Invesco Chief Global Market Strategist Kristina Hooper and WealthWise Financial CEO Loreen Gilbert join the Yahoo Finance Live panel to discuss the latest market action.
- OK, we've got about 2 minutes, 30 seconds to the closing bell on a day when we could see the S&P 500 set a new record close, and the NASDAQ is now above $15,000. We are going to get to that closing bell with Kristina Hooper, Investco's Chief Global Market Strategist, as well as Lauren Gilbert, who is WealthWise Financial's CEO.
Loreen, let me ask you this question, and forgive me for simplifying it. But in your notes to us, you indicated that you had actually been pulling back a bit from equities. Why?
LOREEN GILBERT: Well, overall, we're still seeing strength. We've seen tremendous strength in the last quarter with earnings. And so we've also seen revisions as far as the SPX by the end of the year. So we are in agreement with that.
However, we think that there are some bumpy roads ahead, mainly because of the delta variant and other things that could create shocks to our system. And with that, it's time to get back to a normalized asset allocation. So we are just getting back. We've had such a run up this year that we're getting back to our target risk analysis and where we want to be, so that if we have a shock, we could then increase equity exposure again.
- Kristina, what about you? Do you think that the delta variant's going to scare people away? Or are we seeing them-- no problem?
KRISTINA HOOPER: Well, certainly the delta variant, given the day, given the headlines, has a negative impact on stocks. But we've also gotten some good news recently with the approval of the Pfizer vaccine. So that's really, I think, driving sentiment right now.
We also got good news last week in that Dallas Fed President Kaplan talked about how if the economy is impacted by the delta variant, that he would advocate for an alteration of the tapering timeline. So the good news outweighs the bad news today, and I think it will outweigh the bad news for most days in the coming months.
Having said that though, we should expect more volatility. I agree with Loreen on that.
- Yeah, we're going to talk about that volatility, but I've got to tell you, as we get ready for that closing bell, sector action right now. The gainers are in energy. Some of the losers, consumer staples as well as real estate are down. And here's the closing bell.
- That wraps up a record day on Wall Street. US stocks in record territory. NASDAQ and S&P closing at all time highs. Treasury yields also inching higher. You could see the Dow up 32 points, S&P up just around 6 points as we check out the final trades of the day. The NASDAQ, up 77 points.
In terms of some of the leadership that we saw in the market today, Goldman, Dell Inc, and Caterpillar are the top performers in the Dow today. Sector wise, energy by far the winner. We're also seeing some gains in materials and consumer discretionary. Also the reopening trade, some of those travel stocks that got a boost yesterday pushing even higher today. Some of those airliners and also the cruise lines are among some of today's big winners.
Let's bring back in Kristine Hooper and Loreen Gilbert to help break down the action that we saw not only today, but what we could expect going forward. And Kristine, let me just go to you first, because briefly right before the bell, you were talking about, we could expect to see more volatility ahead.
I guess when investors hear, that maybe some of them get a little bit nervous. How big of a potential pullback could we see because of this volatility, do you think, in the short term?
KRISTINA HOOPER: Well, I think it is possible to see a 10% or around 10% correction at some point. Keep in mind that stocks have had just an incredible run, really, since March 2020, with very few significant drops since then. Now having said all that, I do believe that stocks would have a very rapid recovery, because this is an environment that favors equities and other risk assets.
So from my perspective, yes. I wouldn't be surprised to see anything like that, but it also wouldn't rattle me. I do believe investors should think long term and stay invested.
- Loreen, a lot of us think we can time the market, and we are mistaken thinking that. So what do you say to investors who are waiting for guidance from the Federal Reserve and Jay Powell's speech on Friday, who are then going to make a decision. Is this a foolhearted way to try and go forward?
LOREEN GILBERT: Well, all eyes are on Jackson Hole this week, and we'll get more guidance on Friday most definitely. We actually expect to hear, perhaps, a timeline for tapering. And what investors need to realize is that I think we're going to hear interest rates are off the table for lower rates for longer. And that still is good for equities, still is good for the overall economy.
And so with that, investors need to understand that the Fed's guidance will give us a clear vision. And with that, we are saying that we do think equities are going to end the year higher than they are today. So it is a time, we're even seeing in the market today a risk on positioning.
So just like Kristina was saying, and I was saying, a rocky road. So use those opportunities, use dips as ways to enter or increase equity exposure, but keeping your overall asset allocation in check.
- Kristine, when we talk about the Fed, and we'll hear from Jay Powell later on this week I guess. What do you think needs to be communicated? What exactly is the market looking to hear?
KRISTINA HOOPER: So, I think the market is looking for comments around tapering, including a taper timeline. But what the market really wants to hear is an echoing of what we heard from the Dallas Fed President last week. That the Fed is willing to adjust if, in fact, the delta variant does have a negative impact on the economy going forward.
And so that, I think, is going to be the key message, is that willingness to be flexible depending upon what happens to the US economy. That it is not full speed ahead, adhering to a taper timeline that might not make sense if the US economy takes some hits in coming weeks and months because of the Delta variant. That's critical.
- Christine, when we talk about the delta variant, I'm looking up a statistic as I'm asking you this question. Actions speak louder than words. That's something that you have made very clear. And one of the things, like, with traveling, I'm looking at TSA throughput, it's still almost at 2 million a day, although it fell yesterday. It was 1.8 million.
But travel is still holding despite, we're hearing from the airlines, a slowdown in booking, despite some cancellations. It's still leisure demand. So what is that telling you as you look-- I'm not saying pick a travel stock, but what's it telling you about where we're headed in the as we go toward the fourth quarter?
KRISTINA HOOPER: It's telling me that not much has changed. Yes, consumer sentiment has gone down in the most recent reading. But the reality is, it hasn't changed people's behavior. They're out and about, they're dining out, they're shopping out. We look at go Google Mobility numbers, and they're still rather strong.
So from my perspective, nothing really has changed, even if people are getting a bit nervous about the delta variant.
- Loreen, let's also take a look at what's going on down in DC, because you have the infrastructure deal that's going through the House, also bi-- excuse me, not the bipartisan, but the budget reconciliation, that $3.5 trillion bill. I guess, how important-- are those important at all to the markets? How are investors viewing those two things?
LOREEN GILBERT: Well, that's what I think a lot of investors are missing when investors say, you know, where do we go from here? We see where we're going from here with all that stimulus. And that stimulus, by the way, is going to be put into the economy over the next 8 to 10 years. So that's a huge tailwind for our markets, with that continued spending to increase.
And so when investors ask me that question, I say, look to the stimulus, and don't fight that stimulus, just like we say don't fight the Fed.
- Loreen, I mean, I guess it would be easy to pick sectors, especially with at least $1 trillion in new spending coming. But are there sectors that we're overlooking? Because we all can see the obvious?
LOREEN GILBERT: Well, I think one area that people may not be on their radars, is that we're going into the mid cycle. And in the mid cycle, communication services tends to be one of the outperforming sectors. And so we've been increasing our exposure as we see companies doing increased advertising sales.
So I think that that's going to be very additive for those companies that are focused on communication services. So that's one area of the market that we're looking at.
Another point, with that, is that the mid cycle is the longest cycle. And so we're very far away from the late cycle. And so once again, even though we've had such a run up in the market, we're seeing earnings support that run up, and that's why we're seeing revisions to our end of year estimates.