Chief Market Strategist on why millennial clients are 'taking on more exposure' in markets

JJ Kinahan, TD Ameritrade's Chief Market Strategist, joins The Final Round to discuss the market's recent volatility and popular stocks from TD Ameritrade's Investor Movement Index (IMX).

Video Transcript

MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. Let's take a quick look at the markets here. We are still seeing stocks well off their highs, pretty much at session lows across the board. The NASDAQ off 1.3%, the S&P and the Dow both off about 1.2%.

For more on everything going on in the market today and what's been going on over the last couple of weeks, we're joined now by JJ Kinahan. He is the chief market strategist over at TD Ameritrade. So JJ, let's just start with what we've seen within the last hour.

I guess, when we tried to make sense of why the market had sold off in September, what had led to kind of this relative strength in October, a lot of different ideas out there, but clearly, some of that had been bullish just around getting a stimulus deal done, which now appears off the table.

JJ KINAHAN: Yeah, Myles, well, first of all, thanks for having me. Appreciate that. You know, what is interesting to me, though, is with the stimulus bill being off the table, I actually thought the reaction might be worse.

If you think about the last few rallies we've had, including yesterday, one of the big reasons given for it was, well, we're closer to a stimulus deal. So we've actually enjoyed a lot more upside on this, I think, over the last few weeks than perhaps today's news is showing, not to say we can't go down further.

In fact, you know, the S&P 500 cash trading at about 33.64, when you and I just started talking, may have some room down to about 33.52. But honestly, I really-- you know, obviously, it was a quick, violent reaction.

But I actually thought we might see a little bit more even because there's been so much sort of bet on this next stimulus deal, particularly around the airline industry itself.

MYLES UDLAND: Yeah, and I would tend to agree in the sense that everyone's going to benchmark this to, like, the TARP failure or whatever, right? That's, you know, 4% or 5%, 6% in the market.

But if we think about what has happened today, we're really seeing the biggest reaction from the big cap tech stocks, right? The FAANG names are off more than the broader market.

So to you, is this kind of one of those situations where, you know, right, correlations go to 1. People are just selling winners more aggressively, even though I think, as you note, like, the reaction isn't as large in terms of the S&P magnitude as you might expect, given the kind of news we saw.

JJ KINAHAN: Yeah, I'd love to see correlations go to 1 on the downside. I think sometimes people miss that. But I think you hit it right on the head. They've been the ones that have led us on the way up. So they're probably the first people-- the place many people, especially those who bought in the late spring, early summer, are going to turn to sell.

Now, that being said, what I'm very interested in seeing is, we've seen this buy the dip mentality how many times. Does that come true, now that the news is sort of out there people have today to deal with? I'm very interested to see, as we go a little bit to the close today, and particularly, the opening tomorrow, to see if the buy the dip mentality comes true again.

If you remember, back in early September, when we had the sell-off there, that was certainly what people did overall. And it led, you know, at least with our clients, as we saw in our September IMX, with our clients buying primarily the FAANG stocks as they sold off when we had the early September sell-off.

MYLES UDLAND: Yeah, I want to ask you about that survey. Because you mentioned some of the FAANG names, some of the most bought names include Apple. I think we could probably call Tesla a FAANG name at this point, even though it doesn't fit the acronym.

Meanwhile, Twitter, Ford, Snap, they're getting sold. What does this kind of, you know, this information say to you broadly about investors? Or does it-- you know, does it speak to any trends that perhaps were trying to get going in September that just couldn't get off the mat?

JJ KINAHAN: Well, a couple of things it speaks to. First of all, we saw our clients take more exposure to the market than they've taken actually in the last two years. It's been slowly building.

And in September, I think exactly what happened, when I was talking about the sell-off, those people who hadn't yet participated finally said, you know what? Here is my opportunity. I've missed Apple, or I've missed Microsoft, or I've missed Tesla.

What I did find interesting, however, is that we didn't see as much across the board buying perhaps as we'd seen in April. We saw people buying a lot of names they know and a lot less of those names they were sort of, if you will, taking shots on. And in that, I will say Rocket Mortgage, you know, Neal are two of the names that people did buy on sell-offs, but certainly not in the way we'd seen before.

And the conversation you were having right before I came out, I found very interesting around what Teams are doing. Because one of the things I'll tell you that our millennial clients are doing is our millennial clients are actually taking even more exposure than our-- I'll use the word traditional clients.

And at first, people may be like, oh, crazy millennials. Actually, what it shows to me is a bit of smart money management. Why do I say that? Any financial planner will tell you when you're young is when you should probably take a little bit more risk.

So those who are millennials, you know, they are also buying Apple, Microsoft, et cetera. But we saw things like Rocket Mortgage being a little bit higher in what they're buying. DocuSign being a little bit higher.

And on the sell side, you know, they were the first ones to buy the cruise lines back in April. So we saw them getting out of, you know, RCL, Royal Cruise [INAUDIBLE] Royal Caribbean cruises. And we saw them getting out of Delta. So I found that sort of interesting in terms of money movement for their generation also.

MYLES UDLAND: And just quickly, before we let you go, you mentioned Rocket, which makes me think of just the IPO market this year and also the SPAC market this year, the direct listing market. But we've seen all kinds of new issues hit the market just in the last couple of quarters. Companies are coming to market all kinds of different ways.

How are you thinking about this in the context of a market sentiment type situation? Everyone likes to say that a big IPO is always going to be the sign of the top. Blah, blah, blah. I mean, does this, to you, speak to animal spirits coming back into the market?

JJ KINAHAN: Well, the only reason-- I would say our clients have been very tempered in the IPO market so far this year. Yeah, there's some attractive ones, but it's not-- you don't have that gigantic name like you've had in the past with Facebook, Twitter, et cetera, necessarily an everyday product across the board.

You have some interesting ones, Snowflake, et cetera. But it's probably a more specialized group that's using them day to day. So I don't think you've recently seen that across the board attractive IPO. That's when you start to see people really get ramped up overall.