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'The market might be getting ahead of itself:' Analyst on vaccine optimism driving stock surge

Yahoo Finance’s Alexis Christoforous and Aadil Zaman, Partner at Wall Street Alliance Group, discuss the latest market moves amid optimistic coronavirus vaccine news.

Video Transcript

ALEXIS CHRISTOFOROUS: Want to talk more about the market action now with Aadil Zaman. He is Partner at Wall Street Alliance Group. Aadil, thanks for being with us. So I'd have to think this market's a little overbought here today. What's your take on what we're seeing?

AADIL ZAMAN: So great to be with you. We believe that, you know, this news about the vaccine, it's fantastic news. And you know, 90% efficacy is amazing. You know, you look at the flu vaccine, it's 40% to 60% efficacy. So definitely great news.

But we feel that the market might be getting a little bit ahead of itself. Because in order for this vaccine to be available for you and me to start using, it probably is not going to be until fall of 2021. So we feel that this-- and until then, you're seeing that the COVID-19 cases are rapidly expanding. So we feel that this market is a little bit ahead of itself, and there could be a short-term correction due into the market.

ALEXIS CHRISTOFOROUS: As you look ahead to a Biden presidency, what are some of the things you're telling clients, or that clients are asking you, in terms of where they should be focusing their money, their investments?

AADIL ZAMAN: So Alexis, we feel that this is a market for active management, where we feel that certain sectors are going to thrive and certain sectors are not going to do so well. We also feel that this market is in a long-term uptrend, with several short-term corrections along the way. And we feel that those corrections are buying opportunities in certain specific sectors.

So for example, under Biden, we feel that clean energy is going to do really well. And Biden has a really good relationship with Mitch McConnell, and so his diplomatic relationship will make a good relationship, and through executive orders, he'll be able to get certain initiatives passed. We also feel that there is opportunity in China here, because Biden's approach towards dealing with China is going to be completely different.

He's going to involve the World Trade Organization. He's going to involve other countries. And there could be potential reversal of tariffs as well. So we feel that there's opportunities in China also. So we feel that market corrections are opportunities in these type of sectors.

ALEXIS CHRISTOFOROUS: OK, so China, you see, is an opportunity. What are some areas that you would be staying away from during a Biden presidency?

AADIL ZAMAN: Well, you know, we feel that it is very important right now to have a very well-diversified portfolio, right. So think about it. Today's knee-jerk reactions, energy spike, financial spike, and these are things that haven't been working so far. So if you weren't exposed at all to these sectors, you would have completely missed out on that.

So we feel that in a well-diversified portfolio, you should have all asset losses, but underweight some. But we feel that right now this market is going to give us plenty of opportunities to take advantage of some good quality sectors. Now, look at it this way, we've got a Democratic president, and we've got a divided Congress. Historically, the market has done the best during these type of scenarios.

But what the market is not factoring in is that if those two seats, Alexis, in Georgia, if those turn Democratic, we are possibly looking at tax hikes in 2021, and that could cause a correction in the market. So investors should be focused on, you know, being diversified, having risk management strategies in place, and using corrections as buying opportunities in specific sectors.

ALEXIS CHRISTOFOROUS: Before we let you go, I know that you also like some of the stocks in the social media space, one of them being Twitter. And we know that a lot of the big-cap tech stocks are coming under the microscope on Capitol Hill. We don't know yet what the new Congress is going to be doing with that, but we have to think that regulation will be coming, will the fight to want to break them up continue. Make the case for these social media companies, Twitter and Facebook in particular.

AADIL ZAMAN: You know, we are right now, Alexis, in a high stress, news hungry environment, right? And people need to be able to communicate with other people, and social media gives them an ideal platform to be able to do this. And these tech companies are designed-- you know, their business structures are set up that they will be able to meet the legal challenges.

Look what happened to Google. They got an unfavorable decision, and the stock went up. So we feel that Twitter is relatively undervalued in this space, because they have done a great job in increasing user engagement and monetizing the space. More importantly, we feel that within technology, e-commerce is going to continue to thrive, and that's why we've seen Amazon do well.

But another company that we see potential in is Alibaba, which will further benefit from de-escalation with China. So we feel generally technology, even though it's taking a pause today, is a good place to be for investors, because the only reason tech would have taken a break was if there would have been higher taxes, which under a divided government doesn't seem likely.

ALEXIS CHRISTOFOROUS: All right, and for disclosure purposes, we should point out, you do own Twitter, Facebook, and some of the China stocks, including Alibaba. Aadil Zaman, Partner at Wall Street Alliance Group, thanks so much for being with us.

AADIL ZAMAN: Great to be with you, Alexis.