Eric Diton The Wealth Alliance President and Managing Director joins the Yahoo Finance Live panel to discuss the latest.
- Let's bring in our first guest for the hour. We've got Eric Diton. He is president and managing director of the Wealth Alliance
Eric, it's good to have you on on this New Year's Eve. As Emily highlighted there, the news, at least within the last week here, is good on the employment fronts. But we're also coming on the back of some disappointing economic news where we saw household spending decline, household income falling as well. How are you processing all of that going into the new year-- new year?
ERIC DITON: Well, first of all, thanks for having me, [INAUDIBLE]. To understand where the markets are and going forward to 2021, you first need to understand what happened in 2020, right? And we all know what happened.
We had a pandemic. We had a massive stimulus. The Fed and the Federal Reserve both basically came out and told the markets we are going to do whatever it takes, right?
The result was a bifurcation of the markets. Who's going to win in a pandemic? Who's going to lose?
Who won? Big tech, right? Big tech was able to continue to grow their earnings in a pandemic. The Pelotons of the world, the Zooms of the world-- they could grow their earnings.
Value stocks, companies tied to the economy, the banks, energy-- they could not. It stands to reason that we are now seeing a proliferation of a vaccine. We are seeing a recovery.
It's going to be choppy. It's not going to be quick, but it's happening. And that means that the laggards, those value stocks, those dividend stocks, we should see more profound moves. That's been happening already over the last month, but I think there's a lot more to go.
- Yeah, and Eric, I mean, when we talk about some of those cyclical names, those hard hit names in the pandemic this year, I mean, each time we got updates of bad news, whether it be, you know, rising cases, new outbreaks, we did see those ones retreat quite a bit here. So considering how shaky the vaccine rollout has been so far here, would you not be a little worried that those names could get hit in Q1, Q2 while we're awaiting full herd immunity?
ERIC DITON: Listen, it's not going to be a smooth ride. It's going to be choppy. But Zac, what you have to realize here-- I was on with Bridgewater last week. We went back to the year 1600.
These are the lowest global interest rates in the history of mankind. How are the GEs and the IBMs of the world going to provide pension benefits to all these retirees for decades to come with a sub 1% 10 year Treasury? They can't assume a 7% return. They're going to need to own more equities. You ask me, I'd much rather own a Verizon or a Pfizer paying over 4% dividend with growth potential of that income than a 10 year Treasury of 0.95.
- Eric, you talked about the growth that we've seen in tech. In many ways, that's kind of become the safe haven play here at a time when we've seen so much volatility in the year. There's the obvious names like a Zoom that no question benefited from the pandemic. But as you look ahead to the new year, does that thesis still hold in terms of tech and its outperformance because of the growth story? Or you think valuations are setting up for a bit of a pullback right now?
ERIC DITON: Well, first of all, I think the stock market in general is due for a pullback. It's gotten very frothy. It's gotten choppy.
Margin debt levels are at highs. You're still going to want to own some big tech, but you do not want to be in an S&P 500 type of ownership, right? You don't want 25% in five names.
That just doesn't make sense. And they are pricey. But I laugh when everyone says the stock market is expensive.
The stock market is expensive. No. It's a market of stocks.
There are stocks within that index that are very expensive, but there's a whole bunch of value names. I mean, you look at the banks. They are cheap. Energy-- cheap. So the stock market has a lot of value in different names.
- Yeah, and to your point, I mean, when we look back on what happened this year, you know, the wave of stimulus that we got and now the latest bill as well seems to reason that if Democrats do win both of these Senate races in Georgia, that would set up for a lot more accommodative policy there as well. Of course, maybe some more moderate Democrats have been kind of cheering the fact that if Republicans maintain control in the Senate, he won't need to go along with more progressive policies that he might not be in favor of. So how do you see that shaking out in what we should expect out of Washington to maybe be different than what we saw this year?
ERIC DITON: Right, so the first thing you need to realize is Joe Biden is-- we're OK with Joe Biden. The market has been OK. When Biden pulled ahead, the markets continued to rally.
Biden is not a Bernie Sanders or an Elizabeth Warren. He's a moderate Democrat. Now the markets love a split in Congress.
So we already know the Democrats lost seats in the House. And there's, I think, a very good chance that the Republicans are going to eke out a majority in the Senate. So I think that a lot of those big tax increases that Joe Biden would like to see, he probably won't see. And you know, markets like that too.
- And Eric, let's talk about some of the investment themes you're looking at-- pot stocks as well as green energy. Green energy, one that we've seen a lot of our guests be very bullish on, especially on the expectation of the focus on climate change coming from the Biden administration, but what specific names are you looking at that you think have significant upside on the back of what is expected to be new regulation around the environment?
ERIC DITON: Well, so we're-- first of all, I just want to say within green energy, this was going to happen whether Joe Biden won or lost. You have to look at what's going on in the world. There is a realization that climate change is an issue, and every country is talking about it. And the United States would have addressed it too.
It's going to happen faster because Joe Biden is a big proponent of green energy. We're not-- within our practice, we use a lot of ETFs. We will bring in money managers.
We do not pick individual stocks. I like the ICLN as the [INAUDIBLE] to represent green energy. I think that it's a low expense, and I like the names in there. Green energy has had a big move.
So again, we could very well see a pullback. You want to add into that pullback. This is not a one year, a three year, a five year theme. This is a 20 year theme.
- And that's a long term hold. Obviously, a lot of these changes take time, no doubt. Tesla didn't become what it was overnight either. Eric Diton, president and managing director of the Wealth Alliance, appreciate you coming on here to chat today. Be well.