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We believe that the bigger story is still unchanged and that the economy will continue to recover: Portfolio Mngt. Director

Patricia Glass, Morgan Stanley Financial Advisor & Portfolio Management Director joins the Yahoo Finance panel to discuss the latest market action.

Video Transcript

AKIKO FUJITA: Let's move onto our next guest to get a better sense of what this means for the markets. Patricia Glass is Morgan Stanley's Financial Advisor and Portfolio Management Director. And Patricia, it's good to have you on today. We're looking at records across the board here. It does seem like we have the election risk sort of removed now, now that it's somewhat resolved for the presidential election.

Now, you've got this vaccine as a big catalyst for today. Is this sort of the start of a new cycle here, more upside? Or do you think investors should be taking the news we got today with a little more caution, given all those question marks that you heard Michelle just address?

PATRICIA GLASS: Sure. Thanks very much Thanks, Akiko. And thanks, Zack. It's great to be here. Given all the news today, which is vividly terrific, we still believe the bigger story is unchanged. And Morgan Stanley with elections largely behind us.

So we've got this US and broader global economy that we believe will continue to recover. And they'll continue on with their bull market. We are in the early days of the bull market. And we think it's definitely got legs, although we're going to face a lot of choppy, volatile roads in the near-term.

ZACK GUZMAN: Yeah, that was going to be my question. It seems to still be my top concern here in this rally. Obviously, it's a good reaction to the news that we're getting on the vaccine front. But obviously, as our last guest was just noting, it's going to take quite a bit of time before this gets out to even just 25 million people.

I'm not sure how confident people might be in going back to movie theaters or going back on a cruise if it takes that long. So when you talk about the moves, right now, we're seeing play on some of these cyclical stocks that had been beaten down, talk to me about maybe how the market might be getting a little bit ahead of itself, or maybe not, depending on where you stand.

PATRICIA GLASS: No, I mean, it actually moved quite a lot. If we look back a week, we're already it's 12% ahead of where the S&P was. So we've got a year end focus here on maybe, you know, 3350, which obviously we've far exceeded that.

Our mid-2021 estimate for the S&P is at 3700, 3750. So we really are advising clients to be very careful here, to be very prudent, not to have this FOMO effect and chase stocks. So we move back to the old adage of dollar cost averaging. We've had cash on the sidelines and some ultra-short investments on the sidelines during this period. And we think that it's fine to identify those individual equities or sectors, where you may want to step in.

But we do know price matters. So your entry point, if you can divide it maybe in four or five pieces over a period of several months, that's what I mean by dollar cost averaging. And in the long run, that will protect you.

AKIKO FUJITA: Patricia, what does today's news mean, in the context of some of these other moving parts we've been watching, particularly the stimulus bill? We heard our guest earlier, Lanhee Chen, saying that he believes that Republicans may be willing to move beyond that $2 trillion number now that the election is behind them. Is that still the catalyst that the market needs? Or is the stimulus question or risk, if you want to call it that, sort of removed if we continue to see positive developments on the vaccine front?

PATRICIA GLASS: Sure. It's a good question. I think sometimes the market can only handle one issue at a time. And we were working off of the pre-election news and the pre-election uncertainty for quite some time.

And then, we moved to sort of digesting what we think is going to be this balanced government and more COVID news. And it does seem that if we end up with this more divided government, divided Congress that we stand the chance at having a more muted response with regard to regulatory and legislative changes, which we've always thought was going to be better for equities.

ZACK GUZMAN: The other interesting thing, too, when we're watching today's action play out is energy is by far the biggest gainer here today. We saw crude posting its best day in about six months off those, obviously giving the energy sector a boost here. But I'd be curious to get your take on maybe some of these other beaten down sectors, financials as well-- the second biggest gainer today. That was one industry we had a lot of guests last week and the week before talking about opportunities still out there, despite the level in the overall market you were just talking about. Do you expect that to maybe continue here, as we move farther along in this recovery?

PATRICIA GLASS: I do. Thanks. We really are focused on those sectors and those stocks that are beneficiaries of a recovery. And we look to the sectors, such as financials, as you mentioned, industrials, materials, some consumer services, some health care. We also do, like, small mid-cap names and selective international players.

So we do see that there is opportunity. But again, we really want to keep this barbell approach, have cash, have some of your safer fixed income there, as you are legging into the equity side of your portfolio. And you mentioned a commodity. We've actually thought about adding commodities to the portfolio.

Particularly for us, we've been adding gold. Now, it's down today. We would like it to get down a little bit more. But as an inflation hedge and some ballasts to the ship, we would advocate putting some gold in a portfolio as well.

AKIKO FUJITA: That's some important insight there. Patricia Glass, Morgan Stanley Financial Advisor and Portfolio Manager. It's good to talk to you.

PATRICIA GLASS: Great. Thanks a lot. I appreciate it. Take care, guys.