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Market Recap: Thursday, September 9

In this article:
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Stocks fell on Thursday, with Wall Street logging a 4th consecutive day of losses. Ed Campbell, QMA Portfolio Manager and Managing Director and Simeon Hyman, ProShares Global Investment Strategist joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: We have just about a minute here until the closing bell. And we have our panel ready to break down today's action. And also what we've seen recently, what we can expect going forward. And for that, we have Ed Campbell. He's QMA portfolio manager and managing director. We're also joined by Simeon Hyman, a ProShares global investment strategist. But let's take a look at where things are in the final minute of trading. Because you're looking at losses across the board. The Dow off 132 points lower for the fourth day in a row.

The S&P off nearly half of a percent. You're also looking at losses in the NASDAQ as well, off just about a quarter of a percent. In terms of where we are seeing weakness within the Dow, Amgen and Merck, both of those stocks off just around 2%. Johnson & Johnson off 2% as well. Walgreens and Microsoft are also amongst the biggest laggards in the Dow today with both of those stocks off just around 1%.

In terms of the sector action that we're looking at today, we're looking at weakness in healthcare and real estate. Those two sectors, the biggest underperformers.

[MUSIC PLAYING]

- OK, it's a wrap. We've got to close on this Thursday for the markets. Let's see where we're going to end it up officially. We're going to have all three of the indexes in negative territory. The Dow is going to be off roughly about 150 points. We're going to have the S&P 500 down about 20 points. The NASDAQ is going to be off roughly 38 points. Let's go to our guests and talk about how to position going forward. Because this is all minor volatility, Simeon. But a lot of people get nervous when they start to see consecutive days when we close down, even if it's minor.

But we've had such incredible gains. Are we, you can't see the forest for the trees kind of scenario right now?

SIMEON HYMAN: Well, the concern, of course, is around the Delta variant. And we saw at that point on Friday that sort of confirms some concerns because the job report was a big mess. You're talking about a half a million miss off of expectations. What was interesting about that, though, was that yields still rose. And they pulled back a little bit. But they're still actually higher than they were prior to that big miss on Friday's employment number. And if you think about it, the odds of a zero fed funds rate, a little bit of inflation.

Because in that job report was actually very high wage inflation, over 4.3% year over year. That's the sticky stuff. So if you combine inflation, zero funds rate, which will hold for a while, but tapering that more and more people are talking about. And even the ECB with sort of the taper not taper talk this morning, that's the kind of thing that could spur the long end to start to rise as we go into the back end of this year. And that leaves you thinking, what am I going to do in the equity markets? And I think for us, the quest is for what you might call yield at a reasonable price.

SEANA SMITH: Ed, what's your view just on the recent action that we've seen the Dow lower for the last four days? I guess, how would you sum up what we're seeing play out in the markets? And then where do you expect us to go from here?

ED CAMPBELL: Yeah, well I think it's important to recognize that for most of the summer, it's felt like we've been in a one way market where stocks go up every day on low volatility. So it's not too surprising for us to stitch together four days of declines here. I mean, we're really not that far from all time highs. PE ratios are certainly high as their stocks are expensive. But I will point out that I mean, we've been in an environment where earnings through Q2 year over year grew 95%. US GDP on a year on year basis was more than 12%.

So we've actually seen PE ratios decline a bit here given the fact that we've had some tremendous earnings growth and corporate performance.

- Simeon, you talk about the S&P 500 dividend aristocrats. We just actually had on the CEO from Union Pacific talking about their yield is at around 2% whereas in the S&P, it's around 1.4%. And you make the point that if you're looking for a dividend play, quote, "have not been this cheap relative to the S&P 500 in over a decade." So what is your advice to those of us who are more conservative who want a position with dividend stocks, especially with the uncertainty of what might be coming in the next year or two?

SIMEON HYMAN: Absolutely. So you want those yields to be growing. And of course, that is the focus of the aristocrats in your prior guest. Dividends that grow consistently, because that's your best defense against inflation. And a long track record thereof, it shows you a lot of stability of cash flow and earnings. And indeed, the S&P 500 dividend aristocrats are ETF ticker N-O-B-L NOBL has been a little bit left behind in this megacap tech rally. And it leaves those yields about 100 basis points higher than the S&P 500. But importantly, they grow quite consistently.

And that, we think is a good recipe here. Because there is odds that inflation's a little stickier than the complete transitory notion. We shouldn't get complacent about it. And yes, the broad market has delivered earnings growth. PE multiples are coming down. But it's not a bad idea to look for even a little bit of the cheaper side of the current market, even though I'd be in agreement that I wouldn't call the overall market so expensive. But I'd still like to see some things that have been left a little bit behind in the last 12 to 18 months.

SEANA SMITH: Ed, where are you seeing opportunity in the market? Is it time to have a risk on strategy? Or is it time to take some of that risk off the table?

ED CAMPBELL: I would stay risk on. I mean, we are risk on in terms of our asset allocation. We're overweight equities and commodities and real estate relative to things like fixed income and cash. To Simeon's point, there are areas of the equity market that are cheaper. Value stocks, small cap stocks, cyclical stocks came out of the gate charging this year. But they faced a bit of a setback due to the rise of the Delta variant and some of the disappointing growth data that we've talked about, including the employment report, which Simeon mentioned.

But I do think that although growth is peaking, it's likely to stay solid. And once the variant peaks and declines and growth does stay solid, we think that's a good opportunity for value and small cap to have another period of outperformance here. And as your reporter in the earlier segment mentioned, even though we had a down day today, it was a day that was led by value stocks, including financials, energy, and materials.

- Ed, real quick. When you talk about the small cap stocks, we saw them at the beginning of this year had a bit of a rally as people were shifting out of the big tech stocks. That then seemed to fizzle a bit. What's going to spur that rally again do you think?

ED CAMPBELL: Well, I really do think it's like I described before, sort of us getting past the risks related to the Delta variant. So if we do see cases peak and start to decline again, if we do get a lot of the supply chain issues straightened out because I do think that is holding back growth. So really just evidence that although we're experiencing peak growth, we're not going to see a more ominous slowdown. We're going to see a continuation of solid growth rates.

SEANA SMITH: All right. Our thanks to Ed Campbell, QMA portfolio manager and managing director, and also Simeon Hyman, ProShares global investment strategist.