Tony Dwyer - Canaccord Genuity Chief Market Strategist joins Yahoo Finance’s On The Move panel to discuss how markets are faring amid the pandemic.
JULIE HYMAN: Let's now bring in Tony Dwyer. He's Canaccord Genuity Senior Managing Director and Chief Market Strategist. He is joining us from upstate New York. Tony, it's always good to see you. Before we dive into your current thinking about sort of positioning in this market, I do want to ask you about this stimulus bill, right, because we've talked a lot about it.
We've talked about-- a lot about the potential economic impact. We have had a correction in the markets. What is your thinking around the stimulus bill and how vital it is from a market perspective for it to get done?
TONY DWYER: Well, clearly, it's important, because every wiggle and giggle that we're getting in the market in the last couple of days, Julie-- and thanks for having me-- is based upon something that Nancy Pelosi, or Mnuchin, Treasury Secretary Mnuchin, or then even throw in a little bit of McConnell, some Mark Meadows, it's impossible. So for example, this morning, I'm sure there are a lot of research notes written about how great the market looked because of the imminent deal that's coming only to get kind of we're in this position you just highlighted with Nancy Pelosi.
So I don't think it's a tradable or an investable event. My underlying assumption is we'll get something. But ultimately, we're bullish for-- you know, due to the excess liquidity driven by the Fed, as well as the earlier fiscal stimulus, coupled with the global synchronized recovery.
ADAM SHAPIRO: So I'm curious, when you talk about this global synchronized recovery, usually you'd look at oil, and you would see-- the price of oil going up would indicate that things are starting to turn. There's demand. People need oil. But we're not seeing that. And yet you still continue to favor the economic recovery in places like industrials and materials. Why?
TONY DWYER: Well, I think also, Adam, I-- you know, when we got the 15% correction in the NASDAQ-- in the NASDAQ 100, we neutralized the call to lower any excess exposure to the mega-cap stocks. They were all the way back to where they were in June or early July, depending on the name that was there. So it's not-- it's more cyclical than just-- just that specific value kind of bend, but because this is what happens every time.
If you look at the fall of 2009, you got the same kind of data. Nobody believed it. You were very early in the economic recovery. The market was, quote unquote, "ahead of itself." Insiders were selling.
All those factors were at play in the beginning-- beginning of another 11 years. So I think it's really important to acknowledge you want to be optimistic toward the economic synchronized global recovery as it's beginning, not after it's already fully mature. No, the data's not great, but it is still inflecting off of a historic low, similar to what it does after the-- after the end of every prior recession.
BRIAN CHEUNG: Hey, Tony. Brian Cheung here. So you raise an interesting point there. And it does seem like the market has been a little bit desensitized to the high-frequency data, at least on the labor market front. This morning getting the reports that 1.4 million people on an unadjusted basis still turning to unemployment insurance. We have that big jobs report for September coming up tomorrow.
So I guess I'm wondering, do those things not really matter within the context of what's going on right now, especially since we know the Fed's reaction function won't be as sensitive to the headline unemployment number, at least for the short term? And if that is the case, what is going to be the headline driver for the market in the next medium term? Is it the election?
TONY DWYER: That's a fantastic question. The economic data, I think it's-- and I want to be really clear. I don't put out notes and give comments on every economic data series, even though I'm a macro economist, for the following reason-- the revision is so extraordinary that it's useless data. You really have to look at the trend of the data.
To your point, no, I don't think that this morning's specific data is the most important and should be, you know, market moving. The trend of the data remains positive off of a historic shutdown. And we do know that there's going to be extraordinary revisions. Just-- just think of the number of government employees that weren't working at the time that they were taking in and commenting on this data.
So again, I think this focus is going to be on whether we get the fiscal stimulus bill first. Then it will be the implications of the election second. And in our view, Brian, that creates opportunity. When you have excess liquidity to a historic degree, and you couple that with the beginning of an economic recovery, that's-- that suggests you're early in the-- in the new bull market.
JULIA LA ROCHE: Hey, Tony. It's Julia La Roche here. And I was listening to you talk about the catalyst as to why you're bullish. Just curious, though, what are some of the risks, though, that you'll be paying attention to in the coming months, maybe some of the less obvious ones that we might discuss here?
TONY DWYER: The ones that are out there-- it's a great question. Because we were looking for-- in the fall of 2009, you were in this, like I said earlier, this economic kind of-- the beginning of the recovery, and people thought the market was ahead of itself, and the market was up 50% from the March low. Sounds familiar, right?
And that's the-- that's the situation today, where, you know, you're getting this-- you had a 50% run into early August. We were looking for this rolling corrections. You got four corrections between 3% and 7% from the August of 2009 peak into the end of the year. And I think we're going to get that.
And what causes those corrections can be anything. I think the big misperception is people like me and folks like you come on TV, and we try to explain every time the market pulls back. Sometimes there is no reason, there's just too much optimism. And I think that was the case when you went into that August peak for the market of this year.
There was just-- you were gapping mega cap stocks higher on stock splits. It could be a broken shoelace that causes the correction. It doesn't-- of course, you're going to try-- and people-- we're all going to try and blame the election stuff. We're going to blame some kind of economic data point that may come out. But ultimately, when you get too optimistic and you're on a run in this backdrop, you get a pullback, and it's those pullbacks that we want to add risk to.
JULIE HYMAN: Hey, Tony. This is a great point about the markets and sometimes what they move not being sort of very logical, right, or you can't draw an exact line. I'm curious now as you're talking to clients, as you're talking to investors, I know you have a lot of conversations, what are you hearing from them? What is the sentiment like right now when we still have a very high COVID case count, for example. We have the election, and there's been a lot of consternation surrounding that. Is that filtering down to people? Are they concerned?
TONY DWYER: So Julie, here's an interesting thing. We've got-- let's just paint the picture of why the market could correct today. It already did, but let's just pretend. What would the reasons be? COVID-19, election risk, geopolitical tension with China, Brexit, and social unrest, right?
The funny thing-- not the funny thing is-- nothing-- none of that is funny. The interesting thing about that is they've been with us for the last 50% plus the last 10% correction. So those-- the client base is understanding that when the Federal Reserve chairperson looks into the camera and says, we're just printing money and now is not the time to worry about the deficits, they're coming to understand that-- you have significant sustainable declines when you have a need for money and no access to it.
We have a historic level of money for corporates and households. Of course, some are not doing well. This has been a terrible tragedy, this whole COVID-19 and small businesses. I know a lot of small business owners that are suffering. But from a macro standpoint, because of the Fed's move, there has been a historic level of excess liquidity.
Where the-- where the client base is challenging me a little bit, just like you folks did, is what's with this global synchronized recovery, we're still not great, and it's choppy? And the answer is if you look at the market PMI data, if you look at the OECD, Organization of Economic Cooperation and Development data, we have inflected off of a historic period of weakness, and they're moving back in the positive direction, just like we have after every other recession.