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Dow rises as earnings roll in, stimulus talks continue

Payne Capital Management Senior Wealth Advisor Courtney Dominguez joins Yahoo Finance’s Zack Guzman to discuss her expectations for earnings as coronavirus cases in the U.S. surpass 4.7 million.

Video Transcript

ZACK GUZMAN: You look at the market overall, earnings, in general, holding up versus admittedly lowered expectations. So now, what are the best opportunities out there? Here to talk that with us is our next guest, Courtney Dominguez, Payne Capital Management senior wealth advisor. And she joins us now. And Courtney, I mean, when we look at it, I'm not sure if you're blown away as much as I am by all of this. But when we look at earnings, they've been super, super strong here. So what's your take on how we're trading here through the second quarter?

COURTNEY DOMINGUEZ: Yeah, I mean, strong is an understatement, I would say. We're seeing earnings right now. We have 85% of companies have beat their expectations. And they're not just beating it by a little bit. I mean, we're seeing over 20% above expectations that companies are beating their averages by.

Just to put that in perspective, if you looked at the first quarter, averages were above expectations but only by about 3%. So analysts really came in a lot more negative with everything going on right now. But everything is picking up so much quicker than they had anticipated. And I really see that as a positive sign as we look forward here.

ZACK GUZMAN: Yeah, I mean, that's obviously important to highlight when you have companies beating more than 22% here when they're reporting, obviously, the highest we've seen since going back to 1994. But, I mean, when we think about moving forward, obviously, guidance has been light. If anyone is giving guidance, analysts right there don't really have a lot to go off of.

When we think about the recoveries here in Q3, Q4, what could happen ahead, all that seems very shaky considering we don't know how this pandemic is going to play out, especially as schools reopen. So what advice are you kind of giving clients here in terms of bracing for that uncertainty ahead? Is it still the best case to be hiding out in tech names? Or where do you put your money to work?

COURTNEY DOMINGUEZ: Yeah, I mean, you've got to look at the broad market. So the big, sexy, exciting names, like Apple and Google and Microsoft, are doing great. But they are getting so much more expensive than the [INAUDIBLE] markets and arguably a lot more expensive than their earnings just [INAUDIBLE] right now. [INAUDIBLE] looking [INAUDIBLE] the S&P 500 is doing really well for the year.

If you were just to equal weight all of the companies in the S&P 500, it's actually still down about 8% right now for the year, which means a lot of companies are actually still off their highs and still have a lot of room to grow. So I'm not getting out of these tech names right now. But there's definitely a lot of places that still have good value that you can be averaging your money in here. And I still think there's a lot of upside potential as we look forward.

ZACK GUZMAN: Yeah, let's talk about more of that, because we kind of saw that happen before big tech started to report their earnings maybe before we saw that big antitrust hearing kick off. We did see kind of the start of a mini rotation out of tech into cyclicals. So when you look at the opportunities in some of those names, which ones are you seeing right now that might be ones we're taking a look at?

COURTNEY DOMINGUEZ: Yeah, I really like-- so I had two broad markets rather than just individual names here. And I'm really looking at your value sector. So whether it's actually your small companies in the US or well more off their highs than all those big brand names. I'm looking at your small and your mid-sized companies that are your dividend payers.

Like, Vanguard or Charles Schwab is really good options there that you can own an entire index and with all those value companies. That's really where we're looking to add right now. And that's what we're focusing on for our clients, because the great thing is they're paying great dividends. And you're getting nothing sitting in cash anymore.

I mean, all of our checking and savings accounts basically just went down to zero. So there's not a lot of good alternative. But you're getting good dividends on these things. They're still well off their highs. I much prefer the index, though, over any individual companies right now.

ZACK GUZMAN: Yeah, and when we talk about two, I guess just backing up and kind of charting where all this happened. Of course, we've come a long way since March if you're thinking about the S&P being positive. I mean, I don't know whether or not you put more weight on the fact the Fed's been out there trying to do everything they can to keep the market afloat or if it's more the $3 trillion we saw-- it's $2 trillion come through in the CARES Act.

And what we might see come through, I mean, how important is this next week or two depending on what Republicans and Democrats can get forward, as we hear from Jerome Powell kind of backing off and saying, look, the fiscal side needs to do its part here as well.

COURTNEY DOMINGUEZ: Yeah, and they have come in and done their part. But what's also really interesting to see is people have saved a lot more amount of money than they've been spending. So a lot-- there's really increase in savings right now which can boost consumption as we go forward. The Fed has continued to step in. I really wouldn't be surprised if we continue to see that.

But people are saving more right now. And on top of that, we have record levels of money sitting in cash, just so many people got nervous in March and sold out of their investments. There's over $5 trillion just sitting in money markets and checking and savings accounts. What's happening is people are realizing there's not a lot of good alternative. You can't just sit in cash forever.

There's this fear of missing out as they're seeing how well the economy and the stock markets have continued to bounce back here. And sell any future debts, we're seeing a lot of buying potential coming in. And that might mean those debts are a lot less severe kind of regardless what the Fed does or not.

ZACK GUZMAN: I pushed back 1.2 here that we've raised with a few other guests here that are also raising kind of the same points. When we think about the underlying economy and consumer spending right now, a lot of debate going on as we get new studies out there looking at whether or not it was more beneficial to shut down economies completely or whether or not it's just consumers don't actually want to leave their house and spend.

We did see on Sunday, the TSA traveler data came within about 140 travelers of topping 800,000 passengers for the first time since the pandemic hit. But still, travel not anywhere near the more than 2 million passengers that we'd see a day before back in 2019. So, I mean, what does that maybe say about opportunities in some of these names tied to travel and whether or not you're optimistic that that recovery might persist?

COURTNEY DOMINGUEZ: Yeah, I mean, I think long-term, these things are going to recover. Maybe we're not flying right now, but we are driving. I mean, things are starting to pick up. And when you're looking maybe a year, two years, three years down the line, those things are going to pick up. And so it's a really good buying opportunity right now. But spending very well may shift. I mean, it might not be the big travel industries or big cruise industries that were booming quite before this.

But it really goes back to why as an investor, you need to make sure you have a well-diversified portfolio because these things are going to happen. And certain industries are not going to bounce back the way others are actually benefiting from this. So making sure you own all of those different names is that much more important right now more than ever.

ZACK GUZMAN: And perhaps a little bit better when you diversify and manage those risks better than cash as you're saying there. But Courtney Dominguez, Payne Capital Management senior wealth advisor-- appreciate you giving us that insight there.