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Stocks mixed over November retail sales, stimulus impasse

November’s retail sales fell 1.1% as consumers pull back on early holiday shopping. AlphaSimplex Portfolio Manager and Chief Research Strategist Katy Kaminski joins Yahoo Finance Live to discuss how markets are faring as we near 2021.

Video Transcript

AKIKO FUJITA: All of this coming as we got those retail sales numbers this morning, falling 1.1% in November. That is the first drop in seven months and the steepest drop. As expected, in restaurants and bars, they've been particularly hit hard. Those numbers were down 4% on the month.

Let's bring in Katy Kaminski. She's AlphaSimplex Portfolio Manager and Chief Research Strategist. Katy, it's good to talk to you today. Let me just get your sense on those numbers that came out today. It does feel like we have sort of moving-- been moving in this direction of a slower recovery, largely because there's been no stimulus to really support it as well. How big of a surprise is this dip for you?

KATY KAMINSKI: It's not that surprising. It's sort of about balancing the short term concerns with the longer term hope for a vaccine, a vaccine to really solve some of the issues we have right now. I think there's also an issue that, today, there was a lot of hope about some positive direction for stimulus. And really, we've seen that the markets have moved a lot on stimulus. So we expected some positive response today, so some of that positive response might have been dampened by these difficult numbers and retail sales. Which are also kind of justified considering the type of environment we're in right now where it's sort of wait and see, get out of the woods, get people vaccinated, and get to a place where things can go more back to normal.

ZACK GUZMAN: Yeah, one of the questions, too, I had on the stimulus front. You know, a lot of questions around how all of these changes are going to be impacting the dollar here. We've seen that week and-- we've seen oil prices also rise. Incredible nine month highs here, up for about, what, the last six weeks. Talk to me about all the changes you're expecting to see there, your expectations for the dollar, and how that could continue to give a boost here to the price of crude.

KATY KAMINSKI: Yes, it's been an interesting year because we've really seen-- one of the themes we've been following is this reflation theme. We've also been following the weak dollar since this summer. These moves have had big impacts in the commodity markets and big impacts in the dollar versus other currencies. So we're seeing-- even though bonds haven't moved much, we've really seen massive movements in many of these different asset classes, particularly energies.

So obviously energies have recovered substantially. We saw crude hitting its $50 recently. We also saw a lot of movement in terms of agricultural commodities this fall that have been kind of showing a strong recovery. So for us, we don't really see anything that could be in the way of this. We see the dollar continuing to weaken, we see energy potentially rallying a little bit further, and we're also looking, as well, at gold. That's been a-- one that's been a little confusing in that gold peaked this summer, but it hasn't started to move on that weak dollar move.

AKIKO FUJITA: So Katy, with that said, how do you think investors should position themselves away from equities? It sounds like you're-- you're overweighing more commodities than equities. And is that the way to think about it? How do you think the breakdown for the portfolio should look like?

KATY KAMINSKI: So within this reflationary theme, what we've seen is still a positive sign on equities, but we've also seen bigger moves from our side on the trend side in commodities. So being long those demand assets as there is some chance for recovery if stimulus and vaccine hopes come into fruition. But we've also seen this short dollar trade being the strongest, most recently. And that's because there's a lot of things that are going against the dollar right now.

First of all, we like to divide it into three things. Or I like to think of it this way. There's sentiment's, there's stimulus, and then there's the overall US economy that seems to be moving the dollar. Right now sentiment clearly is risk on, which does weaken the dollar generally. We've also seen that talks of this potential for stimulus is also pushing down the dollar in recent time. So for our-- from our side it's really thinking about things that would benefit from a weaker dollar and still remaining somewhat optimistic for equity markets.

ZACK GUZMAN: Yeah, it's interesting because obviously the US's decisions here on stimulus aren't coming in a vacuum. There are other economies across the world kind of weighing their own hits tied to the pandemic. When you look at those opportunities, though, out in 2021, what are you seeing in terms of maybe some overlooked opportunities in emerging markets that investors should consider as well here?

KATY KAMINSKI: Yes, that's actually one of the themes we've been watching. Because as you know, the US has done a little bit better this fall than Europe and EM. So we're starting to see some indications and we start to wonder if EM will benefit some from, A, the new regime in the United States, but also from just the way that things seem to be progressing with demand and other factors. So I think it's going to be a place to look for how things are diverging relative to the dollar as well. So going into Q1 we're interested in EM. We're also interested in things that might move on this continued reflation theme.