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The market is ‘settling down’ following GameStop saga: Strategist

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MAI Capital Chief Equity Strategist Christopher Grisanti joins Yahoo Finance Live to discuss the latest market action as Alphabet and Amazon report earnings.

Video Transcript

AKIKO FUJITA: Welcome back to Yahoo Finance Live. Let's take a look at where AMC and GameStop are trading today, seeing a very slight bounce back, we should point out, although not really significant when you consider both of these stocks sold off more than 40% in this session yesterday, as the Reddit trade started to unravel. All of this comes as Treasury Secretary Janet Yellen calls for a meeting between key regulators, including the head of the SEC, the Fed, to discuss the volatility in the market.

Let's bring in Christopher Grisanti. He is chief equity strategist at MAI Capital. In many ways, it really took, Chris, a shake up at the top of the largest company for the conversation to shift a little in the markets. But how are you looking at the volatility right now when you look at the impact from the retail trade versus the fundamentals at play?

CHRISTOPHER GRISANTI: Well, Akiko, it's good to be with you. I think today just feels so natural. We're talking about the real big news, which is Amazon transition-- and by the way, terrific earnings at Amazon, which were eclipsed by the executive news-- and the Google complete blowout earnings. And these are two trillion dollar companies, as opposed to GameStop, which even at its peak was $20 or $25 billion.

So I think we're back where we need to be. And I think the market is settling down, and professional investors feel more comfortable in a market that just seems to make a little more sense this week.

ZACK GUZMAN: And Christopher, I mean, I wonder what that might do to set us up from here, right? Because coming into Alphabet's big pop today, we had seen a lot of companies, including those tech names, kind of report and not necessarily see any reward for beating estimates. So what do you make of that maybe being a tide change here when we think about where we go in the rest of 2021?

CHRISTOPHER GRISANTI: Yeah, in fact, Zack, we've been sitting here in January, waiting for the reward for some really terrific earnings. Facebook, for example, had, you know, 5% or 10% upside to their already big expectations, and the stock went down. So, again, we like it when things make more sense. And I think as the ship is stabilizing, you're going to see that more and more. You'll see some earnings coming up. And I think you'll see some catch-up trade, like with Apple and Facebook and things like that.

AKIKO FUJITA: Given that we are right in the thick of earnings season, particularly from these big tech names, I wonder how you're looking at the tech space overall. It seems like the headline from every company, including Alibaba yesterday, saying they posted a profit in cloud for the first time. We talked about the growth in Google Cloud-- AWS, of course, firing on all cylinders. How are you looking at the growth in this space and where to put your money?

CHRISTOPHER GRISANTI: So, Akiko, I think the smartest thing for investors to do is not be too put off by the admittedly lofty valuations, and instead, focus on their best guess at the cash flow over the next two or three years. So when you look at it that way, you take companies like Facebook and even Amazon and Google, and you see not only huge cash flows of $100, $200, $300 billion, you know, cumulatively, but you see it growing at 15%, 20%, 25% a year.

So you can get used to high valuations. I think that the pandemic didn't change the world as much as accelerate it into the future. We're not going back to pre-pandemic. In other words, Amazon was good in 2020 because of the pandemic. But it will remain a strong performer going forward. And we just brought all this stuff-- accelerated it. So I'm actually quite upbeat with the right tech names. I'm not saying be indiscriminate. But I am saying just because it's done well, take each one individually and weigh out the cash flows coming at us. And it's pretty encouraging. And so, I would still be an investor there.

ZACK GUZMAN: From a macro sense, obviously, we're going to have what looks like Democrats just going their own route to get through that $1.9 trillion stimulus plan on the reconciliation front. Some people have been connecting the dots in the last stimulus check we saw come through as a trigger to some of the retail activity. I wouldn't necessarily connect those dots and connect correlation and causation. But what should investors make of how big a $1.9 trillion package would be for the market overall and this recovery that seems to be maybe faltering a little bit in January?

CHRISTOPHER GRISANTI: Well, you know, I think even if they don't get the whole 1.9-- and frankly, I don't think they will-- I think it will be easily over a trillion dollars. And just to put some perspective on that, the stimulus package for the global financial crisis 10 years ago was only $700 billion. And add this trillion plus that we're about to get to the about 2 and 1/2 trillion that we've already gotten.

And what I like to say is, look, we're paying a lot of money for this recovery. Let's enjoy it. I do think it will stimulate financial assets and will continue to do so through 2021. I get a little nervous later in the year, as I think it will almost do its job too well, and we may start to see higher rates as the year closes.

AKIKO FUJITA: That $1 trillion you said at least is what you're expecting in terms of stimulus, how much of that do you think has actually been baked into the market? How much of a lift are we likely to see if, in fact, the Democrats can get the number to that?

CHRISTOPHER GRISANTI: You know, I think you'll see a lift-- I think there's a kind of a win-win here. If they do get close to the 1.9, the market will love it. If there's some bipartisanship and we get 1.1 or 1.2, I think the market will like that, too. And don't forget what's waiting in the wings is a huge infrastructure package, which both sides will vote on and it'll bring something to each of the congressperson's districts. And so, that's going to be yet another shovel of coal into the stimulus engine. And I think we're-- you know, we can argue about whether that's wise or not, but it's almost certainly going to happen.

ZACK GUZMAN: Yeah, maybe under the Biden administration, a little bit more of a solar-- a renewable energy metaphor there. Maybe more solar boost here for the train running along--

CHRISTOPHER GRISANTI: Sure.

ZACK GUZMAN: --instead of coal. Christopher Grisanti, MAI Capital chief equity strategist, appreciate you coming on here to chat today.