In this video interview, I turn our focus to money, specifically how to make smart investment decisions in today’s market with insights from my guest, Jay Hatfield.
Jay Hatfield is CEO of Infrastructure Capital Advisors, ICA, and is the portfolio manager of a series of exchange-traded funds and hedge funds. He leads the investment team and directs the company’s business development.
While this interview ranges across capital markets, its relevance to aircraft appraisers, lessors, and financiers is direct and practical. Aircraft values and lease rates do not exist in a vacuum; they are ultimately shaped by the same macro forces that drive equity valuations and capital allocation decisions.
The article below is a condensed transcript of our conversation. My questions are in bold.
Given my large aerospace audience, I’d like to begin with a question about Boeing.
Boeing has suffered reputational woes. Regulatory oversight has cracked down on the company, due to fatal accidents. Boeing has been accused of cutting corners to boost profits, and it suffered a loss of clients and money.
But now, under the new CEO, Kelly Ortberg, the company seems to be turning itself around. The stock has been in a slump, but it’s rebounding. Is Boeing undervalued according to its future growth prospects, or is it still too risky and not quite the stable blue chip it used to be?
Well, certainly Boeing does have an element of risk because there can always be a new safety issue. But Kelly Ortberg is 100% focused on reinstalling the engineering culture and the safety culture, and making money is a secondary priority.
And you’re seeing increased confidence by Boeing’s customers and new orders for the company’s airplanes. But Boeing isn’t really constrained by orders. Boeing is part of a duopoly [with Airbus], so most countries want to have Boeing planes. The Trump administration in their trade deals is demanding that other countries buy Boeing planes. So there’s good demand for Boeing’s products. It’s really a supply issue, but Boeing’s manufacturing is ramping up.
Yes, it is a risky stock because it’s not earning a lot of money now. We have to value the stock on 2028 earnings, two years out, which we normally don’t do. But this is a duopoly. So it’s not like it’s some risky chip company and you’re valuing it on earnings. You’re really valuing it on an earnings level that’s in line with what they earned a long time ago when they were producing normally. Our price target for Boeing stock is $280, which is a multiple of 35 times 2028 earnings.
The stock has run up a lot and it’s getting closer to our target. You’re supposed to sell things when you get to the target. Regardless, Boeing is a great recovery story. It’s not going away. It’s a stock you can give to your children, and they can hold for the rest of their lives.
The broader indexes, they all hover at record highs. A lot of analysts are warning of overvaluation. We’ve been hearing that alarm for a while now due to AI mania. And by just about every valuation yardstick, the stock market is overpriced. Do you expect an imminent correction? Or something approaching a crash? The market is pretty frothy right now and it’s being held aloft by a handful of mega-cap tech darlings, the Magnificent Seven especially. Or do you think these warnings about overvaluation are overwrought?
We do believe that the large tech companies are fully valued, not all of them, but as a group, they’re fully valued. However, the S&P 500 is trading at a forward price-to-earnings ratio of about 23, which might seem like a huge number. But historically, you have to correct for the fact that we had the biggest corporate tax decrease in the history of the world in 2017.
When you tax something a lot less, it’s worth a lot more. We apply discounted cash flow. In theory, for all investments, you should perform discounted cash flow. If we perform a discounted cash flow on the overall market, and assume interest rates are a little bit lower, we do get to 23 times.
I think what most investors miss is that stocks normally go up. If you own stocks, it’s like going to the casino, but you own the casino and everybody else is coming to you. So you’re going to get your 10% a year if you hold stocks in the long run. But we do believe that growth is continuing with tech stocks. There’s a ton of undervalued valued income stocks that we hold in our ETF iCap.
There’ll be an ongoing rotation. Tech will do okay but underperform the market. S&P will underperform the Dow, small caps, and the equated index. So you don’t have to have all of your ideas in tech. There’s a ton of other ideas. And those other ideas usually pay dividends. It reduces the risk of your portfolio. If you need to take money out of your portfolio, you get the dividends. You can spend them.
As valuation risk rises, which defensive sectors are beginning to stand out and what fundamentals make them attractive in the current environment?
We’ve added aerospace/defense stock Lockheed Martin. It’s clear the defense budget is gonna rise pretty substantially, at least this year while the Republicans are in charge.
Lockheed Martin is a very reasonably priced stock, and it’s not betting everything on missiles or space. It’s really in every defense sector, including helicopters [and combat jets]. It’s a reasonably priced way to play rising defense spending, with a good dividend.
How significant a threat are President Trump’s on-again, off-again tariffs to the economy and the stock market?
The important distinction to draw is between normal tariffs that act really like a sales tax on imports, which fall in a range of 10% to 20%. We actually think those are, at the margin, very positive.
We’re forecasting the U.S. budget deficit will drop by $400 billion and fall to 4.5%, which, importantly, is a sustainable level. The growth of the nominal economy is about 5%. If you grow debt at 4.5%, you gradually improve the debt-to-GDP ratio. So don’t ignore the revenue part.
I draw a distinction between trade war with China or Europe and just normal tariffs. Looks like we’re going to have normal tariffs.
That’s a contrarian view. Those are subtle points that you don’t ordinarily hear in the mainstream financial media. What sort of economic backdrop do you anticipate as 2026 unfolds?
The U.S. economy is slow. In fact, it’s in recession in two areas: housing and construction.
But there’s this thing called AI and for the first time in any tech boom it’s actually impacting the real economy, or the old economy, way more than it ever has.
Most of your viewers probably remember the Internet boom. During the dot.com boom, there was no corresponding CapEx boom. You invested in software, bought some laptops, and hired some software engineers. But you didn’t go build millions of data centers for it. You didn’t need that. In those two offsets, we have very slow investment. In fact, last quarter, zero growth in investment.
We’re forecasting that U.S. GDP growth accelerates from 2.7% in 2025 to 3.2% in 2026, as U.S. growth returns to normal levels due to the dramatic reduction in mortgage rates that had caused a recession in the residential and construction industries. And we’re bullish on inflation. It’s going to roll down.
A lot of analysts are too negative; it sounds more intelligent to be negative. Everybody wants to call the next big short or the next Enron and be a hero. We just try to be normal and reasonable.
There’s a 1% chance an asteroid destroys North America. We’re not going to focus on that. We want to deliver what’s most likely to happen.
Well, normal, rational and reasonable don’t drive ratings on cable TV. You’ve painted the Goldilocks scenario, which Wall Street likes best. Not too hot, not too cold. Liquidity is the lifeblood of the financial markets, which leads me to this question: What do you think the Fed will do in the coming months?
I think the Fed will initially pause. The government data is very unreliable, but we think the Fed might cut in March if we’re correct and inflation cools down.
Thanks for your time.
Editor’s Note: This article is a transcript edited for concision. For the unabridged report, watch the video, which contains charts and more details.
Disclosure: Jay Hatfield or Infrastructure Capital Advisors or its affiliates has beneficial long position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities and beneficial long positions may change if a company’s position changes or due to portfolio considerations.
The opinions Aircraft Value News expresses are solely its own and are not the opinions of Infrastructure Capital Advisors, LLC nor its affiliates. The opinions expressed are for information purposes only and do not constitute an offer to buy or sell securities, options, or cryptocurrency.
Please conduct your own research and consult your own tax attorney or financial advisor before making an investment decision. Past performance is not necessarily indicative of future results. ICA has not been involved in the preparation of the content supplied at these web sites, and does not endorse these web sites, their sponsors, or any of the policies, products, activities, or services offered on the sites.
