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The market 'definitely has that rage feeling to it right now': Strategist

Steve Sosnick, Interactive Brokers Chief Strategist, joins Yahoo Finance's Kristin Myers to break down the latest market action as the Dow tops 30,000 for the first time ever.

Video Transcript

KRISTIN MYERS: We're joined now by Steve Sosnick. He's the chief strategist at Interactive Broker. Steve, so glad to have you on. I haven't chatted with you in a while. I want to ask you now--

STEVE SOSNICK: I'm happy to be here.

KRISTIN MYERS: I want to ask you about this level that we are seeing in the Dow. I kind of have to-- I have to ask if you think that we are going to maintain or if the Dow is going to be able to maintain this level given the current environment that we are in. I know that we have a lot of good-news headlines out of there. There is some room for some optimism around the vaccine, but I mean, we are still seeing this virus absolutely surge across the country right now. So what do you think is going to be happening to the markets over the next couple of days and even into the end of the year?

STEVE SOSNICK: Well, the next couple of days-- first of all, Thanks for having me, Kristin. It's a pleasure to see you again.

The next couple of days are fluky. Anything can happen because it's a short week, and I don't want to read too much into what happens in a short week. And that's why 30,000 seemed inevitable. Once there was no-- once there was enough good news to push the markets higher, yeah, 30,000, why not? I know that sounds flippant, but between, you know, sort of the holiday-shortened mentality-- you've got, you know, Thursday off. You get a half day Friday. Anything can happen. The market-- the momentum has been relentlessly higher. So sure, why not?

Going forward, I think the market's ability to look through the short-term potholes to a rosy future-- you know, I think it may be a little-- may be a little tricky to overlook some of these potholes that are out there. The bullishness is so rampant. But, you know, why let the facts get in the way of a great story, I guess?

KRISTIN MYERS: No, I'm really glad you said this, right? The question-- I know it seemed a little bit flippant to everyone at home. Why not? But, honestly, if the history of this last year is any indicator, I'm wondering what you think is going to be happening, if you think the markets are going to continue as they frequently have over the last several months. Since March, honestly, have looked over bad headline after bad headline, pothole after pothole. The markets were really on a tear, up at least until the fall. I mean, what are you expecting going ahead? Do you think that the market is going to say, hey, we're going to keep the party going, even-- we're going to ignore everything else that's going on out there?

STEVE SOSNICK: It definitely has that-- it definitely has that rage feeling to it right now, you know? And I hate to bring up some of these historical precedents, but it has that 1999 flavor. It has that 2006-2007 flavor where it just felt like it was never going to go down until it did.

Now, there was a catalyst for each of those. One would think that COVID might be the catalyst. It's not there. I mean, in terms of enthusiasm, we're seeing the put/call ratios at levels not seen since those years I mentioned, meaning that people are not bothering to hedge with puts. They're speculating with calls in a big way. And you know what? It's been paying off for people. People do what keeps working until it stops working.

And the problem is until or unless we get something that changes the mindset, the market's going to remain-- the market's going to remain in said mindset. Too many people are making too much money right now for them to just sort of say, you know what? I had enough. You know, people are greedy, and the greed has overtaken the fear in a big way. It doesn't end well, but when that time comes and how bad the end is is really tough to say at present, especially in a weird week like this one.

KRISTIN MYERS: All right, so a lot of that greed and a lot of that money that we've been seeing has been in big tech, some of those big tech names which are a little bit under pressure-- have been under pressure, especially every time we get a lot of good-news headlines around the vaccine. I'm wondering where you see investors parking some of that cash if they decide to start trimming their exposure to tech going forward? Is it always going to be-- is it going to be about value in 2021?

STEVE SOSNICK: Well, I think it seems like it should be about value. You know, certain sectors are showing signs of life. You know, the difference between growth and value is somewhat arbitrary anyway. I mean, Clorox is growing at a faster rate than Apple. But, you know, try explaining that.

But basically what you see there is it doesn't take much, and that's why I think Russell 2000 is ripping higher the same way that-- the same way that, you know, some of these other more speculative items are because the total market cap of the Russell 2000 is not all that much bigger than Apple. So as Pete-- so if a few-- if enough investors say I'm going to get out of Apple, I'm going to get out of Amazon-- which, by the way, has not confirmed its tops the same with that certain other stocks have, so Amazon may be a little precarious going into the holiday season. That's going to be an interesting one.

But people aren't putting it into cash. They're rotating into other things. Whether that's the Russell 2000, whether that's value stocks, whether that's Bitcoin, whether-- who knows? The money is not really going into cash because people have been trained not to value cash as an asset right now. It's punitive.

KRISTIN MYERS: So I know that you've mentioned some of those retail, names and we just heard from Brian Sozzi talking about some of those retailers which had been doing very well in some of the last quarters. I was reading your note, and I noticed that you also mentioned housing, of course, doing really well as people are fleeing the cities, heading out to the suburbs. They're supported by those low interest rates. I guess I'm wondering from you, how many of these trends that we have seen really thrive during this pandemic era, how many of them do you see continuing in a postpandemic era or at least once they start to really get that vaccine distributed to most Americans?

STEVE SOSNICK: Well, I think-- I think COVID accelerated a lot of trends, as you can see-- you know, with Amazon taking over the world sort of trend. You know, that had been in place for a while, the web shopping.

Well, people had always historically moved out of the suburbs when they had families. You know, that was a normal-- when we lived in the city raising small kids, the question was always when are you going to move to the suburbs? The answer was when I took a job in Connecticut.

But you see people making those kind of changes now, especially as working from the office seems less necessary. People are-- that trend has accelerated. The problem I see also is I don't think we've seen the back end of that trend where the urban-- where a lot of the urban homeowners or urban landlords have to reckon with the end of the rent moratoriums and stuff like that, the commercial real estate. You know, all that's there.

I'll admit, frankly, I've looked at some New York City apartments and realized that, you know, the market hasn't adjusted there, and I call it the Wily E. Coyote moment. The sellers know that they're standing on the precipice, but they're not-- no one wants to be the one to acknowledge, you know, that they need to cut their prices. So I think that there's-- there are these trends occurring, and we could see housing doing well.

Low interest rates and demographics are helping it in the short term. Whether it persists in the long term, I think it's not-- you can't just say unilaterally that this is a trend that's never stopping. You know, again, like we said about stocks, it's the trend-- it's the trend that's in place now and will be until it's not. But that may-- that's probably not immediate. These are not immediate decisions.

KRISTIN MYERS: All right, some warning bells there from you, Steve. Steve Sosnick, chief strategist at Interactive Brokers, always great chatting with you. Thanks so much for joining us today.

STEVE SOSNICK: Thank you, Kristin.