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‘The labor market is a bit of a risk in the near term’: Strategist

U.S. Bank Wealth Management Sr. Investment Strategist, Rob Haworth, joined Yahoo Finance Live to discuss why the momentum present in job market earlier in February is fading.

Video Transcript

SEANA SMITH: We want to stick with the broader markets here. And for that, we want to bring in Rob Haworth. He's a senior investment strategist at US Bank Wealth Management. Rob, great to talk to you again. Let's just start with the action that we've seen over the last couple of days. And it seems like some of that momentum that we had to start the month is starting to fade a little bit. What's your reaction to that, and why are we seeing that?

ROB HAWORTH: Well-- excuse me, sorry about that. The market has certainly been-- excuse me. Has certainly been running quite strong for some time. We're getting towards the end of earnings season, and we'll have to see if there's still more momentum in earnings increases for the year.

And then I think the second thing is the market is hoping for some new fiscal stimulus to come through. And it looks like it's going to take some time for that to make its way through Congress.

ADAM SHAPIRO: Hey, go ahead and clear your throat, Rob. I have to do it all the time. I sound like my grandfather sometimes on this broadcast. But anyway, when we talk about where the market is right now, a lot of people are concerned that it's expensive for the average investor. And yet, there's really nowhere else to get any kind of return or yield, even with the 10-year and some, you know, fixed income slightly going up. You still got to be looking at stocks, right?

ROB HAWORTH: Yeah, no, we're still biased towards stocks in this sort of market. And I think there's a couple of reasons. So one, we think we're in the early innings of earnings improvements. There's still room for earnings to improve. Two, we're in the early innings of the recovery. We think growth and inflation accelerate through the first half of the year.

And there's some question in our mind as to whether that continues in the back half of 2021. But there's probably a large error term around our estimates there because fiscal stimulus, maybe an infrastructure plan could change that equation and push growth much higher as we look at the back half of the year. So I think this is a--

SEANA SMITH: Rob, we got the consumer sentiment number out this morning showing that it was a little bit weaker, at least in early February. What are your thoughts on that when we take a look at the consumer? I guess, how would you characterize the consumer right now? And is that a potential risk here going forward?

ROB HAWORTH: Yeah, we'd certainly label the labor market as a bit of a risk here in the near term. Part of it is we just had the jobless claims data where through the middle of January, we're now back up to 20 million continuing unemployment claims. Jobless claims are remaining high. So I think we really need to see the labor market improve.

Now, this fiscal stimulus bill should provide a nice bridge to get to that point where maybe we're much closer to having the economy mostly vaccinated. Our current estimates would be middle of September by the time we can get 70% of the population vaccinated based on the current trends we're seeing.

ADAM SHAPIRO: Let's put this in context for the people I call just the average folk, who are your clients, in some respects. I mean, how do you help them who might be white knuckling it right now about, wow, I need to take some profit, I'm very worried, I'm very worried? When what a lot of professional people like you are saying is, not yet, perhaps, not yet.

ROB HAWORTH: No, not only not yet, we'd place a little more emphasis on equities in your portfolio. But you might think differently about what you should have exposure to. Certainly through-- if we think about a year ago, we were looking towards growth-- secular growth stocks, more large US names. Today, we'd look down the market cap spectrum into the mid-cap space and emphasize those mid-cap spaces.

And then adding some of those cyclical growth names, as you mentioned earlier, some of the leaders for today, energy, materials, industrials, and even financials looking to those cyclical growth names for your portfolio as well as we move into the mid part of the year.

SEANA SMITH: Rob, when we talk about stimulus, I have to ask you this, just how big of a boost do you see this being to the market if we get that $1.9 trillion deal?

ROB HAWORTH: Well, yeah, what's interesting about that is I think the market had expected something somewhere between the $600 billion deal that Republicans had put together and the 1.9 billion that the Democrats are proposing. And it looks like we may get much closer to that $1.9 billion deal. So that-- I think the market currently kind of underappreciates the potential size of the deal.

And there's much more upside here as we price in a deal that will be 8% to 9% in terms of relative to the size of our gross domestic product.

SEANA SMITH: Rob Haworth, great to speak with you again. Senior investment strategist at US Bank Wealth Management, have a great weekend. We'll talk to you again soon.