Bob Doll, Chief Equity Strategist and Senior Portfolio Manager at Nuveen, joins Yahoo finance's Kristin Myers to discuss the market outlook as the election looms.
KRISTIN MYERS: Now talking about coronavirus since that seems to be the major headwind of the day, 45.1 million cases globally. Just under 9 million cases here in the United States. It likely will touch 9 million today. I was looking at the tracker just a little bit earlier today. Roughly 229,000 deaths now in the country.
Now the US did report roughly 90,000 new cases that was added in just one day. That was yesterday, Thursday. And that is a record right now. So that means roughly two weeks. In roughly two weeks, 15 days, the United States has actually added 1 million new infection cases.
But let's start on today's market moves. We're joined now by Bob Doll, chief equity strategist and senior portfolio manager at Nuveen. Bob, always great to chat with you. Seems to be a pretty rough week for the markets. Selloff on Monday, Wednesday. Of course, now we're seeing all of the markets-- all markets right now are in the red.
Now you mentioned in your note that the markets are vulnerable right now to near term risks. Wondering how vulnerable you think the markets are right now. Where do you see investors perhaps getting confident? And what's making them the most nervous?
BOB DOLL: I think this is mostly about the coronavirus flareup. I get all this, is it the election? Is it the election? I don't think so. I think it's coronavirus flareups and fears of rolling lockdowns on top of that. We've seen some of the European countries, you know, jump on their economies, begin to shut things down. Worries, could that happen here.
I think-- and you mentioned this at the front end of your comments-- the fading of the chance for a stimulus package is when the market started getting sloppy. And then the third thing I'd add to it is earnings. Earnings actually third quarter to date have been nicely above expectations. The problem is, so many companies that come out, the earnings are just fine, thank you, and the stock sags.
So it means expectations were even higher than that. You put all that together, the market's tired. So that we're at 32.50 on the S&P is not a surprise to me. The surprise is we've got the 35.88 on September 2nd. That was 2020 hindsight. You know, the market had a little bit of froth in it, and that froth's coming out. It's going to take some time. I think that was the high for the year, and I think we're going to churn for a while somewhere around these levels.
KRISTIN MYERS: I'm wondering-- so this is an environment right now with a lot of question marks, far more questions than there are answers. Wondering if-- you know, we have the election just a couple days away. Do you think that there might be any measure of, I'll call it calm, being restored to the markets once the election is over? Or do you think once we have the elections, frankly, that more question marks are going to be appearing?
BOB DOLL: So if the election comes on Tuesday and by Wednesday morning we kind of know who the president is and maybe we know who controls the Senate, I think there'll be a relief rally regardless of the results.
One of the things that has nagged the market is the probability of some sort of contested election. And if we had that, then the market's going to stay sloppy. The markets hate uncertainty, you know that. So if we get to Wednesday morning and we resolve that uncertainty, then the market I think takes a breather.
KRISTIN MYERS: So you mentioned churn just a moment ago. Where do you think the opportunities are going to remain for investors who do have the appetite for risk or even just the benefit of being able to hold on through all of the volatility over the next couple of weeks and months?
BOB DOLL: Yeah, so let me answer that two different ways, if I might. Kind of near term, I'm still some of these retailers that have gained market share in the wake of COVID, the Best Buys, the Lowes, the Targets. I think the HMOs have been unduly punished, so, you know, pick your poison-- Humana, United Healthcare, Cigna.
My other answer is to say, I think we are in a position. You mentioned the groups that are down the least. They're more cyclically oriented. I think the underlying US and global economies are going to get a little better, that we're going to get another stimulus package into the new year. And we'll continue to see this irregular rotation.
While the broad S&P has gone nowhere over the last three months now-- it's basically flat-- we've seen small stocks do a little bit better, cyclical stocks do a little bit better, and emerging markets do a little bit better. That's all indicative to me of a world that is slowly going to heal. Maybe that's predicting we're going to get a vaccine. Wouldn't that be good news?
KRISTIN MYERS: So to that point, Bob, do you think going forward that perhaps we're going to see value actually beating out growth?
BOB DOLL: You know, so my preference is to talk about cyclicals over defensives. But you do a correlation, and that's clearly the case that if that happens, value will do a bit better than growth, yes.
KRISTIN MYERS: All right, so let's talk economic recovery right now. We had, you know, pretty good economic data out this week on GDP, on jobless claims. Wondering how much of that recovery or the recovery that we're seeing right now being at risk.
Particularly, as I just mentioned, we had 1 million new coronavirus cases added in the United States in just two weeks. The record number was 70,000. It's now hitting 90,000, Bob. Do you at all see that economic recovery really being at risk as we're seeing these cases surge across the country?
BOB DOLL: First of all, I would say even before the surge, we were certainly entering a period of time where the nice, straight up V was going to give way to something that's still up and to the right, but bumpier. And then you layer on top of it the coronavirus flareups. And it's inevitable that's going to be called into question.
And then you put the delayed fiscal package again. And yeah, the probability that the economy pauses has certainly gone up. I think at the end of the day, it will be OK. But it's not going to be a straight line.
KRISTIN MYERS: I want to lastly ask you about tech since we had earnings come out yesterday. As I mentioned, a lot of these tech companies really taking a beating. Amazon right now down 8%. Twitter now down over 20 and 1/2%.
I'm wondering what your reaction was, I guess, more broadly to some of those earnings reports that we got yesterday. And do you think that investors right now are looking for more than just strong earnings reports from some of these tech companies, given how much they have led the market over the last several months?
BOB DOLL: You know, so I would characterize, if I could be general about it, the earnings for these big tech companies as mixed, meaning there were some good ones and some not so good ones. The problem is, the stocks were priced for everything's going to be perfect. And so some of the air's coming out of the balloon on this. And that's why they're sagging.
Look, many of these companies still have good business models. And we'll take Apple. The absence of giving any guidance for the next quarter, you know, a lot of people are saying, what's going on? Well, what's going on is coronavirus is flaring up. There's no stimulus package. Don't know what it's going to look like in China where they do a lot of their business.
No wonder they're not giving guidance. It doesn't mean they're saying something's bad. They just don't know. And that's part of the overall market's problem, the lack of visibility of continuation of this wonderful V we've seen since April.