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The 2020 stock market legacy, according to this strategist

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Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland discuss the November’s Investment Movement Index and market outlook with TD Ameritrade Chief Market Strategist, JJ Kinahan.

Video Transcript

MYLES UDLAND: Let's start first with the overall market and bring in our first guest. JJ Kinahan is the chief market strategist over at TD Ameritrade. JJ, it's great to talk with you--

JJ KINAHAN: Morning, Myles.

MYLES UDLAND: --this morning. I'd love to begin-- we're going to get into some of the data you guys have on how your clients are positioned. But I'd love to begin with just your view on the market today, coming off that record close on Friday, and how you're thinking about 2020 with, you know, only two full trading weeks left in the year.

JJ KINAHAN: Well, I mean, I think, thinking about 2020, to sort of start with the last part of your question, you'd have to start with the fact it's absolutely amazing. Who would have thought, you know, when this first started in the first couple of weeks of March, that we would be talking about setting new records as the year ended while still being in a quarantine state and, in fact, with some states actually being in the same position they were in in March?

And so I think that 2020 will go down as a pretty spectacular year, to be honest with you, and for a number of reasons. Number one, the market itself. Number two-- and I think, really, the healthiest part of this year-- is that we saw so many new participants in the market this year.

For years, we wrang our hands, saying, how do we get young people interested in the market? How do we get people wanting to start investing? This was the year that people came to the market. They had time to get educated, and to learn how to use platforms, and actually come out and invest in some of the things that they actually use in their day-to-day lives. So I think that that's truly going to be the legacy of 2020 in terms of the markets overall.

JULIE HYMAN: That is an interesting takeaway. It's also interesting, by the way, JJ, what clients were doing in the month of November, because some of them were actually taking advantage of the rally that we've seen in stocks this year to try to take some profits and do a little bit of selling. What's interesting, though, is, a couple of things that they sold out of, a couple of the top-sold stocks on your platform, were things that haven't done well this year-- in the financials, notably.

JJ KINAHAN: Yeah. You know, JP Morgan and Bank of America leading the way, Julie, is, I believe, what you're referring to, overall, in terms of stocks that our clients sold last month. And I think-- I'm not quite sure if that's more of a comment on the fact that maybe there is not the belief that interest rates are going to go higher. It is interesting to me that, earlier in the year, our clients were buyers of financials. Now they're sort of sellers of financials as we head to the end of the year.

So I think there's a couple of things going on there. Number one, as I said, perhaps a vote on interest rates. But number two, I think there might be a little bit of a nervousness around a new administration, and in terms of what regulations, et cetera, come in, because let's face it, when new regulations come in, the financials are often one of the first areas hit. So I do believe that that may have part of it.

And you know, backing up, Myles asked a question about, you know, what I think about the next two weeks of the year. The one thing that I think you may see is a little bit more selling, in fact, only because I think people want to realize the tax rate this year and sort of lock that in as compared to rolling it out to the future and into next year. So I think a new administration may have an influence in terms of why people are selling financially.

BRIAN SOZZI: JJ, do you think what appears to be a stimulus plan from the government-- and perhaps it may come this week-- that'll be viewed as a sell-the-moment or sell-the-news-type event for the broader market where the selling you were just talking about-- perhaps that accelerates?

JJ KINAHAN: Yeah. You know, Brian, that's really a great point. But the one thing I will say is that this could be the double whammy in terms of good news, because also, we have the European Central Bank, which is meeting and expected to come out with a stimulus plan on Thursday. So I do think that if they are able to get that done at the same time the US gets that done, you may see a quick sort of up move. And then the selling hits, so to speak.

On the other hand, Brian, I think you bring up a good point, because if one of the two can't get it done, I think that would be viewed very negatively overall. Let's face it, though. The major story that still continues overall is COVID and, you know, will we get some approvals this week in terms of rolling out here in the States as we head into December? What I'm wondering about, though-- and I think you're seeing some questioning about that-- what are going to be the logistics?

You know, a couple of weeks ago-- who of us isn't excited about the fact that we are going to have a vaccine? It's great news. But there is a big logistical concern. And I think people are starting to ask that a little bit more. That may also start to come up more, about not only who gets it first-- I think the whole world's in agreement it should be, you know, first responders, nurses, doctors-- God bless them. But after that, who starts to get it, and how does it roll out for the rest of the population?

MYLES UDLAND: You know, JJ, I want to come back to some individual names in the market before we get you out of here. And one that everyone talks about all the time is Tesla, right? That company is entering the S&P 500 at the end of next week.

Obviously-- what's it, the fifth, sixth biggest company in the market right now? Rarely-- I don't think ever-- has a company that size not been a part of that index. Just in terms of how the flows around being indexed could impact that stock, or sort of how much action, I guess, you guys see around a name like that, and around index inclusion, generally.

JJ KINAHAN: You know, it's usually a favorite of our clients overall, some of it because of what you said-- Tesla itself-- some of it because of a dynamic CEO overall. And I think some of the other things is, you know, Tesla had a bump as it headed into the split. Splits are usually the one thing that really gets excitement on stocks that are very popular and extremely high priced.

So it'll be interesting. Our clients are normally-- you know, particularly this year have been buyers of Tesla most months. So it'll be interesting to see, as you said-- you know, we've seen it be just above normal, I would say, as it heads into the indexing. The day that news came out-- it came out, I believe, after it closed. The next morning, we saw a lot of buying of Tesla on that news.

You know, so I would say that, for a day or two, that had an effect, but certainly not the effect, Myles, that we would see when a stock announces a split. That, and I think that Tesla, because that happened earlier in this year, maybe some of the normal excitement that you would see around them being indexed was already taken away, so to speak, because people who were interested in the stock bought it around that event rather than wait for this event.

MYLES UDLAND: You know, it's funny, JJ. That was, like, what, three months ago the stock split? That feels like a--

JJ KINAHAN: Yes.

MYLES UDLAND: --lifetime ago that we were talking about Tesla shares going up 'cause the stock was splitting. But man, what a crazy year it has been. All right. JJ Kinahan with TD Ameritrade. JJ, have a great holiday, have a great new year. Hopefully, we'll see you in New York in 2021. I think we'd all like that.

JJ KINAHAN: I sure hope so. Happy holidays, guys. Thanks for having me on as well in 2021.