Payne Capital Management Financial Advisor Chris Payne joins Yahoo Finance’s Zack Guzman to discuss hit outlook on the markets as Salesforce, Amgen & Honeywell join the Dow index.
- And right now, though, I want to kick off the show with highlighting what we have seen, in terms of the market trade here, as we have seen coronavirus cases drop over the last seven day averages. We've seen that moving in the right direction. Perhaps highlighted though by Arizona, we've been highlighting the way that that state has been reeling in case counts there, down now 92% off its peak, even as we see the total case count for the country top six million. What does that mean for the overall market moves to watch here? That's the big question.
We're asking to kick off the show. And here to answer that for us is our first guests. Chris Payne is Payne Capital Management Financial Advisor. And he joins us now.
And Chris, thanks so much for joining us. I mean, when we talk about it, it does seem like there has been a boost. And we've seen so many record highs set in the month of August. I think a lot of that does tie back to the idea that we are seeing the case count here in the US improve.
When you look at it, we've seen a lot of the tech stocks leading this rally. I would just highlight that, I guess, when we look at the value sector there, you can look at SPHD. I guess, to kind of tie that in, when you look at the performance over the last month, tech, the XLK outperformed by a 2-to-1 margin. So what's your take right now on how investors might be leaning into tech, and what you're seeing right now, in terms of value stocks maybe being overlooked?
CHRIS PAYNE: Yeah, I think-- Zach, I think we've seen, you know, five to 10 years worth of growth in a three month period, as a result of the fact that the coronavirus, I would say, is the primary culprit of that. But you know, the way I look at it and the way I talk to my clients is that, you know, the old adage is you buy low. You sell high. And I have to say, looking at growth right now, it's-- it's looking pretty high. You know, forward fee on-- on growth right now is probably somewhere in the ballpark of like 30 to 31 times forward earnings. Whereas you look at things that are like, more value-based, they're trading closer to 18 times earnings.
The way that I look at it is that, you know, value for example, right now, is trading at a very low price. And not to mention, you're getting great dividends. So in my mind, it's like you're getting-- you're getting really good prices. You're getting income, whereas growth doesn't really pay out much, in the way of dividends.
And from my standpoint, it's a great buy. Not to mention that over time, value actually tends to bear growth 67% of the time. You know, on average, I would say it's probably somewhere in the ballpark of 4 and 1/2 times a year over what growth typically does.
- When we talk about some of these names though too that have been impacted by the coronavirus pandemic, I mean, you can look at a few of those-- Carnival and Norwegian Cruise lines, when we think about what's going on there, obviously there's some risk attached to those an names. But I'd be curious to get your take on why we haven't seen, as cases have improved, why we haven't seen some of these value names catch a boost here. Do you think maybe investors are just bracing for what could come when we hit the fall, and winter, and maybe that second wave? That's pretty much-- it's been talked about by Dr. Fauci, a lot of experts out there, fearing that. Do you think that's playing into some of the reasons why we haven't seen that rotation happen?
CHRIS PAYNE: Yeah, I mean, if you're talking specifically about the travel industry, the cruise industry. I mean, I can speak for myself. I'm not really super excited to go on vacation somewhere, especially on a cruise ship, which historically are known to-- to be a cause of spread of disease. So I guess that might be part of the reason why that industry hasn't recovered. I think it might take a lot longer for us to see those industries really turn around, as a result of that.
- Yeah, what are some of those value names then that you are watching, that you do see value in here, whether or not maybe that second spike comes? Because we have seen a few opportunities outside the travel industry-- financials, maybe, one that has not seen a very strong recovery here over the last few weeks. Where are you looking specifically?
CHRIS PAYNE: You know, I've never been one to pick individual stocks. You know, I like-- I like more broad-based indexes. You know, like a-- like a Vanguard broad-based index, you know, you're getting a broad-- a bread-- a broad basket of great companies. But to your point, like financials have really been taking a hit here. And I think, you know, even if we see, like, a little bit of a spike in rates, we could see those companies really start to recover.
- And just backing up, too, when we think about where we've come since those March lows, I mean, it's been fast. It's been fierce. I mean, think about this recovery. But over the last few weeks, we've been discussing how a lot of the incoming economic data has not necessarily shown a strengthening recovery. If anything, it's very clear that it has been weakening.
On that front, when you think about catalysts here over the next couple of months, I mean absent Republicans and Democrats agreeing to that fourth stimulus phase here. What are you really looking at? Because we've gotten pretty much the most accommodative Fed you can-- you can ever hope for if you are an investor out there. So what more has any hope to push the market even higher from here?
CHRIS PAYNE: Well, I think one thing is you know, the market, I think, is smarter than us. The market's always forward looking. And if you look at it right now, there's more cash on the sidelines than has ever been in history. And this even goes back to like 2009 after the financial crisis.
So I think at some point, people are going to get really smart and say, OK, you know, I'm getting less than 1% on my returning cash. I really need to get some return out the market. And you're not going to get that in bonds. You're going to get that in the stock market. Because you're going to get growth. And then, you're also going to get potential dividends.
- When we're talking about all this, too, it's strange to consider the fact that we're about to move forward here into September. We have an election looming. I mean, on that front, a lot has been made about the fact that the market does not enjoy close elections. The gap between Joe Biden and President Trump continues to narrow, President Trump gaining ground on that front.
What do you think that adds, in terms of the back half uncertainty? And what could happen, whether or not Joe Biden defeats President Trump? How does that factor into your investing thesis in the back half of the year?
CHRIS PAYNE: Well, you know, I think if you look at things more on a long-term basis, you know, politics in general, has very little long-term bearing on financial markets. And you know, typically, after election, markets tend to fare well. I think, you know, maybe the biggest changes we'll see is if the Democrats get in, will be some changes to the tax code. But I think as the past few elections have shown, I think-- I think the market probably will continue to continue on its path.
- All right, then. Let's talk, lastly, about the real impact here of what a lot of people-- I mean, whether you're Republican or Democrat-- have been open for, in terms of that next round of stimulus. We haven't seen those checks, even though that is something that they both agree to. We haven't seen those $1,200 checks cut once again.
We will be discussing, later on in the show, about states taking up the President Trump executive order here to start rolling out $300 to $400 in weekly benefits, though notably a little bit less than the $600 a week that we had seen before. Do you see that as something that the market may have already priced in here and getting some sort of skinny bundle deal between Republicans and Democrats? And what might you see coming out of that and changing the way that we've seen the market trade here at all time highs?
CHRIS PAYNE: That's a good question, Zach. I mean, I think-- I think the-- the benefit of potentially having another stimulus has hit the market. But I think that once that stimulus actually gets announced, and we start to see that to happen, I think that's going to have a much greater impact and much more positive influence on the markets, as we see in the future.
- Yeah, well, it's dragged on quite a bit. I know a lot of people out there are hoping it would have happened quicker than that. But Chris Payne, Payne Capital Management Financial Advisor, I appreciate you taking the time to chat.
CHRIS PAYNE: Thanks, Zach.