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How to manage your finances this fall amid COVID-19

Joe Duran, Head Goldman Sachs Personal Financial Management, joins Yahoo Finance’s Zack Guzman to discuss and how investors can stay afloat as COVID-19 continues to impact markets.

Video Transcript

ZACK GUZMAN: It's been a very volatile last couple of weeks here. We've seen this rotation as tech stocks took a beating, one of the standouts in yesterday's big sell-off. So a lot to digest here, in terms of investors bracing for all this volatility. And here to join us with more on that is Joe Duran, head of Goldman Sachs Personal Financial Management.

And Joe, I mean, when we talk about all this, it's a weird time, I think, when it comes to instituting some of that traditional advice here when we tell people to save. We have interest rates at historic lows here. What are you telling clients that ask you the best strategies here to navigate all this?

JOE DURAN: Well, there are two things I'd say to everybody who's watching. Number one that regardless of the circumstances, you better make sure that you have a portfolio you can withstand downdrafts. And very often, what happens when you have a big advance or a big decline, your portfolio gets out of whack. And so first and foremost, make sure you have a portfolio that, regardless of what happens, you can ride it out.

The second-- and this is where people really are struggling now-- is this constant battle between the fear of missing out and the fear of losing money. And right now, a lot of people are like, I should be overweight in tech stocks because they've just performed so phenomenally well. You just had a guest on who really demonstrates this accelerant that COVID has to accelerate the move to digitally-based interactions with consumers.

But that's priced in already. And so what you see is a lot of people saying, hey, I got to go move my portfolio to the thing that has done the best. And that's not always a great strategy. You're basically chasing the-- yesterday's news. Again, that doesn't mean these stocks aren't phenomenal investments, but what you want to do is not get chased by your greed into the areas that have done extremely well.

ZACK GUZMAN: No, it's a very important reminder when we think about past performance not necessarily indicating what could happen here in the future. But on that front of FOMO, it does seem like there is an element of that. At least we saw it kind of play out. There are still about $4.5 trillion of cash here on the sidelines when you think about what new money could flood into the market. And interesting points being raised by JPMorgan here talking about rebalancing as we approach the month-end and how equities, relative to bonds, continue to underperform and how that could trigger a catalyst here not just month end, but quarter end--


ZACK GUZMAN: --in re-balancing portfolios, to your point, and kind of trying to adjust things. How do you balance maybe that with maybe some of the other catalysts out there, when we think about maybe a phase-four deal between Republicans and Democrats? You got the election, a lot of volatility digest gesture. So what would be your advice here, I guess? Obviously, we never say time the market. It's a little tough, but what are your thoughts on these things?

JOE DURAN: No, no, we don't-- well, the first thing as we are headed into election. Close elections, like this one is likely to be, tend to create more volatile markets. And so one thing, be prepared for what's likely to be a fairly messy fall. It's true that the equity markets, because interest rates are so low, are relatively appealing. But valuations reflect that already. And what I would suggest is that growth stocks especially reflect that.

And just add one thing, Zack, I mentioned last time I was on, the reason technology stocks have done so incredibly well is that, in fact, although they are high growth and have high multiples, they also are viewed as safe havens, should the coronavirus resurface in the fall. And we see what's happening in Madrid right now and in London, where they're thinking of re-closing things down. That's going to play in the hands more of the technology stocks. So I think what you're going to see is a continued move that we've continued to have of shifting to the winners.

It is true, though, that you need to be prepared for significant setbacks. And I think it's-- while it's awful, it's also really healthy to be reminded that hey, you can lose 10% in a week relatively easily, and people should have portfolios that allow them-- because again, it's going to be messy. The election-- when you think about almost 1/3 of the electorate will be mailing in--


JOE DURAN: --those results take longer to come in. They will skew Democrat. So it's not unreasonable to think that on the election night, it looks like one party has won and as the counts come in, it starts to skew. That could create a lot of turmoil for investors. And I think it creates-- you add to that the Supreme Court debate that's going to be occurring and a lot of finger-pointing that will happen as a consequence, the likelihood of a deal becomes a little bit more difficult as well. So I would not be overly optimistic that we can get something constructive done before the election.

ZACK GUZMAN: Yeah, and just to your point, it kind of makes things tough here, as you're an investor trying to hide out somewhere. You can look at the markets-- yield keeps falling on me, man. So there's that--

JOE DURAN: It does. It does. But the one thing I've shared with a lot of people is look, there are lots of great companies that are trading at very reasonable valuations that have significant and meaningful yields--


JOE DURAN: --much higher than the US 10-year treasury at 0.6% that allow you the possibility of growing earnings with inflation, should it ever come back, or even as the economy grows. So you know, dividend-paying stocks have been in the doghouse for a long time because it's all about tech.


JOE DURAN: But if the market broadens out, that is an area where, again, I would not be-- I would be looking at other areas of yield that would be compelling, given where we're in the market cycle.

ZACK GUZMAN: Yeah, dividend sexy again here in 2020. That's why we had Waste Management on a couple weeks ago. But always love having you on, Joe. It's good to chat again. Be well, Joe Duran, head of Goldman Sachs Personal Financial Management.