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Stocks jump amid a slew of M&A developments

Victoria Fernandez, Crossmark Global Investments Chief Market Strategist, joins Yahoo Finance's Zack Guzman to discuss why she's advising investors to build more of a "barbell strategy" amid market volatility.

Video Transcript

ZACK GUZMAN: First want to back up and think about the questions that investors are facing this week after last week's volatility. A lot of questions around whether or not today's big move to the upside signals an all-clear for investors to jump back in. Tech sector, again, one of the standouts here after a tough week last week. And here to discuss that with us is Victoria Fernandez, Crossmark Global Investments chief market strategist.

And Victoria, I mean, that seems to be the number one question here. I know you're giving advice to investors about certain strategies they can take to protect themselves, should we see volatility resume this week. What are you telling clients right now to navigate all this, and where do you see the market headed now?

VICTORIA FERNANDEZ: Well, where we see the market headed, I think, is going to be more of what we've seen over the past couple of weeks, in the sense that we expect some continued volatility not just because we've seen some of those high-flying tech names really make a move higher, but we've got the election coming up in, what? 50 days now? We've got US-China relations that are kind of back on the front burner on some things. You've got the UK doing its exit from the EU, that deadline coming up later this year.

So there's a lot of things that can add to volatility. But saying that, what we're doing with our investors is really taking a little bit off the table on some of those really high-growth tech names and trying to build more of a barbell strategy where we're going into more of the staple names in the portfolios, some of these value names that we've seen lag a little bit during the big run-up on the tech side. We think building your portfolio that way gives you a little bit of a buffer for continued volatility going forward.

ZACK GUZMAN: Yeah, and some of those value names-- I mean, we've seen the market trade close to the direction that we've seen on the coronavirus case-count front. That's been improving over the last few weeks. It's driven a little bit of a boost here as tech has come back down, as you said. We have seen the opposite true for a lot of these value names. But when you look specifically to that sector, what are the names that jump out to you as maybe ones that might frame well to be a longer-term investment?

VICTORIA FERNANDEZ: Yeah, so we have a few names that we've been adding to our portfolio over the last month or so. Walmart is one of those names that we've added. I mean, you were talking about the TikTok deal earlier, and that was one of the reasons we originally purchased Walmart in the portfolio. But it did add some benefit. We've seen that come back a little bit. But look, that's going to be your only strong player against Amazon on that e-commerce side, so we think that's a good name that you can put in your portfolio.

We can look at other names like a McCormick, on the spice company. And these are names that we see trends going forward, not just COVID-19 bets, but further trends that we think will extend beyond a COVID-19 recovery. Cooking at home we think is one of those, as people are getting used to that and families are enjoying doing that together.

But I think you could also look at names like the banks. JPMorgan is a name that we've added recently. And I know a lot of people are concerned about the banks because rates have been so low. But with that short end of the curve anchored with what the Fed is doing, an anticipation we might see a higher end on the long end of the curve and so we get that steepness-- out of all the banks, we like JPMorgan, so we added a little bit of exposure there as well.

ZACK GUZMAN: Yeah, we got the update on the inflation front last week, showing that things might be ticking up a little bit hotter here than some had expected. So we'll be watching that when we hear Fed Chair Jerome Powell speaking later at the FOMC announcement later this week. But when we think about this recovery, to your point, of some of these names doing well whether or not that recovery really accelerates here in the back half of 2020, I'd be curious to hear your take on prospects of that happening.

When you just think about the length of time that we've gone since those additional unemployment benefits rolled off at the end of July, a lot of people wondering what the actual state of the consumer is. You can look at the deals that are being made in the tech space right now, and maybe that boosts confidence from some of those powerful brokers here, the leaders of these companies, saying things are going to be-- remain intact in the back half of the year. But when you look at the underlying strength of the economy, what do you assess the longer this drags on without any phase four deal in Washington?

VICTORIA FERNANDEZ: So Zack, I think you're right. The consumer and the consumption numbers are really key, and it's something that we're watching very closely. Consumption has actually held up pretty well over the last couple of months, which was a little bit surprising, especially with that extra unemployment insurance not being there for the last six weeks or so. And we don't see a new stimulus package imminent to help those people.

So we have to, you know, kind of look and say the savings that people accumulated over the last six months, is that going to start to run out without any extra benefit coming in? And how is that going to affect the consumers and the consumption numbers? But again, you mentioned the economic numbers coming out last week. The goods component side is lagging the spending side, so that leads you to think that perhaps we could see some of that inflation move a little bit higher.

But in the long run, we've had the Fed say it really doesn't matter at this point. They've taken that new approach to monetary policy. Inflation can move higher. As long as we still have the situation that we're in and the economy is still struggling to recovery, we're going to have the stimulus. We're going to have the liquidity lift from the Fed and low rates. So I think the economy is set to continue to do well with that supporting it.