Yahoo Finance's Kristin Myers and Michele Schneider, Marketgauge.com Director of Trading Education and Research, discuss the impact of Trump's COVID-19 diagnosis on markets.
KRISTIN MYERS: All right, well, let's get to today's market moves and also pick up on the back of that report from Sibile Marcellus. We have Michele Schneider, MarketGauge.com Director of Trading Education and Research. Michele, thank you so much for coming back. It's been couple of weeks since I saw you last.
Now, I was looking at your note a little bit earlier today. And it looks like you agree with Tom Lee that the president's diagnosis could ultimately be positive for markets. I'm wondering if at all there could be a downside, however, to markets from this diagnosis, perhaps if the president does not recover as quickly as we all think or if he comes out and says it was no big deal. We can continue to reopen the economy and cause that surge or those uptick in cases going forward.
MICHELE SCHNEIDER: Well, yes, when I was listening to Sibile reporting on what Tom had to say, I was like, wow, I can't believe he's almost verbatim saying what I had sent to you in my notes. So we're on the same page, and that makes me feel good. When I first heard the news this morning and saw the swoon in the market, obviously, that was concerning because the market looked like it was really trying to come back over the last couple of days. But what could happen, obviously, is the positive, as you said, in that we could see the economic recovery somewhat, or at least hopeful in that things will open up because the symptoms are mild.
And somebody like Trump, who's considered high-risk, being who-- his age and his weight, as I've read, survives it, that will be positive. And we don't know. I mean, we don't know, really, whether his symptoms will worsen or stay mild here. We do know that he obviously will have the best medical care that anybody could possibly have. So that will also be a signal.
But what is happening in the market, whether it's a result of this or not, is a huge rotation. So you've pointed out that tech stocks are down a lot, but what is up today, interestingly enough, is a lot of what I like to call my economic modern family, or the inside sectors of the market.
So the Russell caps-- small caps are up. Transportation is up, partly on the rumors that some money was coming to the airlines. Biotechnology is sort of teetering there. And the financials, the regional banks, are up as well.
And the retail didn't get hit too hard. So to me, this is really where you're seeing the optimism of the fact that this diagnosis that Trump had really means that the economy can still open because it's not a death sentence.
KRISTIN MYERS: Michele, I'm glad you brought that up. And to the point of financials, they're up one and a quarter of a percentage point right now on a sector basis. So then how should investors start looking at their portfolios over the next couple of months? Should folks start rotating more towards those value stocks, or do you still think that growth is going to be leading the day over the next couple of months?
MICHELE SCHNEIDER: An excellent question, Kristin. Well, first of all, I would say that we saw this a couple of weeks ago, where values started to catch up and growth started to sell off. And then that flipped immediately. So we can't really say one day is a trend that we can count on and start pouring our money out of tech and putting it into some of these value stocks.
However, I will say, though, that with stimulus the biggest question mark right now on the table, are we going to get some-- Nancy Pelosi did say this morning that she felt now that Trump had been diagnosed, there was a certain urgency to getting a deal done. I don't know if that means she's willing to compromise more if the House passed the $2.2 trillion, which, of course, we know will probably never pass the Senate.
But nonetheless, that, I think, I would wait a little bit for before I would go gangbusters into value stocks. I'd watch them, but I would wait, because if the stimulus doesn't happen, regardless of what happens with Trump getting better or not, the economy will continue to open. But what we can see from the statistics right now-- factory orders, the unemployment numbers, et cetera, we're stagnating after that first initial period of growth.
KRISTIN MYERS: I do want to ask, because I never predicted this news from the president-- and we've been talking a lot about-- you know, Thomas Hayes actually said this a couple days ago, how there's an information vacuum and a lot of question marks all around right now on the stimulus, on the vaccine, on the labor market going forward. I never predicted that the president's diagnosis could be a catalyst for the market coming up.
But even pushing that to the side, what do you see with all of these question marks out there? The election would be another one. What do you think is going to be the next catalyst for the market? Would it-- do you think it might be stimulus, or is it a combination of all of these things?
MICHELE SCHNEIDER: Well, I would say a combination, but I think stimulus is the number one thing. You and I've talked about this in the past already, because this has been a topic of discussion now for a while. And of course, not being a political analyst and certainly not trying to pretend to be one, just from a logical s-- point, it seems to me that neither side would want to see the market really go down a lot ahead of the election. I've heard other arguments that the Democrats want the market to go down for other rea-- you know, I-- who knows?
But it seems to me that there will be a stimulus deal, and that will be the catalyst of the market. But what I'm looking at at this point, while we're waiting and seeing and it's really hard to predict, is what's happening sort of underneath. And that is a stagflation environment, even though most people weigh inflation on oil, which of course has really been killed. There's been a shift into different types of energy.
And there was an interesting statistic that came out today that more-- for 60 years, Americans are now spending more money on electricity than gas, which of course is part of the stay-at-home workplace. But it also means that, as consumers are spending, what we're starting to see also is these food shortages, not just in the United States, but globally, partly because of climate change. And this is really where I keep putting my money is into soybeans and corn and wheat and sugar. And that's really what I'm watching here, because that could actually be the next trend going forward is the market could find a place, stagnate, but these food commodities could lead to a different types of inflation, not an oil-based inflation, but an energy and climate change and food shortage inflation.
KRISTIN MYERS: Michele, I only have about a minute left with you. And so as a last question, I want to ask, and this has been top of mind for everyone-- election risk. How much risk and how much volatility do you think will be coming around the election, particularly given now the president's diagnosis? And do you think that we might actually see a pullback in the market right before the election?
MICHELE SCHNEIDER: Well, I wouldn't be surprised. There's a couple of other factors into the election now that will be weighed. And one is how much more social unrest we will see. There's a lot of fervor and passion about the Supreme Court justice, for example. And then, also, there's been a lot of insinuation about the election results and whether they'll be contested.
So any logical person would probably either be buying volatility at that point-- I know Leon Cooperman said he's in gold for the first time. Yet gold hasn't really behaved well. So yeah, I think that right before-- but in terms of the fear that if Biden wins the market goes down, some of that is starting to shift.
I can see that in the market, because the initial reaction this morning was, wow, maybe now we'll have a Biden win. We don't know that. But that's what I watch for-- social unrest to increase to a point where it rattles the market. It would have to go pretty extreme for that, because the market tends to be dispassionate. What happens also with, in terms of the election-- is it a landslide, is it close, will it be contested, et cetera?