Yahoo Finance's Alexis Christoforous and Jeffrey Kleintop, chief global investment strategist at Charles Schwab, discuss the latest market moves.
ALEXIS CHRISTOFOROUS: For more on the markets now, I want to bring in Jeffrey Kleintop. He's chief market strategist at Charles Schwab. And Jeffrey, good to see you here. So before we really dig in, I just want your thoughts on this milestone we reached today. You know, oftentimes, we talk about these record highs sort of just being numbers, that they're nice round numbers that investors can glom onto. And they make for good headlines. But what is so notable about this particular milestone during this particular time in our history?
JEFFREY KLEINTOP: Well, this November rally in cyclicals is certainly showing up in the Dow. I mean, this is an index that historically had been composed of companies that make things, right? Like, Boeing or Caterpillar or 3M, just to name a few. So to see the further rally here in cyclicals despite the second round of lockdowns around the world and the rising virus count is encouraging and telling us the markets are really looking to a broader cyclical recovery in 2021.
ALEXIS CHRISTOFOROUS: Also, I have to think that a tailwind here is the fact that Janet Yellen is going to be the next Treasury Secretary. Did she seem to you, you think, as the most market-friendly pick and the most dovish of the picks out there?
JEFFREY KLEINTOP: I think so. This is a person that the market knows well. There won't be this awkward period of the market and the new Treasury Secretary trying to get to know each other in terms of their language. This is already well-known. Obviously, she's obviously, you know, quite well respected. Heck, even I think Trump noted that she did a good job as Fed Chair and was only replacing her to put a Republican in the role of Fed chairman.
So if you've got Trump's endorsement, wow, this is a person that certainly appeals to quite a broad number of folks across the political spectrum. And certainly the important coordination between the Treasury and the Fed, as we've seen lately with Mnuchin and Powell being at odds over funding for some of the programs, is going to be really important as we move into 2021. And so, obviously, there will be quite a bit of close dialogue and comfortable familiarity between Yellen and Powell.
ALEXIS CHRISTOFOROUS: I want to go through the day's economic reports quickly because I think they paint sort of a contradictory picture of the economic recovery. You've got home prices seeing their biggest spike in six years in September-- that's according to the Case Shiller Index-- as this pandemic has a lot of people looking to put equity into their homes, right? At the same time, you've got consumer confidence over at The Conference Board slipping. So where do you see things in Q1? With, you know, of course, the hope that these vaccines are going to be in the backdrop, do you see this recovery gaining steam and momentum as we head into 2021?
JEFFREY KLEINTOP: I do, acknowledging that we're not quite through this surge in the virus cases yet. We've seen some progress on these lockdowns and improved restrictions. But there's still this bridge until we get those vaccines approved, produced, and distributed that we could have some push and pull. Certainly the December economic data will be quite a bit weaker than what we've been used to seeing lately. Hopefully it'll be transitory.
But when we look at consumer confidence, you know, it's interesting. If you break down that index between current situation and future expectations, actually, the current situation improved. People are feeling good about their current situation. A little more worried about the future-- that's the component that fell. But remember, this survey was taken just ahead of the election. So maybe a little bit of election worries creeping into the consumer sentiment there that maybe, hopefully, won't be showing up in their actual purchasing behavior.
ALEXIS CHRISTOFOROUS: Now you were also predicting-- I was reading through your notes-- that you said you expect a near-term economic double dip for the global economy. What do you think is going to cause that? Is it going to be the fact that we're having this rise in infections around the world?
JEFFREY KLEINTOP: Yeah, I think it's these lockdowns. So, you know, we're in the middle of one in France here in November. We're seeing some in the UK and in Spain. We've seen a number of selective and short-term lockdowns in Europe, and now we're seeing some states embrace that, too. Michigan, one that's in a three-week lockdown.
So the consequence of that is, yes, probably a dip in some measures of economic activity. We're starting to see that in some of the high frequency indicators, even, unfortunately, some areas that were just starting to crawl out like movie theaters. You know, we had started to see box office numbers come back. They're all shut down now around the world. So those numbers have dropped back to zero again.
So, you know, as we start to see a recovery in some of those service sectors, the door was closed again. So I think that's going to make for another soft spot in the economic data, though not as weak as in March and April where we had schools and churches and manufacturers closed. This is a little bit more of lockdown light, but still likely to lead to another dip in the data.
ALEXIS CHRISTOFOROUS: And quickly, tell us where you think the leadership is going to come from next year. Will the US stock market continue to lead global markets around the world?
JEFFREY KLEINTOP: I don't think so. We're looking for better GDP, better economic and earnings growth outside the US for the first time in a long time. Those are the current forecasts from the IMF. But they're lining up with a valuation differential, differences in profit margins and expectations that would suggest to us that international stocks may be the leaders next year, particularly in Europe, where we're seeing a really sharp rebound in earnings and economic expectations.
That's really important, given that those markets haven't led in a very long time. And that's reflected again in their very low PEs. You know, when we get to a new global economic cycle, we often see new leadership emerge. And it wouldn't surprise me to see that coming from international stocks this time.
ALEXIS CHRISTOFOROUS: All right, Jeffrey Kleintop, chief market strategist at Charles Schwab, thank you.
JEFFREY KLEINTOP: Thanks for having me on.