Dave Mazza, Head of Product at Direxion joins the Yahoo Finance Live panel to discuss the impact of COVID on the markets and the latest market moves as Moderna announces vaccine access and distribution.
ZACK GUZMAN: Want to bring on Dave Mazza. He's Head of Product at Direxion, who joins us now. And Dave, I mean, when we look at this, it's kind of a carbon copy of what we saw when we got the Pfizer news. As Akiko was highlighting, big rallies in the cruise line stocks here, some of those beaten down, cyclical names. You're saying it's just the start of the trend of this rotation that's expected to continue. So how quickly are you expecting to see these beaten down stocks recover? Where do you see things going from here?
DAVE MAZZA: Yeah, you're absolutely right. Today is effectively the same rotation trade that we saw last Monday playing out again. And really, what this is, it's reflective of many of the stocks that were so beaten down. I think they're embodied by cruise lines, by the airlines.
They're also most inexpensive companies of the market on traditional measures of valuation, like price to earnings, or price to book. And investors had positioned so much toward momentum and growth stocks. We saw the power of that rotation.
As this continues to play out, meaning additional good news is priced into the market, we do think investors can find some opportunities in these cyclical areas. However, the path to getting there isn't going to be a straight line. Just like last week, we saw value stocks of the out-of-favor stocks do significantly well on Monday-- again a bit on Tuesday.
But they really started lagging toward the end of the week, as the reality of the current coronavirus situation in the US and Europe continues to get worse in the near-term. So it's not going to be a straight path. Investors actually probably need to be looking at opportunities on both sides of the spectrum for the next few months, if not well into 2021.
AKIKO FUJITA: Yeah David, I like how you say it's not about the normal, but the next normal, which is how investors should be looking at it. What does that mean for these growth stocks? There's been so much discussion about the rotation out of it last week. But it seems like we keep returning back to, especially these big tech names, as well as those trades that have worked, during this work from home period. Because when things start to get a little shaky, the value, or actually the growth story is the one that still takes hold, at least in the investors' minds.
DAVE MAZZA: Yeah, you're absolutely right. This has not historically been the case. But actually, the growth and momentum areas of the market, primarily tech and other tech-enabled companies, have become the defensive names, because of the way the pandemic has played out, really, you know, of course, impacting our ability to have the connectivity in person that we normally would do for a variety of activities. So companies that have helped both corporations and individuals keep that connectivity, whether it's helping with working from home, helping connect with your family, have been embraced.
But to me, I put it this way. Many people are just looking. And the most obvious thing is to go buy those most beaten down stocks. Again, cruise lines ripping higher again today-- airlines, hotel operators, and the like.
But I'm thinking about, what is the next normal? The next normal is many of the trends that have begun to emerge during this, of course, interesting year are going to stick with us. So for me, while they certainly haven't been up in price, areas that enable us to just be more efficient in our day-to-day lives, whether that's signing contracts electronically, as opposed to doing them on facts or on paper, or working out at home, or having telemedicine. They're going to stick with us.
So it's not always about just looking, well, this is what 2019 looked like. That's what 20-- when we have this great vaccine news distributed, that's what 2021, 2022 is going to be about. I don't think that's the case. Certainly, there's going to be some pent-up demand, as people want to begin traveling. But many of these tech stories are going to be sticking with us for some time.
ZACK GUZMAN: Yeah, that's what makes a 30% decline, since last month in Zoom stock. That seems pretty interesting to me, just watching that all play out, considering, you know, this back and forth we're seeing about whether or not that will stay there, in kind of being the tool that people use, as we see restrictions lifted. But to your point, over the next few months, that doesn't seem to be the direction we're moving, since New Mexico is issuing a statewide lockdown starting today for the next two weeks. I mean, I'm not sure how much that was being considered when we saw the CARES Act relief roll off back in the summer. Talk to me about how much that might hurt the overall macro look right now when you think about heading into the holiday season, how long it's been since we've seen some of that stimulus being received on the part of the American public.
DAVE MAZZA: Well, I think it goes without saying that both the monetary stimulus and the fiscal stimulus were extremely important to help Americans get through the difficult months we saw when we first went into relatively strict lockdown. I would argue, not as strict as many European countries, but much stricter than we're talking about today, even setting aside the political viewpoints there. What's interesting in this setup here is we do likely need to see some fiscal stimulus come in the short-term here to help markets continue propelling forward. Much of this year has been driven by improved valuation multiple, as opposed to earnings. And without some movement there in the short-term, it is difficult to see markets continue moving much higher from here, even though they've moved significantly higher with this positive vaccine news.
ZACK GUZMAN: Yeah, significantly higher indeed, as we're almost there-- 30,000 the Dow. We'll continue to watch it. But for now, we'll leave that there. Dave Mazza, Head of Product at Direxion, appreciate you joining us to chat.
DAVE MAZZA: Thank you.