British pound hits record low against the U.S. dollar

Yahoo Finance Live anchors discuss the British pound hitting its lowest level against the U.S. dollar since 1984.

Video transcript

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BRAD SMITH: It is Monday, September 26th here in New York City. This is Yahoo Finance's Live. I'm Brad Smith alongside Brian Sozzi who is back in action. Julie Hyman has the day off today. We've been keeping a close eye on some of the Dow futures especially for those individual components right now. You're seeing the biggest moves lower particularly. And more broadly, you are seeing a lot of red on the screen. That's last week's move and a little bit of a preview right underneath of this week's moves that were really shaping up to enter into this week's trading session.

We're taking a look at the futures. They're down by about 4/10-- well, 3/10 of a now. Additionally, checking in on the NASDAQ 100 futures as we've been keeping a close eye on that. Let's scroll down here a little bit and get you over to the futures there for the Dow futures. We're seeing that down 3/10 of a percent. NASDAQ 100 futures flat, just barely to the downside. S&P 500 futures also down by about 3/10 of a percent right now.

BRIAN SOZZI: Yeah, you flagged Apple. Just keep an eye on that too. Apple shares down about 9% over the past month, continues to lead this market lower. But let's switch gears here because the British pound is continuing to crater against the US dollar, hitting its lowest level since 1984 as market confidence takes a toll after the UK unveiled its biggest tax cuts in 50 years. It signaled more are on the way. And Brad, this continues to-- who would have thought we would have started today talking about the British pound? I can understand maybe the dollar near 20-year highs. But still, now you have Wall Street as economists and strategists out here rethinking their estimates.

And I just got a note moments ago from Chris Harvey at Wells Fargo taking down his S&P 500 target in large part because these volatile currency moves, looking for a potential low of 3350. You see Jefferies out this morning changing their allocations in between sectors. A little more cautious on consumer discretionary because of these moves and currencies and rising rates. And this is just a big fat mess in the markets.

BRAD SMITH: Yeah, there's a lot of pessimism in the tape right now and thinking through exactly where the projections are going to continue to come down, whether that's in the face of rising rates or whether that's in the face of companies. Also seeing what you were laying out right there a moment ago in some of the currency part of the equation, FX is still a very real concern for the major tech companies and the most global companies as well. And that's going to seemingly continue to be a headwind going into whatever the slate of the next earnings are that come out from these companies once they wrap up this current quarter that we're in.

But also thinking through more broadly, the fact that this is a global recession era that we're talking about, where you're going to see kind of this economic downturn that's not just in the US that could be impending, but it's also in other parts of the world, whether it is based on even trying to just get past the COVID pandemic more in entirety, or because of the rising interest rates elsewhere as well.

And so all of that being instituted at the same time, meanwhile China and the efforts that they're putting forward there to try and stimulate the economy, all of this taking place at a time where we still don't have something that the Fed has no control over, which is a clear answer and a movement forward on the supply chain side also. And so all of that in consideration and continuing to be factored into the market's equation right now.

BRIAN SOZZI: Yeah, it's getting ugly out there, Brad. You're seeing a really-- I think a complete loss of investor confidence. And I'm not going to sit here and try to play currency trader on live television. I'm not a currency trader. But what I do know is this. The dollar is at these levels. Multinational companies like in Apple we just mentioned, like a Caterpillar, like a John Deere, those companies are going to see reduced sales and profits. That's just an old-- just a tidbit of wisdom, investing wisdom that all of you folks should be out there remembering.

But going back to what Chris Harvey said over at Wells Fargo, he's saying this. The cracking of investor confidence in the dramatic back up in interest rates has caused us to reduce his S&P 500 target. He is now looking for a discount rate of over 6-- almost a little over 6%. When he's in his models thinking about where the S&P 500 to go, a rate over 6%. That is huge. That is not only meaning that the S&P 500 could be lower. Of course, it's all the 500 components in that index that are going to be just revalued by the market because of these rise in interest rates. It's not just currency fluctuations. This rise in rates as the Fed pulls out from under the rug of markets, this extraordinary stimulus they provided is now coming home to roost in a very, very big way.

BRAD SMITH: Well, and it's important to us to remember-- for us to remember as well that the Fed lends well while Congress spends. And so, you know, that is the environment that we're trying to emerge from at this point. And so, for the Fed, it's the comfortability that they have with actually spurring or triggering a minor or even kind of longer protracted recession in order to get inflation back to their benchmark targets. That's what's really going to be in focus here after that period of easy money.

Easy money getting taken off the table going to most notably impact some of the tech stocks. That's continuing to be priced into the tape as well. And so all of this considered, I think it's the fact that the Fed has been as clear and transparent now and off of the transitory word about how apparent they need to be about any policy decision that they're making right now. How clear-- transparent I should say that they need to be about that. They're not going to mince words anymore. And we've seen that, whether that's a Jackson Hole, whether that's at the most recent Fed policy decision after the FOMC meeting concluded and Fed Chair Jay Powell. I mean, we've seen a very concise, very clear headed but also very tempered with his words that he's using because he doesn't want it to be misconstrued in one direction or another as well.

BRIAN SOZZI: Jay Powell is keeping me out of the housing market. Brad, I am upset. I am upset I did not buy a house last year. God, I-- just-- you would think I would being in this field. That guy right there. Jerome Powell is a reason I may not own a home within the next two years. So Jackie Jerome Powell and just being really completely late on everything you're supposed to be doing.

BRAD SMITH: Look at the bright side.

BRIAN SOZZI: I want to be a homeowner. I want a house!

BRAD SMITH: Look at the bright side. You added on 16 more Sonos speakers within your house that you have right now.

BRIAN SOZZI: I bought those are cash. I bought on cash.

BRAD SMITH: All right.