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The fed is likely to remain accommodative depending on what happens in Washington: CIO

Michael Sheldon, RDM Financial Group at Hightower CIO joins the Yahoo Finance panel to discuss the lates market action and impact of COVID on the markets.

Video Transcript

AKIKO FUJITA: Let's bring in our first guest for the hour. We've got Michael Sheldon, who's RDM's Financial Group at Hightower CIO. And, Michael, it's interesting to see the response to the Pfizer news today a bit more muted, largely because, after that announcement about the efficacy-- this was kind of expected-- but we are seeing that work-from-home trade reemerge on the back of concerns of more restrictions coming ahead. How are you're looking at all these dynamics playing out?

MICHAEL SHELDON: Well, I think the big news from Pfizer really came out in the markets about a week or so ago when they announced that their drug was going to be available likely for too long and that it was almost 95% effective. So, about a week ago or so, we saw a major rotation in the market into value stocks away from the stay-at-home into the reopening trades. So that rotation in the market has been sort of going on in the markets over the past few days.

One day it's off. One day it's on. I think, from our perspective, looking ahead over the next 6 to 12 months, our thinking right now L that you're going to have-- you're likely to have several effective vaccines, that Fed policy is likely to remain accommodative. And, depending on what happens in Washington, we're likely to have another round of fiscal stimulus. Although you never know in Washington.

So I think that combination should set the stage for a positive outlook for the economy and the markets we get into middle of next year. But we do have to get through the next few months first.

ZACK GUZMAN: And, Michael, I mean, it's important to raise those next few months because we've seen cases continue to rise as Akiko was highlighting off the top there. I mean, when you think about the strategy here in your sector picks, it seems like you are still kind of splitting the difference and focusing on cyclicals in a barbell approach to also include growth stocks as well. It seems a bit strange to some of these cybersecurity names rally each time we get bad updates on the pandemic front. But that seems to be a new safe sector to watch.

MICHAEL SHELDON: Yeah, I think, within our portfolios, we sort of have a barbell approach. Over the past few years, we've been overweight growth. And I think that's still probably the right thing. But we are starting to add a little bit more in the way of parts of the market that may benefit from an economic rebound.

It's uncertain to figure out how quickly the economy will really get back on track. Remember, we still have only recaptured 54% of all the jobs lost. Another stat I was looking at the other day is real income this year for the United States is up about 3%, which is a great number. That's a good number.

But, if you exclude all the transfer payments from Washington, it's actually down to 2.2%. So there's still additional work that needs to be done. And we have-- for that reason, we have a barbell in place where we do have some exposure to growth, but we also have some exposure to some of the re-opening trades. And, sort of in the middle, we have some health care exposure, which is sort of our GARP, growth at a reasonable price, exposure.

AKIKO FUJITA: And, Michael, we did get some headlines today on the stimulus front. Although, that doesn't say much about where things are moving. Treasury Secretary Steven Mnuchin saying that he will continue these talks with Mark Meadows and Mitch McConnell. Well, we've heard from Nancy Pelosi saying that she is still optimistic a bipartisan stimulus bill can be passed.

What's the market pricing in at this point? And could it be a potential catalyst if we do, in fact, get something before the end of the year?

MICHAEL SHELDON: I think expectations right now are pretty low that we're going to get anything in this sort of lame duck session in Congress. It seems that most of the legislators are really thinking about going home to Thanksgiving. Although, hopefully, they'll keep socially distanced.

But I think, really, we're talking about early 2021 during the Biden administration. And, hopefully, the Republicans and Democrats can agree that some sort of package to help the states and municipalities, to help the unemployed workers you were just talking about, to help small businesses, some of that funding is [AUDIO OUT] needed to sort of bridge the gap until the economy gets back [AUDIO OUT]. So I think early 2021 is the more likely scenario.

AKIKO FUJITA: OK, Michael Sheldon, joining us from RDM Financial Group at Hightower. Thanks so much for your time today.