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Senior Investment Strategist on concerns for earnings season

Rob Haworth, Senior Investment Strategist U.S. Bank Wealth Management, joins The Final Round to discuss how stimulus talks are impacting markets and why secular growth is important during current volatility.

Video Transcript

SEANA SMITH: Well, again, stocks ending higher here today, as talks over an additional stimulus at least seems to be trending in the right direction. For more on the market's reaction on this, we want to bring in Rob Haworth. He's a senior investment strategist at US Bank Wealth Management.

And Rob, great to have you back on this show. Let's just start with the stimulus talks and the market's reaction to this. I'm just curious, just from your point of view, how important do you think it is for the market that we get some sort of deal? Does it matter, I guess, what is included or just that we get something out of Washington?

ROB HAWORTH: I think in terms of magnitude, it will matter what specifically is included. But we just-- we do need a deal, right? We need a deal to continue to backstop an economy that is still meaningfully shut down, to battle our coronavirus pandemic, with large swaths of the economy still not able to reopen or well below year ago levels.

Thinking about airlines, travel, leisure, retail are all still under pressure. And we even had airlines lay people off to start this month. So I think some kind of deal is going to be important to the market.

And to some extent, the action we saw today, I think tells us that the market is a little concerned that the deal may not be about reopening as much as providing some stimulus to growth. And that's why we saw the lift in the secular growth names and the tech names today, rather than the value names that had been doing much better earlier this week.

SEANA SMITH: So Rob, what are you favoring in this market? Are you still finding reason to bet on those value names, even though there is a lot of uncertainty around this deal?

ROB HAWORTH: No, we're still tilted towards secular growth. And we have some concerns as we look forward into earnings season that some of that growth may have been pulled forward into the current quarter.

But we're just not seeing that rotation happen just yet, although, you know, we're paying close attention to what's going on with small caps, we're paying close attention to what's going on with industrials and materials, which have certainly performed better. And we could see a pivot at some point. But for now, we're sticking with what's been working.

SEANA SMITH: And Rob, you brought up small caps obviously outperforming this week. We've seen the market breadth here improve significantly over the last couple of weeks, last couple of trading days. In particular, how encouraging is that to you, just in terms of being able to continue this upward momentum and continue this upward trajectory, really, going forward?

ROB HAWORTH: Yeah, certainly very constructive for us, as we-- but we do have a lot of uncertainty coming up, as we've talked about, in the next three weeks, whether it's fiscal stimulus or the election. And right now, the election is still very close and very tight and could lead to some market volatility in the next three weeks and in the weeks just after the election as well.

So we're encouraged. We're looking for signs to change our view, particularly because we see economic growth as generally being better in the future. But for now, that's leaving us kind of with where we've been.

JEN ROGERS: Just talking about the election, saying that it looks tight right now, what do you think about the blue wave idea and what impact that would have on the market?

ROB HAWORTH: Yeah, it's certainly something where we think there's maybe some initial impact to the market as investors to have to change their positioning based on possibly higher tax rates, possibly a change in regulation. But we think you probably get a slightly bigger stimulus. And that's supportive for the market.

So there may be some short-term volatility. But it'll probably be worked out because as we look at the overall economic growth story, that's probably still good, whichever sort of election we get, right? A lot of the impacts will really be at that sector level, rather than at the overall market level.