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Markets continue to flitter between stimulus hope and COVID concerns: strategist

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AlphaSimplex Portfolio Manager and Chief Research Strategist Kathryn Kaminski joins Yahoo Finance Live to break down how markets are faring amid pandemic and this weeks earnings haul.

Video Transcript

AKIKO FUJITA: Let's continue the conversation here with our first guest for the hour. We've got Katie Kaminski. She's portfolio manager and chief research strategist at AlphaSimplex. Katie, it's good to talk to you today. You've been hearing a sort of look ahead to some of the big tech names that are reporting. How are you looking at this space overall? And what's the headline you're going to be looking for when Microsoft or AMD reports this afternoon?

KATHRYN KAMINSKI: I think for us, it's been more about looking at the balance between challenges with COVID and also stimulus and how earnings come in. Are they going to be just second order to, sort of, what are the key themes, which is more people are just worried about, sort of, the baseline challenges. So if earnings are positive and they go in the right direction, does that just reconfirm a positive narrative of stimulus is going to help and, you know, if things are going to be better? Or if they're negative, will people ignore them, like they did through parts of last year?

ZACK GUZMAN: Katie, let me ask you this, too. And I'm sure some of our viewers out there are probably tired of me talking about it. But I like the note from Bank of America. It's a good note. When we think about the expectations and how we haven't necessarily seen a positive reaction to some of these earnings beats, Bank of America highlights last time we saw that, it signaled kind of this depth of growth versus value. What do you say to that idea that maybe, you know, it might have been a short-lived pop that we saw from some of these mega tech names, moving forward that value may, again, take the lead?

KATHRYN KAMINSKI: I think that's a hard thing to say, because one of the challenges a lot of investors forget is that the world has changed. And the composition of the S&P 500 and a lot of these indices that we follow have just naturally moved to be more tech-focused. If you look at things like the CAPE ratio over time, you'd look at it today and say, oh my goodness. Like, the S&P 500 is just so, you know, so overheated.

But ironically, the composition of the stocks within these indices has moved more to technology. And technology is maybe something that is more of what the future is. It's not about place, and it's not about book value. It's about value in sort of a more abstract sense. And that's not surprising to me because if you look at some of the research even going back 100 years, you'll see that back 100 years ago, almost all of the S&P was in railroads.

And so, that's kind of an interesting thing that we talk a lot about, is just sort of, you know, how much is this a change of-- that value is coming back, but value has a different face. Value isn't book value. Values maybe something else. And that's more sort of the discussion that we tend to be having.

AKIKO FUJITA: Yeah, that's an interesting point. We've had a number of guests on who have talked about just this transformation that's happened on a digital front over the pandemic, and that sort of companies that traditionally weren't tech companies are now inherently part of tech as well. So we tend to talk about tech overall, but certainly, a difference is we look at the multiple components in the sector. What are some other sectors you think that are actually being overlooked that are ripe for some opportunities right now?

KATHRYN KAMINSKI: I think you brought up a very good point in this idea that the pandemic didn't sort of change the world, it just accelerated change. And so any sort of company that is moving in that direction in the right way, whether or not they might have been a more value company, but are finding ways to be more savvy in what value is in the future, in a new more digital world is going to be an opportunity.

So it's not where you are today. Perhaps it's where you might be able to go. And I think that's where there's going to be some exciting, new changes, as the world continues to adapt to what has been going on in the last year.

ZACK GUZMAN: OK, one of the questions I think we get more now as we continue to watch the headlines coming in on the pandemic front with investors earlier this year, let's not forget, just a few weeks ago, kind of stressing their largest concerns might have been vaccine distribution issues or the emergence of variants that might be resistant to the vaccine.

And of course, we had the CEO of Moderna on yesterday stressing the vaccine is still fine. It still, you know, works against some of these variants, but that's an increasingly stressed question. So if you were advising, you know, clients out there to be a little bit more defensive here, how would you trade maybe some of the volatility that could be expected as those headlines come in?

KATHRYN KAMINSKI: That's a very good point because what we have seen is that the market has fluttered back and forth between hope and euphoria related to stimulus, and on the other side, concern over COVID. And I think this goes to the point that we often like a silver bullet. We like to think things are black and white. But on a daily basis, we're kind of navigating how much of this is going to be solved by stimulus, how much stimulus is needed, and even more so, how are we going to solve what's been not a simple problem, but a hard problem.

And so, we've seen that throughout the year. It's one of the particular points that we notice, is that there are a lot of trends out there. In normal information markets, you can imagine that information is processed quickly. But in new worlds like this, where we're trying to actually figure out where the world is going, things may take time to determine what's going to work.

And so, what that means is that investors need to start thinking about things not as black and white, and also start thinking, what is directions that we might move that may not have been possible before, or companies and investments that might adapt in ways that could be very accretive and positive for your portfolio, while still being aware of the risks in front of them.

AKIKO FUJITA: And Katie, while you're talking about shifts in the real world, of course, in the market space, so much of the discussion over the last few days, at least on our air, has been about the pressures that we're seeing from the retail investor. Yesterday, we were talking about the shorts being squeezed out, particularly on GameStop.

And we had a guest on who said, look, this is something that could potentially be destabilizing. How are you looking at the dynamics at play right now? And how big of a concern is what's playing out with some of these names that have significant short interest? How big of a concern is that for you?

KATHRYN KAMINSKI: So for us, it's perhaps more understanding where liquidity is coming from and who's trading when. One trend that we saw last year in the markets that is consistent with this is that there seems to be much more action around the close. There seems to be a lot more involvement in retail. Maybe it's perhaps just the accessibility and the fact that we're much more focused on the markets as retail investors, given the ride that we had last year.

I know Robinhood and other trading platforms and the amount of notoriety that those have gotten on social media definitely makes people more engaged and perhaps more likely to start getting involved in the markets than we might have thought. I guess, we all need something to do, right? These days.

ZACK GUZMAN: No, we do. We need something out there. And right now, for a lot of people, making money in GameStop seems to be-- or losing money, we should point out. Katie Kaminski, portfolio manager and chief research strategist at AlphaSimplex, appreciate you coming on here to chat with us today.

KATHRYN KAMINSKI: Thanks for having me.