Market opportunities in 2021

Yahoo Finance’s Julie Hyman and Brian Sozzi discuss today’s market action with Jimmy Lee, Wealth Consulting Group CEO.

Video Transcript

JULIE HYMAN: First though, let's talk about what's going on in the markets and the stall that we have seen in that aid package and getting it signed into law here. We're joined by Jimmy Lee of the Wealth Consulting Group. He's the CEO there.

Jimmy, it's good to see you. So as we close the year here and as we start to turn to 2021, how are you thinking about the markets, especially you know, fiscal stimulus and how it pertains to the markets given that, you know, for months now, we've been talking about getting this thing passed and it's just not getting over the finish line?

JIMMY LEE: Good morning. And Merry Christmas, Julie.

Obviously, the stimulus package being held up right now with a little curve ball from President Trump has not disturbed investors today and the market's going up. And I think, eventually, a deal getting done is kind of priced in. And so maybe the $2,000 check won't happen, we'll see, but investors are shrugging this off. So Santa must be on his sleigh and on his way in.

And today, as you know, starts the "Santa Claus rally." And historically, according to the "Stock Traders Almanac," the seven trading days starting today, two days into next year is the best seven day period in a year, as far as probability of the stock market going up. And so again, like I said, maybe Santa is on his way. And I still think that we have room to run in a stock market on the upside, even though, in the near term here, we've got some economic data with consumer activity and confidence being off because, you know, checks stopped coming. And so we do need more stimulus and we need, you know, Congress to get to work and finish this deal off for end of the year.

BRIAN SOZZI: Jimmy, do you think we'll see a second half 2021 economic boom as more people get vaccinated? And if you do, where's the market?

JIMMY LEE: I really do, Brian. I expect that we could get a little bit of consolidation here in the short term before we get a stimulus deal and stocks could pull back. But as the economy reopens, I really do feel that the consumer here and the demand and spending may be much more robust than what a lot of experts think it may be. And so I think that some of those cyclical sectors that have been off before that are leading the markets really in the last three months potentially will lead the way again going into 2021. I'm talking about financials, industrials, materials.

We're still overweight tech, but we're very wary of the really high flying valuation names. And I think that we've got a chance to get double digit returns again in 2021, like we hopefully will close out in 2020. And how amazing is that if investors were to just fall asleep on January 1st and woke up now and missed the ride, you know, most investors would have been better off instead of panicking and trying to time the market.

JULIE HYMAN: Yeah. Pretty amazing there. So it sounds like you're kind of leaning value here, Jimmy, if I'm hearing you correctly, if you're talking about things like financials. Is that a change in your playbook?

JIMMY LEE: It is, and it goes back more than three months now where we think that, you know, there's been a shift. And really, if you look at the big tech names, they've been flat pretty much for the last few months and led-- and the sectors that are leading are the ones that I've mentioned. And so while we're still bullish on tech and we think you can be very selective there, I think there could be a continued rotation as the economy reopens and the big mega cap names, I think investors will find other opportunities, relatively, that might be better on the upside.

So I think you might see that rotation continuing to happen. And think about it, from the market bottom, you know, sectors such as small cap stocks are doing better than the large cap stocks, for example, and we're also bullish on international as well. And we think that there are opportunities outside the United States in terms of valuation.

And so investors being diversified, I know a lot of people think that's not an idea that works anymore, but I still do. And I think being diversified this year is very important and going forward.

BRIAN SOZZI: Jimmy, let's stay on international, because it looks like, this morning, we will finally get that Brexit EU trade deal. Where is the better place to put money, UK focused stocks or EU focused stocks?

JIMMY LEE: I think more EU at the moment, probably. I think there's still uncertainty as far as the Brexit goes and what's going to happen with the UK. But I think in the long run, everything will work out there.

And I'm glad that this is finally happening for the UK and for the rest of the EU. You know, UK is a very important country when it comes to trading overseas and still the capital of international trading. So I think that things will work out.

And again, most US investors are underweighted in international, whether it's emerging market or developed, and don't have enough of their money sent overseas. So I think working with their financial advisors and looking for that optimal mix is very important, Brian.

JULIE HYMAN: Jimmy, I do want to ask you, kind of going back to if you fell asleep on January 1st and woke up now, and kind of how you're thinking about investing going into next year, what have been your biggest lessons from this year? I mean, did you make any kind of calls that didn't pan out that you've learned from? And how are you applying that going forward?

JIMMY LEE: We can always do better. So we're always looking at decisions that were made or not made and how to improve upon them. But fortunately for the firm and our clients, we were rather lucky in some regard.

We rebalanced a lot of portfolios literally on March 23rd, on the bottom. So many people benefited from taking tax losses in their taxable accounts and with lots of gains right now. And so-- and taking advantage of, you know, even sectors that were normally out of our normal model and taking advantage of sectors that are travel related. For example, I live here in Las Vegas primarily, and a lot of the casinos and companies that are in the travel related industries got hammered. Still down, but they've come back a lot, including the airlines, et cetera. And so I actually think that that's another sector, where you can still have upside and better potential upside than maybe some of the bigger names that people have been going into when the economy has been closed.

So as far as lessons learned, I think for investors, if you think about it, you know, the downturn this year was extremely quick. It was unprecedented in that manner. It scared a lot of people. And but the lesson of this year is almost like every other bear market. You know, if people bought low, you know, during those times instead of selling low in a panic, think about where you'd be today. You might even be doing better than the market, right? And so-- or just do nothing and which is what most investors should do. Or maybe rebalance, you know, once a year or when there's opportunities.

So I think the lessons of the past of not panicking and when there is a correction going on and being diversified, you know, still held true this year. So I think as far as investors go and viewers that are listening to this, think about it for the next time around, you know?

And also, on the greed side, right now, there is a bubble potentially in some stocks, right, and maybe in some sectors. And to not chase and not be greedy. This is not going to go on forever.

I've heard some analysts talk about how this time period reminds them of the dot com bubble. Well, this time around stocks are actually making money. So I think that's a little bit different then, but the valuations are crazy in some of these names.

And so, you know, can these stocks continue to climb forever? Probably not. So not being too overweighted in any one company is very important.

JULIE HYMAN: Yeah. Although not all of those IPOs are making money quite yet. But your point is well taken.

Jimmy Lee, Wealth Consulting Group CEO. Happy new year. Happy holidays to you. We'll talk to you soon.