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Market Recap: Tuesday, December 15

Stocks closed higher Tuesday as more updates on the stimulus front out of Washington helped at least temporarily offset concerns over the potential for more virus-related restrictions. Villere Balanced Fund’s George Young and The Wealth Consulting Group CEO Jimmy Lee joined Yahoo Finance Live to break down the details.

Video Transcript

SEANA SMITH: We want to bring in George Young. He's a portfolio manager at Villere Balanced Fund. We also have Jimmy Lee, CEO of the Wealth Consulting Group. Thanks both for being here. Jimmy let me just start with you, because we're seeing another day of gains, all. Three of the major averages here up over 1%. Yet, the number of COVID cases continuing to climb. We still don't have stimulus. Do you think we have enough here to carry this momentum not only through the end of the month but also into next year?

JIMMY LEE: I do, Seana. I think that we can get a little bit of consolidation before year end just due to normal selling at the year end for rebalancing or tax loss harvesting. Also, depending on where the polls sit for the Senate race in Georgia, investors might want to try to get ahead of that if they think that capital gains taxes may go up in the future.

So that could cause some additional selling before year end, and we could get a little bit of a pullback. But I am very bullish on equities at this point. And I do think that we may get a little bit more of a rotation into the economy open sectors. But I'm bullish. And I think that investors should look at volatility as an opportunity to buy in the dips. I don't want to sound like a broken record, but I still believe that.

ADAM SHAPIRO: George, if they are going to buy on the dips, you're talking about investors looking at dividends. A lot of talk today about dividends from a lot of our guests. Why now the focus on dividends?

GEORGE YOUNG: Well, it's pretty obvious. meaning the 10-year governments dealing 0.9%. That's not much to get excited about, and you got to lock up your money for 10 years to get that. So if you to think about inflation, the only way to counter that is to buy stocks that pay dividends, because over time, dividends should increase based on earnings. If earnings increase, then the proportionate to the payout ratio will also increase.

So right now, the S&P has a yield of something like 2%. So I think it's worthwhile for people to consider dividends. Also, to a certain degree, dividends have sort of been out of favor. Everybody's fallen in love with growth stocks that don't pay dividends. They offer growth, but they also offer some volatility. So we think it's a good idea to keep an eye on dividends.

SEANA SMITH: We're just around a minute to go until the closing bell. We want to bring in our very own Jared Blikre. Jared, taking a look at the movement here that we're seeing across the board, all 11 of the S&P sectors are higher. Let's get to your own.

JARED BLIKRE: Well, I'm looking at the NASDAQ 100 right now, even though small caps are outperforming again today. But specifically, Apple just, on another gangbuster move, almost up 5% for the day. Most of the mega caps were in the red this morning. Now, only Microsoft slightly in the red, down seven. Basis points-- Facebook has managed to turn a 1 and 1/2% loss into a 1/2% gain. And then in the EV space, we've got Tesla down about 1%.

Now, just looking at some of the sector action for the day. Utilities, now, in the forefront, up 1.87%. Energy just behind. And then materials, real estate, financials, tech, industrials, and discretionary all outperforming the S&P 500. To the downside we got-- excuse me, not downside because everything's in the green. We do have Staples Communications Services and health care. Those are the underperformers. But even Staples' up about a 1/4% of here. And here is the closing bell on Wall Street.


ADAM SHAPIRO: And that's a Tuesday wrap. We've got the S&P 500, the Dow, and the NASDAQ all closing up today. We're still waiting for markets to settle. But the Dow is going to be around 30,186. The S&P 500 is going to be up over 1%. And the NASDAQ's going to settle up over 1 and 1/4% as well.

Big sector moves today. We were talking about energy the past couple of weeks. It was down just yesterday. But today, energy up. That sector about 1.7%. Want to go back to Jimmy Lee and our other guests. We want to talk to you about when you talk about stocks consolidating, one of the stocks that people have shied away from-- not one, but one of the industries they've shied away from are the airlines.

There's so much pent up demand to fly. We're getting the vaccines. We're going to get some paycheck extension through the new stimulus. When could an investor in an airline stock expect to see a return?

JIMMY LEE: Adam, I think that some investors that bought airlines and other travel-related stocks when the market was really a lot lower in March, April, have done well with that. I know some of our clients have that wanted to get into those areas. And I think that now's actually not too late. And I think returns will be there.

And so the sectors that I think will do well are travel-related. That's included. Also, financials and industrials and materials. And these are the sectors that have been leading the market for the last three months. I think we continue to see that in a while. I don't think we get a huge sell-off on the mega cap tech trade. I do think that you might get a little consolidation there when we start to see the rotation more into some of the value stocks as, the other guest was talking about, and into the sectors I just mentioned.

And as far as airlines, I'm bullish on airlines. I think that-- not all airlines. But certainly, I think as a sector that there's a lot of room to go on the upside for that.

SEANA SMITH: George, just taking a step back here, and I know you like the dividend plays, and there is a reason for that, but when you take a look at where the markets are, the levels that we currently are at right now with so much uncertainty out there in the market, is there any thought from you that the market might be getting a little bit too ahead of itself, at least in the short-term?

GEORGE YOUNG: Sure, I don't disagree with that. We've got about 15% cash in our bill rebalance fund right now, and that's strictly a function of we're not finding that many opportunities that we want to buy. However, we are predisposed, and we are, I guess, eternally optimistic that the market, the stock market will do well. So there's always some dislocation.

If you just look at what's happened this year, it's been interesting in that the small cap stocks really didn't respond until September 1. Since September 1, if you look at the Russell 2000, which is a good proxy for small cap, Russell 2000 is up 24% versus the S&P up 5%. So that dislocation that we saw prior to September 1 has relocated, if you want to call it, post September 1. So it's been an interesting change, and that's what keeps our job interesting, I think.

So as for what's going to be happening in 2021, again, we tend to be optimistic, but we're not out of the woods yet. I mean, we have an economy that's slow. We have a vaccine that has been approved and looks like it will be distributed. But we still have the acceptance rate, so we've got to think about that. It's not a clear picture, but it never is. But we think there's some values out there, and we're always looking for them.

ADAM SHAPIRO: George, when you bring up the Russell 2000, it closed at a record high today as did the NASDAQ. But a quick question for you to follow up on that. There's that out-- you know, the election in Georgia could have an impact on this market. And you point out, George, that people might be concerned if the Democrats sweep, we get some new capital gains taxes. Do you really think that would dissuade or be a problem for this market going forward? Don't markets tend to do better under Democrats?

GEORGE YOUNG: That's a very general statement. And what we try to do is to pick individual stocks based on their potential and hold them for a longer period of time. Our turnover's something like 20% a year, which is less than our peers, which saves money for our clients. So we try to take that long-term view. So I'd rather take politics out of it.

I think you're right, that if the Senate is balanced, there won't be a change in capital gains. That's generally good for the economy. That's what we would hope for. But if you pick the right stocks, that's the way to approach it is on a metric-oriented evaluation approach as opposed to what are the taxes? What are the politicians going to be looking like?

SEANA SMITH: Jimmy, when we take a look at these uncertainties out there in the market, what do you view as the biggest challenge or the biggest headwind that investors face over the next few months?

JIMMY LEE: Well, the next few months are really going to be critical, because we've got cases going up and more deaths, and states are shutting down. And so we do need stimulus. And so I hope the politicians can put the American, you know, citizens' interests ahead of theirs and get something out there, because there are a lot of small businesses that are just hanging on by a thread that need more help and a lot of Americans that are out of work or will be out of work if we don't get more stimulus.

But with that said, in terms of stock market risk, in the short-run, I really do believe that the Senate race in Georgia, if that goes where we get a Democratic sweep, I think that could cause some short-term volatility in equities for sure. And then going forward, I think a lot of investors, potentially, would view a government that's controlled by one party not to be so good. And according to my records, stocks do the best when you have a split government, not one-sided. And so that's what we're hoping for as well.

JARED BLIKRE: We're expecting tomorrow and, of course, that omnipresent Jay Powell presser. Sometimes, it goes well. Sometimes, it goes badly. But seems like investors are kind of thinking this is going to be a placeholder meeting, not any expected policy changes, maybe a little bit of communication about its forward guidance strategy, for instance. What are you expecting? And what could come out of left field, perhaps? For George.

JIMMY LEE: Is that for me? Oh, sorry.

GEORGE YOUNG: Oh, I didn't know who it was fore. Sorry. Sure. I'll be glad to take that one. Again, if there's a change in interest rate, it's going to be somewhat small. There's not a reason, at this moment time, to make any drastic move. We've already seen the 10-year government move up to 0.9%, approximately. It was about 0.7% two months ago. So we've seen an upward movement already.

Don't think it's going to make a whole lot of difference. And I guess the big picture is for any investors, they need to think about what's best for their portfolio. And I would advocate for most people at this time, you got better value in stocks. So your bond portfolio shouldn't move too much based on what's going to happen in the immediate future.

ADAM SHAPIRO: Jimmy, did you want to respond to this? We had a guest in the last hour talking about a perfect storm in a good way, he said, of Janet Yellen and Jay Powell and both sides of the financial world next year. And that could lead to a bubble. And I fail to see how that could be a good perfect storm. But, hey, we got a low interest rate environment. Why not?

JIMMY LEE: Well, some people might say that we were in a bubble now. I mean, we have incredible equity markets compared to where the economy is. With that said, as I've said before, I'm still bullish on equities. I really do believe that consumer spending is going to be robust and maybe even better than what people expected.

And as we've spoken on this show before. You know, this V recovery or L-shaped, whatever people want to say. I think the recovery has been a lot stronger both economically and, for sure, the stock market than a lot of experts predicted, you know, in the doldrums of earlier this year.

And so I think that going forward to 2021, sure, with more stimulus, we have to be careful that we don't get inflation. But I don't see interest rates moving up too quickly too fast. And so I think we've got a balancing game there that the government has to do a good job. The Fed and the Treasury have to do a good job of balancing that going forward.

But I'm hopeful that, like I said, because we're such a big country when it comes to consumer spending, I really do believe there's a lot of pent up demand. And I think consumers will do well. And hopefully, corporations will prove-- I'm sorry, provide greater earnings, and that the multiples won't get out of control. And that's what we're hopeful for. And I'm very optimistic about the future.

SEANA SMITH: George, one area of the market where we've seen a lot of excitement, certainly over the last week, has been some of these big IPOs-- Airbnb, DoorDash popping to extremes here on their first day of public trading. We've seen them pull back just a little bit. But when you see this-- the fact that this new issue market is getting so much attention, that there's so much excitement, how do you read that?

GEORGE YOUNG: Well, I started in this business in 1984, and I came out of Villere in 1986, so I've been doing this for a long time. So it reminds me of the internet bubble in 2000. And I remember going through that painfully, where we had plenty of clients who called said why aren't you buying these wonderful stocks? And we said we need to see the valuation. We've got some revenues, but there are no earnings, and there won't be for some period of time.

So it's starting to be reminiscent of the frothiness of those days 20 years ago. That's what it reminds me of. These are popular stocks. Doubtless, all your viewers have been to an Airbnb. They've probably used DoorDash, so their products, they feel, or services, they feel, that they know very well.

There's a difference between a good product, a good service versus a good stock to buy. And I think that's what your viewers really need to focus on is let's think about a good stock to buy not the most recent service provider that we use. And I think that's very important.