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‘The consumer is very strong’ heading into the holidays, analyst explains

In this article:
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Wealth Consulting Group CEO Jimmy Lee joins Yahoo Finance Live to give an insight on what to expect during the holiday shopping season.

Video Transcript

- And we will keep it on market news right now and bring in our next guest, Jimmy Lee, the Wealth Consulting Group CEO. Sir, thank you so much for your time. I want to start off, obviously, with these retail numbers. It's been a busy week for them. And would you agree most of them have been hitting it out of the park? They've been delivering good numbers.

JIMMY LEE: I do agree with that. I think the consumer is very strong. Obviously, we've had trillions of of stimulus in a lot of different ways. And a lot of that money has hit the pocketbooks and bank accounts of consumers. I believe that we're going to have a strong holiday season, as long as we can stock the shelves and the orders through online can can get delivered. And so supply is a concern for that.

But I think the consumer is very strong. Retail is a sector to look at in terms of how strong the consumer is. And, of course, in the United States economy, representing approximately 2/3 of our economy, it's very important. And so I'm bullish when it comes to consumer spending going into the holidays.

ALEXIS CHRISTOFOROUS: Let's talk about what sectors you are bullish on, because there's a lot of FOMO still out there. And some valuations in certain sectors are looking pretty frothy. So is it too late to get into areas like energy and like financials, especially in an environment where we know interest rates will be rising sooner rather than later?

JIMMY LEE: So those are the two sectors that we've actually added to most recently and rebalanced in our model. So I don't think it's too late. And while interest rates have not really gone up too, too much yet, I think that that is an environment that investors need to be looking at in terms of what sectors are going to do better or worse. And so energy and financials, I think we have more room to run there. I think also I like industrials, materials, consumer discretionary sectors. And I'd be very cautious and I've been cautious all year long and trying to warn investors to not pile in to the extremely high valuation names that are out there. A lot of those names are in technology.

And as interest rates do go up, it will put some pressure in the technology sector. Although I still like technology, but being very selective there. So I think active management is very important in technology. So I see a rotation continuing to happen into more of the value-type sectors. And I think it's warranted, and hopefully as the rest of the globe opens up and there's more robust growth overseas, those markets will will help the whole entire world economy.

- Hey Jimmy, I want to go back to Macy's for a second. So shares are up 330% over the last 12 months. And like Kohl's, Macy's has activist investors, right? And they are saying spin off this e-commerce business because the value is there. That's where you will drive further growth. What do you think that Macy's will do? They say they're considering it. They have AlixPartners looking into a possible spinoff. But does it make sense for them to do it?

JIMMY LEE: Macy's is not one of our holdings. And so I can't give you an analyst view on that. But, sure, I mean, I can see why active investors would want to spin off the highest growth sectors and so they can invest into that and try to create some value there. But, you know, I'm not sure what's going to happen. Obviously, it's a brand that is loved here in the United States and name that we all follow. I think it's a good sign though that, you know, while internet is the place to be, that they have more room to grow there. And so I'm not sure exactly how they're going to make decisions regarding the spinoff or not. But either way, I think that the consumer is buying, you know, more and from that brand is a good sign for other brands as well that have good reach here in the United States and globally.

And so all companies these days that are in retail sector need to have robust internet platforms. And I think all companies need to concentrate on that, if they're not there already. And if they're not there, they're probably not producing the kind of earnings that the other retailers are.

ALEXIS CHRISTOFOROUS: Jimmy, what do you like outside of US equities right now? I mean, I know the bond market hasn't been doing much of anything. But as interest rates move higher, perhaps that's an opportunity for investors. Are you looking at alternatives like like crypto? What are you doing outside of stocks right now?

JIMMY LEE: Well, we don't like bonds. We believe that while interest rates probably won't skyrocket, I think it's going to be tough to make money in the bond market. We don't use crypto in our model portfolios today. But I do believe that it has a place in people's accounts. And so I think that investors need to look at that one investor at a time and be very selective and understand how much volatility that they may face in that asset class. And, of course, there's thousands of coins, most of which I believe have no real business case for them. I also think, though, that international, even though US will still be stronger, international is starting to pick up.

And I would look at valuations, for example, in Europe, being a place to potentially pick up more value here than in the US going forward. I'm still cautious of the Far East due to China and all the different volatility that we're getting in a lot of the sectors and names over there due to regulation and the Chinese government. I think it's still a kind of a bigger unknown how that's all going to be resolved. But so Europe and don't like the bond market. I do like other sectors that are in the alternative space, private debt lending, securitized lending I think will do, is an asset class I think that investors can can look at in terms of getting yield and not be hurt by rising interest rates.

- OK, sounds like you are a conservative bull there. Sir, thank you so much. Jimmy Lee, the Wealth Consulting Group CEO.