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'A lot of it has to do with price': Strategist on buying stocks amid coronavirus pandemic

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TD Ameritrade Chief Market Strategist JJ Kinahan joins Yahoo Finance’s On The Move panel to discuss the market volatility in the past weeks and what stocks people are selling due to COVID-19.

Video Transcript

ADAM SHAPIRO: So what have people been buying and selling in the markets? I want to bring in JJ Kinahan. He's TD Ameritrade's Chief Market Strategist. And of course, they have an index, a measure to let us know where things are going. And it's good to have you here, JJ.

I am curious, because I know millennials, one of the things you've pointed out, is that millennials actually were buying-- and this surprised me-- Royal Caribbean. Any information as to why? JJ? You have to star six to unmute your phone.

JJ KINAHAN: Adam, I-- Adam, I apologize for the technical difficulty I had this morning--

JJ KINAHAN: No problem.

JJ KINAHAN: --first of all. And thank you for having me. The work-from-home environment has us all in a new space. But you know, back to your point, Adam, as to why they are buying that stock, I think a lot of it has to do with price.

You know, a lot of other stocks are pretty expensive in terms of just pure dollars is what I'm talking about. This one seems to be one that's fairly inexpensive. You know, we talk all the time about having a time horizon. If you're a young person, I would think your thought being, OK, they may have a little bit of a tougher time in the short-term.

But in the longer-term, at some point the hope is obviously people want to go on cruises again. I don't think any of us are rushing out to do it tomorrow. But you know, longer-term, I think they believe they'll come back.

And also, I think things like this, when they do come back, whereas you and I who've been around a little longer may not be the first ones to jump on board, if you're a younger person you're like, well, this is a pretty cheap cruise. Things seem to be going well. I'm healthy. Why wouldn't I be somebody who goes back? So they may be the first users of the products when the sort of all-clear is given.

JULIE HYMAN: Hey, JJ. It's Julie here. Speaking of cruise lines, we learned today that Saudi Arabia's sovereign wealth fund had bought 43.5 million shares in Carnival. So they own now more than 8% of that stock. So obviously, others are also trying to find value out in the market here.

That seemed to be sort of a theme. It wasn't just cruise lines, right? Things like Exxon Mobil were also being bought by people using TD Ameritrade. So it seemed like that was sort of the theme. People were looking at these sort of crushed stocks.

JJ KINAHAN: Absolutely, Julie. And you know, as you look at the general population away from just the millennials, you know, the millennials, obviously, the cruise lines and Uber were two of the stocks that they found very interesting.

But our more general population, the one thing I would say that they shared in common in the stocks they bought last month were stocks that had weathered crises before, be it 2008, 9/11, whatever it may be-- Exxon, Boeing, Ford, Disney-- and sat on a lot of cash. And so I think that that also is something that they have in common, and have all been-- you know, Ford, obviously a low-priced stock, so I'll take that out of the conversation for a moment.

But when I look at Boeing, Exxon, and Disney, these are also stocks that have just gotten significantly beaten up over time. I shouldn't say over time. Over the last few weeks.

The other interesting pattern we saw in this, guys, which I think you'll find particularly interesting is the first two weeks of March, our clients were actually selling things. It was like right in the middle of the month, a gun went off or something that said, all right, time to start buying, because the behavior changed really, really quickly sort of after that initial panic hit.

To your point, Julie, people were like, hold on. These stocks have gotten beaten up long-term. I still believe in these companies and what they're doing. And I think that they'll be good as time goes on.

BRIAN CHEUNG: Hey, JJ. It's Brian Cheung here. Obviously, we know that we've seen outflows in equities. But I'm wondering, how much inflow have you seen into ETFs as people try to avoid value investing and just want to try to buy the market if they think that we've reached the bottom, which jury's still out on that one? But are you seeing any sort of interest to where equity ETFs are kind of going here?

JJ KINAHAN: Yeah, well, we tend to generally have big interest, particularly in the ones that are based on stock indexes-- you know, the Spiders, QQQs, IWM. And so a lot of the buying was based on S&P 500 type companies in March. The corresponding ETFs also went hand-in-hand with them.

So I do think that there is sort of this little bit of a split between people who are like, OK, companies that I like have just gotten so destroyed that I'm going to go toward that individual company, because I believe that it's going to come back. But there was a lot of people that are also like, I'm just a big believer in what's happened that the market itself is going to recover significantly. I don't necessarily want to pick the individual winners and losers.

The interesting thing is you did have a little bit more, perhaps, of the general ETF buying them maybe sectors, as those who bought it just believe that the whole market would come back.

JULIE HYMAN: JJ, Julie again. I also just have some data from JP Morgan that retail investors are starting to get back to some of the equity mutual funds. That combined with the data you're seeing, have we seen a bottom in stocks?

JJ KINAHAN: You know, I-- I don't know that we've seen a bottom. But what we have seen, Julie-- which I like to see, because this is what definitely forms a bottom-- is that the ranges are getting smaller overall. Now, today may be a little bit outside that to the upside. But we'll see where we end up.

But you know, we're not hitting those 5% up, 5% down overnight. Now we're getting to where the range is-- and I know it sounds crazy and almost laughable to say, yeah, the range is falling. We're only getting 100 S&P point moves overnight and in the next day now. I think we want to get to the point where we're at 50 points throughout the day, because then you're returning more to normal.

I think right now, it's very difficult-- you have so many great guests on here. For somebody to come on and say, here's definitely where I see support, here's definitely where I see resistance, that's a really difficult thing to say when we're bouncing around this much. So I think when we can get back to the point where people have some true conviction behind those intraday numbers, will actually help and will help the volatility come through.

That said, I don't see that happening for a little while. Just as-- you guys were nice enough to have me last year. We talked a lot about the tariffs and how they were always the underlying story. You may have some news during the day. But if there was tariff news, it overtook everything. Well, this is that on steroids.

And the fact that you may have some other news about companies, but especially as we get into earnings when you guys are reporting on it next week, but the coronavirus story, if there's something there, it's going to just blow everything else away.

ADAM SHAPIRO: JJ? I'm curious-- is the index, the investor movement index, old enough for you to work in the kind of demand destruction we're witnessing? I realize that we haven't had this kind of demand destruction in our lifetimes.

But is that a kind of model that could weigh how you balance that? Because that would give you an indication whether this question of a bottom is legitimate with what you're seeing in movement of stock purchases, wouldn't it?

JJ KINAHAN: Yeah, it would, Adam. And I would say that given the fact what I just said about those last two weeks of the month, let's put it this way. There is a strong belief, I think, on our client activity that we saw what could be, you know, people saying, hey, I think this could be a bottom. Or certainly, this is a level I'm very comfortable putting a lot of my money to work at.

That's not to say that we can't have one more leg down. But I do think at least we've reached a level where you're starting to see significant amounts of money hitting the market.

ADAM SHAPIRO: All right. JJ Kinahan is TD Ameritrade's Chief Market Strategist. Good to have you here on Yahoo Finance.