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November 2020 will end up being ‘one of the best months’ for investing in this decade: strategist

Baird PWM Market Strategist Michael Antonelli joins Yahoo Finance Live to discuss why November will end up being one of the best months for investing in this decade.

Video Transcript

MYLES UDLAND: Joining us now to talk more about everything going on in the markets is Michael Antonelli. He's a market strategist over with Baird Private Wealth Management. Mike, great to talk with you.

This morning, let's begin by just maybe talking about November so far. I mean, let's assume we don't see any 7% move in the S&P today. So we can pretty much know what November has, right? And it's been, I mean, in a year full of crazy months perhaps the one that maybe gave us the most clarity on sort of where people see things going. How are you thinking about November?

MICHAEL ANTONELLI: Yeah, I also remember pre-election doing a whole bunch of events for Baird and for our clients and just talking about the kind of uncertainty around the election, and kind of what scenarios might play out. And I remember, you know, constantly being bombarded with the notion that we might have some sort of like super volatile, contested election. And you know, when that kind of stuff happens, when you hear that kind of stuff in the news, you know, that tends to not be what happens in the market.

So we ended up, like you said, we ended up having not only a little bit more clarity added to the political world, we also had technicals really, really make some impressive moves. And when I talk about November, you're talking about more highs in the NYSE and the NASDAQ than we had in early 2018. You're talking about the best month since 1987. You're talking about greater than 92% of the stocks in the S&P 500 being above their 200-day moving average, the highest in seven years, the global Dow hitting a new all-time high. Transports, just as utilities-- our friends at Strategus, a Great Bear company, they're comparing transports to utilities, and it shows the cyclical nature of the breakout going right now. So November is going to end up being one of the best months, my friends, you know, maybe in decades.

JULIE HYMAN: And Mike, so as we look ahead from November at that momentum, right, we've got some deals that we're talking about. We were just talking a few moments ago about S&P Global agreeing to buy IHS Markit. We've got an uptick in IPO activity, right-- DoorDash just filing for its IPO this morning. And so I'm curious what these various things tell you about sentiment, right, that on the one hand, you know, S&P says, you know, this is the right time to make an acquisition. On the other hand, we've got all these hot IPOs that are coming in, but maybe not as at high valuations as they once were.

MICHAEL ANTONELLI: Yeah, think about what these corporate CEOs are kind of faced with. They need to grow earnings. They need to grow earnings. We've got to get on the other side of the pandemic. Money is cheap. So animal spirits in terms of deals starts to pop up.

I think that, you know, "The Wall Street Journal," some other news media organizations-- we're talking about Salesforce in advanced negotiations with Slack. Then you come up to this SPGI info deal and, you know, to me animal spirits. It leads me to believe that animal spirits are coming back to the market from a corporate perspective. Money's cheap. These acquisitions are potentially, potentially a catalyst for these companies.

IPO market starts to heat up. You start to see some stocks come back to the IP-- that's all healing to me. So healing, to me that strikes me as saying that the market isn't-- is thawing out from its kind of static entity, its static state that we were stuck in during the COVID world.

And I think this vaccine is starting to give not only consumers like you and I, and your listeners, and your watchers here a thought about where six months to 12 months might be, and it's also starting to give it to these corporate CEOs. And they're looking at the landscape. They're looking at low interest rates, cheap money. And that's-- it's a catalyst. It's a catalyst for them. It's a catalyst for us.

JULIE HYMAN: And just to mention, since we're talking about deals, right, there is now a report from CNBC that the Salesforce acquisition of Slack is expected to be announced tomorrow. And those Slack shares are spiking in the premarket as a result of that headline, so just to put a fine point on some of the headlines that we're talking about involving deal flow. Brian?

BRIAN SOZZI: Yeah, Mike. Myles mentioned this in our morning meeting this morning. You have Palantir up about 150%. I would argue most people still have no clue what this company even does and what they might be doing for the next 75 years. Do you think activity we see in Palantir and really across so many other sectors, is that evidence of a bubble forming in the markets?

MICHAEL ANTONELLI: I don't think so. You would never run into me on social media or Twitter, on my blog kind of talking about bubbles. I don't think that there's a bubble in the stock market right now. That's not kind of one of my views.

You know, when you think about something like some of these names that maybe people don't understand what they do or maybe they're new to the market, you know, you got to remember that it's not just institutions that are kind of trafficking in the market. We know that institutions can be a big, huge part of what drives markets on a day-to-day basis. But you know, we've entered this world where there are fans of stocks, if you will, almost like fans of sport teams. And they traffic in places like Robinhood, if you will. And they can end up sponsoring a name. They can end up being so into a name they can end up moving a name because, you know, once it gets interesting, once it hits their radar, you know, it starts to become part of the market's narrative.

And then you could even-- if you even want to talk about that take versus Tesla being added to the S&P, we could talk about that. But you know, these names might not be well understood, but they end up getting a bunch of fans out there. And those fans drive the price action.

MYLES UDLAND: Well, Mike, I guess related to that-- and it's-- I mean, you're sort of talking about the meme market, right? And I guess, you know, from where you sit, the institutions that you talk to, I mean, these are more staid, buttoned-up, conservative-type investors. Is this something though that money managers need to be at least aware of? Like, there is a market of all these meme ideas and meme stocks, and they actually drive flows around the edges of what BlackRock does, and it is a major-- it's a part of the story whether you like it or not.

MICHAEL ANTONELLI: I think that's right. I think that's right. I mean, I've covered institutions for about 12 years when I was an equity trader on Baird's sales desk, equity trading sales desk. And you know, institutions, they have their mandates. They have the way they invest. They have their styles. And they stick to those, right? That's what they're doing. That's how they're managing money for their clients.

This is new. This whole notion of Robinhood, even at the border, somebody like Dave Portnoy, that kind of stuff seeps into the market, and it ends up having an effect, like you said, at the margin on price action. I believe that the long-run institutions tend to dominate the flows of the stock market. But in these moments, in these moments, like we experienced in 2020, you're right.

You can get fans of a name, memes. You can get them talked about on all sorts of different venues. And then they become part of the witch's brew. They become part of the narrative, that the institutions, they probably say, whoa, what's happening? And maybe they're not-- you know, maybe they're not thinking about that angle, Myles. So I think it's interesting. When I think of Palantir and I think of some of these other names, there are names that you end up seeing on one of a top 20 Robinhood list or something like that.

JULIE HYMAN: Right, but it doesn't seem to have much of an effect on the broader market perhaps--

MICHAEL ANTONELLI: No, no, I doubt it.

JULIE HYMAN: --as much as those individual stocks. Mike, are you looking at downside protection at all right now? I mean, it seems like there is just-- we may not have a bubble, but there is epic bullishness out there right now seemingly, especially with the progress we've seen on the vaccines that we just heard about from Moderna's CEO Stéphane Bancel. Are you buying any insurance of any kind in case something goes wrong?

MICHAEL ANTONELLI: So I-- you know, sentiment is flighty. We know sentiment is something we track all the time. There's people out there that do a good job kind of monitoring where it is. Sentiment only works at extremes. Like, if you see sentiment rising, there's places you can look for it. It only really works as a turning point at extremes.

One of the things that I'm worried about next year is that the notion of a boom, the notion of a roaring '20s is starting to become a little more consensus. I'm starting to worry about, hey, there's a vaccine. Hey, I'm going to go to a million concerts. I'm going to go out to dinner every night. I'm going to be out spending as much money as I can.

I'm worried that that is starting to become consensus. And that puts a little bit of fear into me, where I start to think, you know, how am I going to play it if this stuff is already priced in? And I may not be buying protection here at this moment because I think that the technicals are so strong that that argues for a nice rally into year end. I might think about that in the start of next year when I look at the landscape and I say, how many people are writing about the roaring '20s? And if I see Myles's Substack being like, hey, this is going to be the best year in 50 years, then I might start to sit back and say, all right, maybe I need to circle a little bit on whether, you know, we are too over our skis or whether we need to pull it back. But I think the technicals right now argue for a continuation of this pattern, a continuation of this strength at least into year end.

MYLES UDLAND: Mike, I appreciate being considered a contra-indicator, certainly the highest honor that anyone in the media can hope for in any market environment. Mike Antonelli, market strategist with Baird Private Wealth Management. Mike, always great to get your thoughts. Thanks for joining.