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Markets move higher, tech stocks look to rebound but 'this is not a bubble': Market expert

Kirk Hartman, Wells Fargo Asset Management President & Global CIO, joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss what's moving the markets on Wednesday morning.

Video Transcript

BRIAN SOZZI: All right, Kirk, give it to us straight here. This NASDAQ correction, is it over, or a week from now, we're sitting here, and the NASDAQ's down 20%?

KIRK HARTMAN: Well, I think you have to expect more volatility. As you know, these NASDAQ stocks have had a phenomenal run, so I think a bit of correction is to be expected. I think when volatility kicks up, you also have a lot of the algorithmic trades going in, so I think a lot of this is driven in the options market. But to your point, expect more volatility.

ALEXIS CHRISTOFOROUS: Kirk, there has been talk out there that this is looking a lot like the late 1990s and early 2000s when the tech bubble burst. This time is a lot different for a lot of different reasons, but should investors be fearful that there is a tech bubble and it is about to burst?

KIRK HARTMAN: I do not think this is a tech bubble, and I do not think this is a replay of that era. I do think that tech stocks are fully valued, and in a normal interest rate environment, you probably would say that they are a bit excessive. Given where rates are and given the coronavirus, I think that there's a reason that the tech stocks are fully valued, and I think the key to me about valuation on these tech stocks is where interest rates stay. So if interest rates stay low or almost zero, I think that these stocks will continue to do well. I doubt they're going to go up much, but I don't really think we're in a correction territory.

BRIAN SOZZI: What would be the catalyst, Kirk, for investors to get back into these stocks? I mean, we don't have earnings season for another, what, month and a half?

KIRK HARTMAN: Well, I think you have to be patient. I think what you want to do is to play the value sectors and the other areas of large cap that are way behind. I have never seen the spread between large caps growth and large cap value. I mean, the spread between those two sectors of the market is something like 3,900 points, you know, meaning that the value stocks are really behind the large tech. So I think we're in a scenario where the tech stocks have some volatility and stay flat, but what I would look to is whether the other traditional industrials and the value stocks catch up.

ALEXIS CHRISTOFOROUS: You know, to be fair, tech wasn't the only sector down yesterday. All 11 sectors in the S&P 500 were down. So, Kirk, where are you seeing some good entry points right now and opportunities for investors?

KIRK HARTMAN: Well, I think you want to look overseas. You know, I'm very interested in the European markets and Asia. I think that the thing that's interesting is the dollar has had, you know, had quite a run and now is down something like 8% or 9% from where it was. And again, I come back to the level of interest rates.

So I think there's opportunity overseas if you look at Europe or you look at Asia on a relative value basis, a lot behind the US. You've got the overhang of the election coming up and, you know, the worries about trade wars and that kind of thing. But I think the international markets, especially if the dollar starts to weaken, which I think it will, I think offer value.

BRIAN SOZZI: Kirk, how concerned are you about the sell-off in oil?

KIRK HARTMAN: Well, oil has--

[LAUGHTER]

It's been very volatile, as you remember. There was that day there when, you know, the futures market was saying that oil was below zero. So we've seen-- look, in the last 10 years, we've seen oil run up to-- what was it, not too long ago, maybe five, seven years, it was up at 100? So it's going to go up and down. But again, oil is very, very much a function of where the economy is. So if you get the rebound next year, which I think we're all anticipating when we get the vaccines, oil will rebound. But clearly in this kind of sluggish growth, you know, market, we're in, it's going to languish for a while.