What: Discussion of recent market rally.
Where: CNBC's Market Mavens
When: September 2, 2008
Who: CNBC's Michelle Caruso, Darin Richards (AKT Wealth Advisors), Phil Orlando (Federated Investors), CNBC's Bill Griffeth

Michelle Caruso: Joining us now is Phil Orlando, he’s Chief Equity Market Strategist at Federated Investors and Darin Richards, Chief Investment Officer at AKT Wealth Advisors. Darin, let me start with you. What do you make of this rally today. Do you believe it? Does it have legs?

Darin Richards: Oh I think so. Friday was an awful day and I was hoping that coming back from a long weekend we could see the market rally a little bit. Surviving Gustav, while not nearly the damage that they were expecting, I think its been a huge boost today, pushing commodities prices lower.

Bill Griffeth: What do you think Phil?

Phil Orlando: I think that this morning’s rally was clearly a “Sigh of Relief” category. The expectations for Gustav were terrible. Gustav turned out to be not nearly as bad, with stocks up about a percent and a half this morning--

Bill Griffeth: But you’re being very cautious with this market in the meantime though.

Phil Orlando: Absolutely. I would echo the comment that Dennis made a moment ago. You’ve got Hannah, Ike, and Josephine warming up in the bullpen. This appears to be a very active hurricane season, so you could have some disruptions in the energy market over the course of the month of September. And I think that on top of a weak jobs’ report this week, poor third quarter earnings, I think it suggests we need to be a little bit cautious here in the near term.

Michelle Caruso: And Darin, I say even though that lean toward believing this rally has legs, you are overweight cash right now. What’s it going to take for you to actually deploy some of that cash.

Darin Richards: We’re still holding cash, like you said. And we’re really looking for credit spreads to tighten a little bit. Maybe mortgage rates to come down--I think the market is close to bottoming, if it hasn’t bottomed already. And we just really need an entry point. So we’re looking for maybe one more indicator to push us over the edge--that the housing market has either bottomed, or a credit has stabilized a little bit. Because I think we’re getting much closer than we have been all year. Before, we had priced in inflation and slow growth, and I think inflation’s being taken off the table a little bit and growth was pretty solid this second quarter so I think the market overpriced in the negatives and I think its poised for a recovery here shortly.

Bill Griffeth: And Phil, I see you pretty much have a defensive play when it comes to the sectors that you like here, but energy--I don’t want to oversimplify your position on that, but when you see a pullback like we’re seeing today in the energy sector, is that a buying opportunity for you?

Phil Orlando: Well energy is screening very well for us in our models and the lower price of crude oil is certainly helping some of the energy stocks that we own. Now you should know or remember that we were one of the first ones back in June to talk about the fact that we felt that crude up around 140-150 was going to be coming back to 100 by the end of September, maybe back to 80 by the end of the year. But those lower prices also provide some benefit to the companies that will be able to make some additional margin expansion with those lower feedstock costs.

Michelle Caruso: And Darin your favorite sector is healthcare, why? Sounds very defensive.

Darin Richards: Well its defensive. When the market goes down, it usually goes down about half as much. But it recovers when the market goes up about 85% of the upside so its got a nice setup for this kind of market, its pretty choppy right now. But earnings expectations look pretty solid for third quarter, they’re getting more and more of their revenue overseas. I think its just one of the better sectors to be in at this point in time right now Michelle Caruso.

Michelle Caruso: Alrighty guys, good to see you. Darin and Phil thanks.

Phil Orlando: Thank you.

Darin Richards: Thanks

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