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Housing is 'an incredibly powerful story' in the stock market: strategist

Yahoo Finance’s Brian Sozzi and Myles Udland break down today’s market action and outlook with Michael Antonelli, Baird PWM Market Strategist.

Video Transcript

MYLES UDLAND: All right, let's bring in Michael Antonelli now, he's the market strategist over at Baird Private Wealth Management, to talk about everything going on in the markets. And Michael, leak our DMs to the whole group here, you and I were chatting a couple of days ago about kind of the state of the market, not a lot going on.

And I mean, even Jay Powell last night is talking about the-- or he's asked about the Archegos thing. And I think it's because everyone is reaching for what's the next exciting moment in the market, where we've kind of leveled out at earnings are going up a lot, we'll see how it plays out, and we know it's going to be a huge summer in the economy.

MICHAEL ANTONELLI: Yeah, that's right, Myles. I mean, as much as I love the financial media, you guys are absolutely my favorite people, you know, you're right. We're kind of reaching for stories a little bit. You know, the Archegos thing, you know, I just kept remember getting asked, is this big, is this bigger?

And I'm like, no, I think this is kind of your run of the mill, an investment bank is over its skis with a client and a trade went bad. You tend to see that. I mean, that's-- again, I said it on Twitter this weekend, that's a tale as old as time, actually. You know, volume is starting to fall, but the funny thing is they're falling from incredibly high levels.

I remember seeing somebody saying that volume last week really slowed, down to about 9 billion. Hey, guess what? Back in, like, 2013 to 2017, volume averaged about 6.5 billion a day. So we're not in the-- you know, we're not at the quiet super low levels of volume just yet. But there is some stuff this week.

We got the Coinbase IPO, certainly people will talk about that, CPI. You know, earnings, and then some Treasury auctions. Although, I will say that if you're watching Treasury auctions, it's definitely a boring market.

BRIAN SOZZI: Well, Michael, I've got bills to pay and so does Myles. What's the next big story in the markets we need to be following?

MICHAEL ANTONELLI: Honestly, you know, I think it comes down to the reopen. And all of us are trying to make more of the macro outlook ahead of the reopen, when, unfortunately and sadly for all of us, including me, I love when things are going crazy, we need to reopen to be further along. And that's unfortunately going to be the summer.

I mean, if I could get a sneak peek at something, it would be the June or July FOMC meeting transcript. So, you know, it just boils down to the fact that we can't make big conclusions based on early CPI or early PPI and recovery. We just-- we need to see more of the recovery, more of the reopen before we start getting into the Substacks and the Papers and the takes about how things are going post-pandemic.

MYLES UDLAND: All right, now, we're seeing live pictures from the floor of the New York Stock Exchange on this Monday morning, Dimensional ringing the opening bell. Folks from Dimensional Fund have been on the program a couple of times over the last several years. We see-- opening bell, we'll see how things open as we get into the day's trade.

So Mike, let's kind of talk broadly then about not just the state of the recovery, but let's drill into kind of an economic thing that I know you're thinking about, I'm thinking about, and that's the housing market. And you look at the stress that we are seeing there and how that sets or doesn't set the recovery up for a year or two from now. I mean, the situation in housing is really unprecedented.

You've got, I think, what, a million homes for sale, one month of inventory essentially at this point. How important of a growth lever is that for a recovery that lasts, I guess, just beyond 2021?

MICHAEL ANTONELLI: Sure, I try to keep my macro simple. I think, you know, the simpler you can make your macro, the better it probably is, for not only for your own knowledge, but for kind of speaking with either clients or media or kind of business leaders. Housing isn't a hugely important part of the American economy. And for most people, Myles, it's their number one asset.

For most people, especially if you're talking about the bottom, you know, 80%, 70% of taxpayers, house is their biggest financial asset. And a strong housing market gives them animal spirits. It makes them confident in the value of, again, their largest asset. So housing's super, super important.

And the great thing, Myles, is that there's lots of smart people out there doing great work on the housing market right now, saying, look, this is not a bubble. It's driven by the biggest demographic cohort in the nation. Low rates, low supply, that combination is powerful. We're lending to some of the best FICO scores in the nation. So this, to me, is not a bubble. It's important.

It's a huge tailwind and I think a multiyear tailwind. Prices are kind of rising. You hear about these anecdata all the time. Certainly a hike in mortgage rates, certainly mortgage rates going higher, certainly a little bit more supply coming online. And the spring and the summer will help these kind of price gains moderate.

I think that housing is an incredibly powerful story, not only from a demographic perspective, but a stock market perspective. There's lots of great places to invest in the housing market. I've said that on Yahoo Finance I think for months now.

BRIAN SOZZI: And Michael, a lot of animal spirits still priced into stocks here. We were talking about valuations really being at 10-year highs at the top of the show. Should investors just ignore valuations? Do those historical comparisons even matter in this environment when everything is going up?

MICHAEL ANTONELLI: You know, here's how I like to frame this question. Do you want to be right or do you want to make money? I think that's a great way to just frame this question. I remember reading this morning about the Buffett indicator, I think Myles was saying, we're talking about that in the email.

It doesn't mention the fact that half of revenue from S&P companies come from abroad now. So there's ways to look at the stock market and say, you know, our valuation stretch, sure, based on history, they are. But you know what? Valuations are a terrible, terrible timing tool. They're absolutely terrible for trying to make a decision about whether you're in stocks or not.

Do you want to be right or do you want to make money? It's really the ultimate question when you're asking yourself whether valuations matter. Are they higher than the past? Yes. But it's just not a great sell signal. It just never has been.

MYLES UDLAND: All right. Mike Antonelli, Baird Private Wealth Management. Mike, always fun. Thanks for hopping on on this Monday morning.

MICHAEL ANTONELLI: See you guys.