market outlook and you have a kind of unique position given your your position at Robin Hood. What do you see in the markets right now?

1:25 spk_1

I think the markets have recovered a lot since their dip in April and so you've seen, you know, there's my view is I haven't changed my general target on the S&P. I'd said it at the start of the year and I adjusted it down a bit when liberation Day happened.Um, but I kind of think it might still be right. They always say your first answer is the correct 1. Um, 6500 was my target and we're kind of around there. So, um, which is making me a little bit nervous just in the near term. I do think we're in a seasonably unfavorable period.Um, because I do think we get to this point in September where a lot of companies have to go in their quiet period. Um, we've had all the earnings we can have for a time period. There's not a ton of economic data that comes out. The Fed eventually goes into their time quiet period before, um, rates, you know, before the next meeting, andThen I think like the market gets left unread, so to speak. Um, and so I think we get to this period where it's, it can be quiet and the market is left wondering really what's happening and there's still a lot of questions out there. So that's like in the near term a little nervous, but um I don't think there's a ton ofUh, reasons to be worried yet because I do think like Powell said on Friday, the risks are balanced right now. Yeah,

2:44 spk_0

we got a huge reaction to the upside. We'll circle back to the Fed in the second half here, but I want to get to our phrase of the day, which is retail trader retail.The trader is an individual who invests and trades their own money, and we should contrast this with the institutional trader or investor who generally manages larger amounts of money for others. And so how do you, how do you view the retail trader? And I mean, I, I gotta think back to 2021. I'm not gonna draw any parallel, huge parallels to then.Uh, versus now, but Robin Hood was kind of meme central and it caught up in that 2021 GameStop AMC frenzy. How do you see retail traders now?

3:25 spk_1

I don't like calling them retails because I think you can have a sort of condescending connotation. I think that was like the name what institutional traders, you know, an everyday investor, and I, you know, I think.The world has really changed from an information perspective. There's access to a lot more data for everybody, and I, you know, Robin Hood has been at the center of that. Obviously we were the place that people, um, you know, start making their investments and and hopefully continue to grow their investments as we've seen. Um, and I, I think that they're, they're getting smarter and smarter. Like I, our, our customers are um very savvy, and we see them doing things that likeI have seen in my experience, very senior portfolio managers do, which is by core positions that they believe in for the long term and trade around them, uh, and the volatility that they have.

4:19 spk_2

Do you know how they're getting their information, like,I don't, first of all, I don't like a retail trader either. I, when I first heard that, I thought I equated it with like a day trader, like someone who's actively in here. I was like, if you just buy some ETFs, like, are you a retail trader that feels

4:34 spk_1

we can argueabout that.

4:36 spk_2

But how do you think these everyday traders are making their decisions? Do you have insight intothat?

4:42 spk_1

Yeah, I think there's there'sAlmost three kinds. 11 is the is the active trader, that is trading every day, and they may have very short term positions put on either through options or through single names. Um, and I think that is a very technical oriented type of investor, um, and they're looking at the charts. And so we have, you know, legend for, we have a a whole tool kit for our customers like that.Then I think there's like the long-term investors, right? Then there's they, they will may buy a mix of single stocks and ETFs and kind of, you know, when things go down, they may add to it or just have a consistent approach to adding to their accounts. Um and we have something like recurring where you can just like consistently invest in things over time with cash flow.Then I think there's something like in between that, which is um where they're getting their information, and they may actually take like, you know, 6 months, 12 month positions and around the volatility trim and add those. And I think where they're getting their information is a whole host of things, like you can have, you can pay for access to certain types of things. I think we've also seen the explosion of information on social media, like there areInfluencers who do have honest takes that are, I think, sometimes almost as good as as the institutional research.

6:00 spk_0

Yeah, I love how you kind of open up this discussion about your, your, the Robin Hood traders or investors establishing a core position, trading around it, and that's really more how the institutionals trade and invest and just kind of you, you spent 20 years at JPMorgan.You were a portfolio manager. Can you walk us through how you were managing money back in the day and how that might relate to an investor who's just trading their own account or investing their own account? Yeah,

6:28 spk_1

so I think you, you definitely do a lot of reading and understanding like where are trends, what's your time horizon? You always want to know that, um, and how much risk are you willing to take. Like, I think for the everyday investor, you want to make sure, and this is the most boring thing, but you want to make sure you have likecash sitting on the sidelines, that's like, in case something changes in your life you didn't expect. Like, you know, you lose your job, you have an expense that you didn't expect, like, you want to have that. And I always say it should be around 6 to 12 months, but that can vary again from person to person. Once you have that, I think you want to have some, um,You know, maybe some diversified exposure, like have some foundation of broad-based ETFs, and then once you have enough of that and all this is personal to you, I think that's where you can start, you need to take some risk. I always say like, I think that you can be, there is a world where you can be over diversified and you want to have some bets, right? Where is the world going? Like, we see our customers because they're younger on average, investing inUm, quantum computing, like, we don't know where that's going to end up, right? Um, obviously AI is a big piece of it, and then you have some of the well-known brands. When I was investing, I took a lot of things into account where I think long-term earnings will be, and I think expectations are really important to understand. Like I've always thought about that. If I, you know, for example, data centers and power generation are a big theme now and probably further into the future because

7:58 spk_0

Utility is kind of the complimentary AI trade. Yes,

8:01 spk_1

exactly, because you, it's going to gobble up all of the power that we everyday people need to to just have our, you know, have our lives. And so where is that going to come from? But how much of that is already in the price, right? Like what, what are earnings expectations and do I think that they can continue toUm, you know, meet or beat that rising bar, and meeting is not even enough in this market anymore.

8:26 spk_2

I wasjust gonna say cause I feel like when you're investing for yourself, something like data centers, now it's in the news a lot, like that's a good AI play.How, how do you know when you're behind kind of the curve and you might not want to get in right now versus like, oh, I'm looking for like an under the radar play. I know that's like if we all knew the easy answer to what's the underrated play, we would go there, but if you're investing.For yourself, how do you think about like potentially being behindthe ball?

8:56 spk_1

I think it's, it's one, you have to think about your own time horizon, but two, I think you, this is where a technical analysis can help. And what I mean by technical analysis is like looking at the charts and and taking a broader view andEven like if you can plot it, whatever kind of thing that you use, if you're looking to plot like 50 day moving average, a 200 day moving average, and then plot it against where the price is, right? And say where, where has it been going? Has it had any dips? When it does dip, does it, does it breach any of those barriers? And that can help you figure out like your timing. If it's, if it's up into the right, like.You know, look for some small opportunities and maybe make a small position because I've also found that like you can watch something, but if you, the way you really watch it is if you have some skin in the game.Um, so make a small, small position and start writing it. And if it goes down, it's like, OK, maybe now is my time to add or maybe something's changed in thethesis.

9:59 spk_0

I love that you brought up technical question. All right, um, but so you mentioned the simple moving averages and that's a great place to start. You can also look at the slope, you know, are the moving averages going up and down.Anything else, or how would you suggest investors kind of dip their toes into technicals here because it's really easy to get overwhelmed.

10:15 spk_1

Yeah, I, I, there's a guy we actually had, so we have an annual client conference now. This year will be our second one, and we had this gentleman's name is John Roke. He works at 22V Research and we had him come speak to our customers in a in a panel, and you can actually find it on our YouTube channel.It's, he said of all the things he was like, I've been doing technical analysis for a long time and I, I, I agree with him in this, which is why I'm bringing him up is that he says, you know, he, he used to listen to this, um, I forget what he called it, but some guy who would look at like 120 different things and he was like, you know what, actually I don't have, I don't have the ability, I don't have the mind frame for that andWhat he's found is that simplicity is better. And so I've taken a page from him and said, like, I really just look at the moving averages. Sometimes I look at RSI, which is a relative strength index, see whether things are moving up and down based like you look at the volumes and the big moves. Um, those are just some like I I don't think you need to do much more than that. He actually trademarked a metric. Um, it's called. It's called Rob Dignanian.It's hard to say, but what it means is like, is the chart setting a base and getting ready to break out. So if you see something moving kind of sideways for a long time, and then you kind of look at the company or the trend and say, is this like is this building to something that's going to break out, that can be aKind of a cool symbol, but it can be a base for a long time.

11:48 spk_0

I love all that and just hold that thought because we take a short break here, but coming up we're going to be talking mortgage rates staying stubbornly high despite Fed rate cuts, plus a runway showdown classic earnings versus multiples. Stay tuned.This episode is brought to you by the number 6.58%, and that is the current 30 year mortgage rate supplied by mortgage giant Freddie Mac. Over the last two years it's been as high as nearly 8%, as low as almost 6%, but what we want to talk about right now is where.It is going and despite the fact that the Fed has been cutting short-term rates, we've been seeing longer term rates heading higher, and this is not without precedent. We've seen it happen before. I don't think it's happened for a few decades, so we're not trying to say this time is different, but it's not intuitive. The Fed, we should reiterate, acts on the very short end of the market, but these longer term rates, because of various factors and we can get into that heading higher, how do you, how do you make sense of all this?

12:54 spk_1

So historically, the Fed has cut.Going into or already in a recession, right? And they do it in almost every last cutting cycle, um, except for this most recent one, right, because they were, they had raised rates to fight inflation and so they pulled it back because inflation looked like it was, you know, has been moving down. Um, so besides that, there had been this, that it was the hand in hand, recession and and rate cutting to stimulate growth and and get us out of a recession.And of course, when you have a recession, rates across the board go down, right? Because inflation expectations come down. That's a big, another big piece in um in longer term rates. And the thing that does drive mortgage rates is the 10 year, and inflation expectations go into that. And the other thing that now I'd say more recently has become a thing is supply and demand of treasuries. And what I mean by that is

13:50 spk_0

a lot of supply on

13:51 spk_1

a lot of.Um, the government has been borrowing a growing amount every single year and obviously there are some other things in play right now that can slow down that train, but I don't know if it's going to fully stop it, which is the tariffs, tariff revenue collection can help offset some of that. But if, uh, if we have a rising amount of supply, and if you don't have a rising amount of demand,Then those rates, right? Like if you, if you have a, if there's something in your store that is no one's buying, what do you do with it? Well you lower the price.

14:26 spk_0

That's what bonds. We get lower prices and yields inversely.

14:31 spk_1

Yeah, exactly.

14:33 spk_2

So do you think there's a chance that the Fed is behind potentially in its cut, or do you see a recession since you said previously cutting in a recession go hand in hand. Is that not the casethis time?

14:44 spk_1

Not the case this time, I don't think. I, I, I, I don't see signs of recession yet, but I do think that the Fed had been solely focused on inflation, and I kind of understand it. I actually wrote about this recently in my investors guild, which is thatIf you come, if anything that big that happens in your life, you always sort of think about that and say, I never want that to happen to me again. And inflation got out of control, right, and inflation got out of control for the first time in decades, I mean real decades, not since 19 you know 80 or whatever. So we, I think they were thinking we cannot let that happen again. The inflation shock wasfor everybody. And so they were very focused on that. Inflation has been stubborn at that like kind of 3%, 2.8% mark, and they wanted it at too. They just really stuck to that. But what I worry about in this environment of they keep saying, well, with tariffs, we don't know what that's going to do to inflation. We also, and they finally just admitted on Friday, we don't know what that's going to do to the labor market.If a company doesn't pass on higher costs in the form of inflation, they will look to keep their margins the same and cut costs, and sometimes that can mean in the labor market. So if we do have that, then you could end up trending toward a kind of softness slash maybe recession. I don't like to say the word too many times, but.But it's, it's something that I think um they've just decided to admit on Friday that like these are both risks and now we have to think about both of them. But I don't think it's imminent. So I think one or two cuts are insurance cuts like they did in 1994.

16:22 spk_0

I want to ask you about something you wrote to us in your notes and it's you got to watch what Trump is doing and what Treasury Secretary Besent is saying. Break that down for us.

16:32 spk_1

Yeah, I think I said WWP.

16:36 spk_0

We're going to put that on there.

16:38 spk_1

Yeah, so I, I just think that this, um, OK, so kind of quickly going back on Powell, I used to call him the market's DJ because he would, you know, he would play the song and the markets would react. I think the decks have been passed toThe the fiscal policy and President Trump is quite clear, you know, if you read through like his, his language, I think as an institutional investor historically, you might want to listen to it and read through the lines, and I don't think you need to do that. I think you hear we're going to do this, we might do that.It often ends up happening, um, or you know, you start to see like the investment with Intel and it's not the only one, right? Like these are unprecedented moments in a way. There's been some related related times like in 2008 when you know, car companies were but

17:28 spk_0

I mean.fun in the US is something that's new understanding.

17:34 spk_1

And I mean this is not to save them, it's investing to well maybe Intel, but you know there's, but I think and then goes on a lot of, you know, newscasts and he says like, we're going to have this much in terrorists by this time, this is going to do this like.I think it's they're giving you the playbook and you have to listen to it as an investor. Well,

17:54 spk_2

so as an investor, though, how do you listen and make decisions in your portfolio when there's kind of so much being thrown around?

18:01 spk_1

Yeah, it's a good question. Like one example I think is, you know, what, what they're like when NATO happened, right? And the NATO meeting happened andThere was a lot of talk about like, we had a great meeting, that we're gonna all make investments and aerospace and defense. Like, I don't, that was like, I, I said, this is backing up my expectation that, you know, the entire government is going to be umMore technology is going to flow into the into the government, right? And, and there's going to be more spending inNon-traditional types of aerospace and defense, and that's not just going to be, you know, by the European countries but also byus.

18:41 spk_0

We got a pivot here because I do want to get to today's runway showdown where we are stacking up the earnings versus multiple magic. In other words, which matters more, the actual profits and losses a company reports each quarter or the valuation multiple that investors, they slap on top of that. So on stage left, we've got the earnings engine, revenue growth, margins holding.Firm EPS revisions pushing higher and free cash flow in gear and on stage right, we've got the multiple magic prices rising as valuations or that multiple stretch. It might be thanks to Fed rate cut hopes, fiscal policy vibes, or just liquidity itself, money on the sidelines look excuse me, money on the sidelines looking for a home. So the question to you, Steph, is who's wearing the next leg of this market best today, the companies earning it or the multiples making it look easy?

19:29 spk_1

Hm, I think, um, earnings have definitely been winning out this year, uh, but the market, I think at this past earnings season, I do think you saw a little bit of a shift in that.The ones with very high multiples had much more scrutiny on them, and they had to be in every single category that, you know, not just earnings, but guidance. I mean, guidance is almost even more important than looking in the rearview mirror of what earnings was. And so I think there, you're starting to see a, see a shift.Valuations do matter. I think there's certainly a lot of people out there that are saying they don't matter anymore, and I

20:07 spk_0

don't say that I've seen

20:10 spk_1

this movie before um and I I they matter, but maybe not in the ways that they used to because um used to have interest rates be also like a part of that valuation story, and now the insurance interest rates may be a little bit more sticky as to where they are.Um, I think valuations relative to earnings matter more in the long term.

20:33 spk_2

I'm curious, Steph, so your S&P target you said was 6500 earlier, correct? And we're near there now. So I'm curious what investment ideas you have for this back half of the year if we're not going to go too far higher according to your target.

20:50 spk_1

Yeah, I think um because I do think like another theory or view that I have is um the Mag 7 is no longer the Mach 7, you need to analyze those seven, you know, large tech companies individually as if they're on their own rather than being this conglomerate that you necessarily invest in. And as because they dominate so much, right, like the top 10 names are such a big part of the S&P.Those have very high valuations, the bar is very high for them, that I think the opportunities are below that, which means that it makes it harder for the S&P to go a lot higher, like it will be a grind, whereas the opportunities do exist on some of the, I think, less expensive areas of the market. So that might be regional banks, especially if like M&A and deregulation start to come out, and we do have a umA, uh, a steeper curve, meaning that short term rates come down a little bit, but long term rates kind of stay around where they are. Um, I think, uh, some of the cheaper tech names like in the software space, you know, they've been not as strong this year. Some continue to be a little weaker, but I think there are some diamonds in the rough there. Um, and I mentioned, you know, aerospace and defense already. Those are kind of some of the themes.But in the very near term, because I'm a little worried about, I do have a little bit of Tbi exposure in our we have some in there just for

22:10 spk_0

dry

22:14 spk_1

powder if we have some softness in September.

22:18 spk_0

All right. And guess what, we got to leave it right there. That has been a show. And just to recap a little bit, I love that phrase of the retail investors retail.Traders really not the best way to characterize them, maybe, but hey, we gotta, we gotta confront these issues head on here and I really appreciate your time and also kind of elucidating the fact that retail investors or whatever you would like to call them, are really getting a lot more sophisticated. The playbook is approaching, if not that of the institutionals as well, and we're gonna have to leave it there, so we will see you next time on stocks in Translation. Related Videos

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