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Portfolio Manger on stimulus: ‘In this instance we absolutely need it’

Kevin Simpson, Founder and Portfolio Manager of Capital Wealth Planning, joins Yahoo Finance’s Kristin Myers to break down the latest market action, as Sen. McConnell blocks the $2,000 stimulus check vote.

Video Transcript

KRISTIN MYERS: All right, as I mentioned, we are seeing markets reacting pretty negatively to this news of that block on that stimulus vote. So I want to bring on Kevin Simpson now, Founder and Portfolio Manager of Capital Wealth Planning. Kevin, I have to ask as, of course, we saw the markets hitting record highs-- we now have this complete about face. Do you think that this news on stimulus could really derail the Santa Claus rally that we've been seeing?

KEVIN SIMPSON: Hey, Kristin. Thanks for having me.

You know, no one wants to add to a deficit that could trigger inflation, but in this instance, we absolutely need it. As in a time of war, we're in a global pandemic. The economy is strong enough that we can support it. I don't think it's a shock that we're not seeing the $2,000 getting passed in the Senate today. I liked Chuck Schumer's reference to the three-martini lunch and took us back to the '80s for a minute there, but $600 is not enough. We should have had this stimulus out a month ago.

You and I were on this program talking about the fact that Wall Street's already put the coronavirus in its rear-view mirror and was looking optimistically ahead to 2021, but what we still have is a Main Street problem. We absolutely need to help the consumer, the small-business owner, and the American worker to get to the other side of this thing, and we're so, so close.

KRISTIN MYERS: So speaking about that, Kevin, let's put the $2,000 checks to the side. We have the $600 checks, which you called a drop in the bucket, and it's no surprise here. We've heard a lot of criticism about the very small size of that economic-aid package. So how long then do you think that Wall Street can really withstand the stress and the pressures from Main Street as you're describing that Main Street problem?

KEVIN SIMPSON: Yeah, I mean, that's a good question. We absolutely can see the dissection or the divergence between Wall Street and Main Street here throughout 2020, but eventually you get a trickle-up effect. If the consumer isn't spending, if the small businesses aren't open, if they don't have the confidence in the economy, then we have problems that absolutely affect Wall Street.

Now, we can get through it. We've got only a few short months before things are going to look a whole lot brighter, but it's a hard road to hoe. So I think, really, we've got to get through this, and helping the American worker, helping the small-business owner, and helping the consumer is of paramount importance to be able to support all the debt that we've just put on with the previous stimulus packages. I mean, this economy was strong heading into this coronavirus, heading into this shutdown. It's been incredibly resilient during it. And I think with all the pent-up demand that we're seeing, the second half of 2021 can be meteoric. But there's a dark period that we've got to get through, and I'm a little concerned over the short term.

KRISTIN MYERS: So picking up on that, essentially that it could be meteoric, what sectors do you think are going to gain the most next year, especially in the back half? Of course we saw a big tech really leading the market throughout 2020. Do you think they're going to be the leaders next year as well?

KEVIN SIMPSON: Yeah, I don't think we're going to see that rotation back into deep-value stocks. I think you still have to look at growth and technology, which has integrated just every aspect of our lives. If we're looking for specific sectors, I think here we are at the end of the year post holiday season. You can look at the major retailers. Reason being they did phenomenally well in the crisis. They've done incredibly well online, and they're also going to be beneficiaries of a reopening and a return to normalcy. Amazon, Walmart, Home Depot, Lowe's, Target, those are companies that we feel very comfortable with long term, and they're companies that we think will benefit while we're shut down, and they'll benefit from the enthusiasm of reopening.

KRISTIN MYERS: And, of course, we're seeing there Amazon the only one of those companies that you mentioned right now in the green. It has definitely benefited throughout this pandemic with the other big tech names.

But on this point of retail more broadly, you know, several months ago we had $1,200 stimulus checks. We had boosted unemployment where, you know, a lot of folks were saying, hey, people are making more money now on unemployment than they were making while being employed. That has long since faded, and the boost to unemployment now is going to be half what it was before. The stimulus check is now $600, half what it was before. And a lot of folks are saying not only is it too little, it's also coming far too late. So how do you think retailers are going to fare-- let's just say in the first two quarters of next year-- considering that the consumer right now is struggling still?

KEVIN SIMPSON: Yeah, I think we're going to look for pullbacks in the first quarter and take advantage of them for buying opportunities. Your point, Kristin, is spot on. We are looking at this relief package coming too late. We're looking at it coming too small. The writing's on the wall with the weekly jobless claims that we're seeing week after week. We had 14-week lows last week. I mean, the December jobs number is going to be terrible.

So I think the enthusiasm that we have as investors, as Wall Street-- the second half of 2021, you know, it's pretty easy to talk about, but we've got the hardest part coming beforehand. It's almost like a storm before the calm.

So as far as retailers are concerned and the markets in general, if we see pullbacks in the first quarter, I would expect them, and I would look at them as buying opportunities for a continued long-term bull market.

KRISTIN MYERS: All right, Kevin Simpson from Capital Wealth Planning. Always great chatting with you. Thanks for joining us today.

KEVIN SIMPSON: Thanks, Kristin. Happy New year.

KRISTIN MYERS: Happy New Year to you as well.