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‘The economy has shown signs of resiliency that the market is in tune with’: strategist

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John Stoltzfus, Oppenheimer Chief Investment Strategist, joins The Final Round to discuss his thoughts on what’s driving the markets politically and socially, and where investors should be investing.

Video Transcript

JEN ROGERS: Welcome back to "The Final Round" where we have stocks marginally higher right now. The Dow is up just about 1/10 of 1%, while the S&P and NASDAQ are up just about 3/10. It is a mixed picture for the sector, still looking at declines in energy to the tune of about 1.4%.

And meanwhile, communications services, thanks really to that Snap report-- whoever said that before-- doing pretty well. We've got Facebook and Twitter up nicely here, and the sector overall up 2.2%. Let's bring in John Stoltzfus, chief investment strategist, Oppenheimer. John, I want to talk with you and start on stimulus and the election.

JOHN STOLTZFUS: [INAUDIBLE]

JEN ROGERS: You've got to be getting a lot of calls from people asking you, what am I supposed to be doing right now? Anything? How worried they are about what's going to happen after November 3, are their investments safe. What are you telling people? What are you thinking?

JOHN STOLTZFUS: Well, I think, Jen-- I think that the first thing is, we'd have to say, it doesn't appear to be the end of the world, irregardless of how we go forward, so long as we got a vaccine at some point between now and the end of the year or early in the first quarter that has efficacy to spread the stem of corona 19.

That said, related to the stimulus, we think it's needed. We think it'd be a great thing. We are-- frankly, we are stunned by both Pelosi and by McConnell, that they are so deeply entrenched. The president has moved up his bid in terms of what he's willing to pay for a rescue package.

And we just think that both Pelosi and McConnell, if their constituencies ever think of how they've held their feet over the-- the feet of the constituencies over the fire at this time, they might quickly retract from that draw a line in the sand kind of posture.

But we do think this. Ultimately, the economy has shown signs of resilience that the market is very much in tune with. This reminds me a lot of '09 when everybody thought we'd never get out of it. But we thought there was plenty of stimulus in the system. We think this is going to work out OK. There's different outcomes to this.

But overall, we tell people, keep invested. It's still stay overweight cyclicals versus defensives. And maintain your conviction related to your goals and objectives, if they are indeed growth with income or growth or value, what have you. We think that the forward looking looks good for equities into next year.

JEN ROGERS: Is earnings season helping you with that outlook here? Because it has been-- I mean, look, if you look at the overall FactSet numbers, you'll see we're doing just fine. But really, every quarter, people-- you know, companies tend to be here. If you dig a little bit deeper, it's kind of been a mixed bag, especially on outlook wise, given the uncertainty. What has earnings season so far told you about the health of this market?

JOHN STOLTZFUS: Jen, what it's told us, as it did in second quarter earnings season, is that there's a definition of winners and losers that is heavily dependent on the ability of a business, irregardless of what sector it belongs to, to the ability to deliver one's services or one's product to one's clients and communicate with them. If you can do that digitally on some kind of a platform that maintains the relationship, you are likely to be among the winners, rather than among the losers.

The other effect, of course, is related to the way the-- related to COVID-19 itself, wherein you still see some sectors that are decidedly weaker, are some sectors like leisure and airlines, for example, although both can have their days when they actually move up in spite of themselves, so to speak.

But when I look at earnings, so far, materials has done remarkably well in terms of earnings. I'm looking at a Bloomberg terminal right now. It looks like up 14.94% in terms of earnings growth. Positive earnings growth, consumer staples, healthcare, technology is positive. Communication services is very modestly positive, and utilities is positive and real estate. It doesn't look so bad.

Now on the other hand, energy is very disappointing, and the industrial sector, a real drop in growth. But that's understood. You need to feel more recovery before you see the industrial sector earnings improve. But we've already seen investors want to favor those, anticipating earnings growth in future quarters.

SEANA SMITH: Hey, John, it's Seana. I'm just curious what your thoughts are about what we're seeing play out in fixed income. Because when you take a look at yields today, they're at thier highest level. At least the 10-year right now is at its highest level since June. Where do you see yields go from here?

JOHN STOLTZFUS: I think that it really is some-- I think they are destined to creep higher, I don't think dramatically higher, in that we are in a secular low inflation environment which is driven by technology and the process of globalization, which are counter inflationary.

Plus, you have the Federal Reserve and central banks around the world. Even as they act magnanimously in terms of providing accommodative monetary policy at present, they remain vigilant about inflation. So I think rates will creep higher.

But I don't think we're going to get a dramatic jump in yields. Because inflation itself is contained by robotics on the factory floor, algorithms in the offices, a global labor pool, and the demands of consumers that want everything for next to nothing.

JEN ROGERS: John Stoltzfus, great to get a chance to talk with you, Oppenheimer chief investment strategist. Thanks again.

JOHN STOLTZFUS: Thanks, Jen.