Lead-Lag Live

Greed to Fear: Jay Hatfield on Post-Earnings Volatility, Tech Rotation, and the Case for Income

• Michael A. Gayed, CFA

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In this episode of Lead-Lag Live, I sit down with Jay Hatfield, CEO of Infrastructure Capital Advisors, to break down what Nvidia’s blockbuster quarter means for mega-cap tech, why markets fade after earnings season, and the implications for dividend stocks, preferreds, and small caps as rate expectations shift.

From valuation pressure in momentum names to tightening money supply and the path of Fed policy, Hatfield explains where he sees opportunity as volatility resets — and why income strategies may be entering their strongest stretch of the cycle.

In this episode:
– Why strong tech earnings often lead to short-term market weakness
– How Bitcoin and leveraged crypto products spill over into tech volatility
– Why dividend-heavy large caps offer resilience in rotation periods
– How preferreds and corporate bonds can outperform into 2026
– The setup for small-cap value once Fed cuts begin

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SPEAKER_00:

You buy tech stocks when you know Fed's tightening or there's concerns about growth because there's secular growth. And then of course you buy income stocks when Fed funds is being cut, uh removed from CDAs usually into preferred and bonds. So we do think that'll continue, particularly as it just volatility drops. Even if the stock market doesn't rip back to 7,000, if we just stabilize somewhere around 6,500, then all the fixed income and probably small caps will start rallying it's a$10,000.

SPEAKER_01:

The company says it's in a virtuous cycle of AI, yet at the same time, we're seeing mounting questions around cap saturation, earnings sustainability, and whether mega cap tech remains the only game in town. That makes this a key moment to rethink what happens if capital begins rotating. My guest today is Jay Hatfield, CEO of Infrastructure Capital Advisors, a specialist in income value and active small cap strategies in an environment where yield matters as much as growth. Thanks so much for being here today, Jay.

SPEAKER_00:

Thanks, Melanie. Great to be on.

SPEAKER_01:

So first off, given the strong NVIDIA print, what do you see as the broader implications for the megacap tech complex and the the rest of the market?

SPEAKER_00:

Well, the most important thing to keep in mind, and this works four times a year, is that greed occurs during earning season and fear after. So we're after the big tech earnings. And now you might say, well, why did we fade? Well, now we're over all the big tech earnings, not just a five that reported, or I guess six that reported uh two weeks ago. You have Broadcom coming up. But um, so all the cat positive catalysts are behind us. And you know, we have a 7,000 target on the SP, but targets are not just for buying, but also selling. So other people had similar targets. They faded the market at 6,940. And then the all the short sellers come out with their theses about why the world's coming to an end. There's not gonna be any return on ANI investment. OpenAI is gonna go bankrupt, cockroaches and credit. Uh, we don't believe any of that. In fact, the NVIDIA print was super strong. We raised our target on the company to 260, it raised our earnings estimates. So no zero evidence of a collapse there. But here's the big proviso, and it's important to get all this information out, it's a little bit long, but there are so the Mag 8 are roughly fairly valued in our models, which is consistent with that 7,000 target. But and Tesla, by the way, has tremendous downside, but we won't get into that. But um, but there's areas of the market, particularly Bitcoin. We hate uh securities that don't have cash flow, earnings and cash flow, they have neither. And we hate even more levered bets on that, like Treasury, um, crypto treasury companies. So, you know, Bitcoin is kind of crashing on a levered basis, and that's taking some air out of the speculation in the tech market. And given that we're past earnings, you know, we're into this technical market, and appropriately the market rallied, but then we faded at the 50 days, so now we're crashed below that. We think the hundred days support, which is roughly 6,500. So we think we're fine, but there's gonna be volatility. Um, I would watch Bitcoin, not because I like it, but it definitely having a crash every day and having microstrategy, I think, is down uh maybe beyond 10%. Let's just I'll look that up as we're talking. But uh until that stops crashing, you're probably gonna still see at least a lot of nervousness, if not downside, in the overall tech market, because it does kind of suck capital out of uh tech investors. So micro strategy is down 10 bucks and six percent, kind of in line with Bitcoin, they're levered Bitcoin. So that just gonna put a little bit of uh risk into the marketplace. So um, you know, we're gonna have to just bang around these moving averages and settle down a little bit.

SPEAKER_01:

Yeah, what about the large cap dividend stocks if rotation begins away from the momentum names? Why might dividend-rich uh large caps offer a sweet spot? And how are you positioning for that uh scenario?

SPEAKER_00:

So we have a big, big focus. Well, obviously, preferreds are really that's all they are. Um, so they're acting the way they should, which is defensive. We have a more defensive portfolio than the index. So we've been significantly outperformed as uh, for instance, the index has a ton of microstrategy preferreds. We have zero. And so our funds, uh when big sell-offs like today, they're gonna go down a little. You still get your 9% yield. ICAP, we have a lot of defensive dividend stocks there. We write covered calls that works well when a market's volatile and down. So um do you think it's better to be in dividends? It's good to be diversified. And then you have some tech stocks, some large cap dividend funds like ICAP or small cap like SCAP, have some preferred, have some bonds. And then you get less worked up about, you know, uh the NASDAQ moving like 4% of a day like it did today.

SPEAKER_01:

Yeah, and I I want to talk, take a minute now and talk about rate, something we talk about uh every time uh that we do these podcasts. Uh let's dig into that a little bit. And I mean, with the market looking toward a possible cut in December, something, and and more in 2026, you've made a case for small cap uh value as well via SCAP and income via preferreds, as you as you just said, and corporate bond funds, uh, the ETF B N DS. Can you walk us through why you favor those plays heading into 2026?

SPEAKER_00:

So that's a history that you sell small caps during a Fed tightening cycle and you buy them during a loosening cycle. The um only issue is, of course, we have an incompetent Fed following a flawed frame policy framework. So we're relatively certain, unless there's another employment report that's super negative, today's was sort of positive, mixed, but positive, then they're definitely not gonna cut because they have a lot of Keynesians whose models are broken, but they haven't fixed them yet, or they haven't changed them yet. So almost certainly if you listen to them, like the Kansas City or Cleveland Fed president seems to be totally out the lunch. So they're not gonna cut. But the good news is the new Fed chair is definitely gonna cut. So probably small caps are a little bit more of a 20 uh 26 asset class. I mean, they're getting their bounces, they're bouncing earlier today. But as long as the cuts are expected, we think they will outperform. And not just the norm. You buy tech stocks when you know Fed's tightening or there's concerns about growth because there's secular growth. And then, of course, you buy income stocks when Fed funds is being cut, uh removed from CDs usually into preferreds and bonds. So we do think that'll continue. Um particularly as it just volatility drops, even if the stock market doesn't rip back to 7,000, if we just stabilize somewhere around 6,500, then all the fixed income and probably small caps will start rallying in.

SPEAKER_01:

What are you projecting uh for next year in terms of inflation and money supply growth and even tariffs? And how are you incorporating those inputs into your portfolio out?

SPEAKER_00:

So we have a non-consensus call on that um you know, budget deficit's gonna get way better next year. But we don't just like make it up. We have a uh model and forecast. And uh it's important to know CBO doesn't include tariffs, or at least hasn't so far. Because they just do the change in the law, not and the only tariffs aren't in the law. So budget depth's gonna decline to 4.5 percent. That'll be a tailwind for bonds, not critical, but a tailwind. Um and um we do need Fed cuts down to 275 to get to 375. That's our target on the tenure. We do think we'll get there with a new Fed share. So um no real change, even though in our forecast, even though this month is or is really December next month, uh very low probability of a cut.

SPEAKER_01:

And I just uh lastly, I I want to pivot a little bit. Uh energy demand is changing really fast with AI and data centers, uh, electrification infrastructure build out, all pointing to higher natural gas and mid-stream demand. Why do you believe MLPs such as AMZA are positioned uh to benefit from this shift?

SPEAKER_00:

So pipelines are um, even if they nobody really gets too excited about them, it's great because they have tailwinds. Uh, not the natural gas prices are gonna skyrocket, but the throughput is at the margin, you have to use natural gas to produce electricity. Um, so all these data centers are gonna require more natural gas. That's more throughput. Price will probably remain contained because it's a waste product to join for oil. So we're bullish on that. We're tilted in AMCA towards natural gas companies. It's been working well. Um, hasn't become overvalued like a lot of AI plays, so there's that upside. But even if that doesn't happen, you get solid dividend growth of about uh 5% a year, uh 7% yield. So you get low single-digit returns, tax deferred. In the case of AMZA, you'd get a 1099 versus a K1. So um we'd like to sector, it's more defensive, it's acting more like fixed income. So I wouldn't do it to play the AI boom, but just be aware there's a tailwind. Great way to get tax-deferred income.

SPEAKER_01:

And uh Jay, uh just lastly, for investors, uh advisors, et cetera, who want to find more about your research, delve into uh uh what you're thinking and what you're following. Where's the best place for them to go?

SPEAKER_00:

They can go to infracapfunds.com. And there you can email us or even call us or text us. Love talking to our clients, 100% available to anybody interested. So definitely recommend that. Great proprietary economic research there too.

SPEAKER_01:

Fantastic. Well, Jay, it's always uh so great having you on, and I always appreciate your insight into the markets. Uh also thanks to everyone for watching. Be sure to like, share, and subscribe for more episodes of Lead Like Live.

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Michael A. Gayed, CFA

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