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Stocks open higher as coronavirus cases top 700K globally

Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments, joins Yahoo Finance’s Alexis Christoforous, Brain Sozzi, Heidi Chung and Ines Ferre to discuss the latest market action amid the coronavirus outbreak.

Video Transcript

- Let's get Victoria Fernandez, chief market strategist at Crossmark Global Investments into the mix here. Victoria, good to see you on this Monday morning. At least five people have told me this morning that we might be some-- near a tactical bottom. What in the world is a tactical bottom?

VICTORIA FERNANDEZ: Well, I think it's foolish for someone to come out and start trying to determine where the bottom is going to be. I don't think that's a wise decision at this point. As you mentioned a moment ago, we really don't know where that is. Many people are saying you're going to have this V-shaped recovery. They think that last week, when we-- or the week before when we hit those lows, that was going to be the bottom. That was the tactical bottom to allow people, then, to start coming into the market and adding to their positions.

We agree with that concept. Start adding things here and there in your portfolio. But we definitely don't think we're in a V-shape recovery. We think we're more in a W-shaped recovery. And we're going to have more test of that bottom coming. So I would be careful on calling the bottom at this point in time.

- Now are you actually nibbling a little bit, Victoria, on some opportunities that you're seeing in this market right now? And can you share any of those names with us?

VICTORIA FERNANDEZ: We are, Alexis. And we're doing it both for names that we already hold in our portfolio that we were a little underweight on and new names coming in. So names we held in our portfolio-- Apple, Amazon, Microsoft-- those are all names that we're adding to to bring them up to a higher weight. But we're also looking at names that are on what we've called our wish list, names that we've wanted to put in the portfolio, but the price has been too high. We didn't like the ratios we were seeing. A lot of that has come down.

And so it allows us to add new names to the portfolio, one of those being ServiceNow-- cloud-based product. Obviously, there's a lot of corporations out there looking for technology solutions right now. We don't think that's going to end anytime soon. So it's a good long term holding.

HEIDI CHUNG: Hi, Victoria. It's Heidi Chung here. So it seems as if, even though you don't necessarily think that there's a V-shape recovery, long term you are overall [INAUDIBLE] that there will be a recovery in place. But then what's keeping you up at night? Because certainly, all this market volatility is not making investors feel all that great right now. So what is keeping you up?

VICTORIA FERNANDEZ: Yeah, investors don't feel great. And we actually have kind of clients on all sides of the spectrum here. We have clients calling in saying that they want to go to all cash, because they're so nervous. We also have clients putting money into their accounts, because they feel like this is an opportunity.

So what's keeping me up is really the communication to our clients that there's going to be long term volatility. And they need to be prepared for that. What I don't want to see our clients do is try to time the market. That concerns me more than anything. People think it's an easy thing to do. And historically, we have seen that it is not. So we would prefer that people stay invested. That they use pullbacks to add to their portfolios like we were talking about a moment ago, and not try to jump in or out 100%, because that's not going to bode well for them going forward.

- Victoria, you just mentioned that we could retest the market lows. What does it look like getting back to those lows? Do you think it's a little more orderly? Or do we-- we could still see those 2,000 point down days on the Dow?

VICTORIA FERNANDEZ: I'm not sure we're going to see as big of swings as we did before. I mean, those 2,000 point moves that we were seeing, that was so excessive. But I'm not going to say we won't see things more like we saw on Friday, right-- a 3%, 4% move. You're seeing that in the VIX right now. When the VIX is around that 60, 65 number, that implies about a 4%, 5% move in the markets. So I think that would be something we could expect going forward.

There's just so many uncertainties still left, whether it's oil that we're looking at-- I mean, you guys have been talking about that all morning long. Whether it's when we hit peak cases in the US, or whether it's the fact that we can't even really rely on the fundamental numbers that are coming out. I mean, the labor market is a great example of what caused some concern for people. So expect some more volatility, I would expect, in that 4% to 5% range.

- Victoria, you mentioned the labor market. We're going to get a lot of economic data in the coming days now that will start reflecting this pandemic. We've got the monthly unemployment report out on Friday. But do you think it's really going to likely show the full impact of the crisis? Because it's really only going to show us the first couple of weeks of the impact. And that is before a lot of governors actually locked down their states.

VICTORIA FERNANDEZ: That's exactly right. We're not going to get a full picture from the report that we get on this Friday. It's the weekly numbers that come out on Thursdays that I think is going to be a better indication of where the labor market sits. But I think we also have to be careful. Because just where these numbers come out-- and we had three million last week-- I don't think that tells us what the trend is going to be long term. I think it tells us where we are in this crisis situation right now.

What we have to figure out is how long that's going to last and what it looks like coming out of it. That's what your long term investors are trying to determine. And it makes it quite difficult when you have things shut down like this. It totally skews your numbers and will make it more difficult. But the weekly numbers, I think, are more important, Alexis.

- Victoria, you sounded a little upbeat, just a little upbeat on Apple. But why Apple? Why Apple, but not, let's say, big cap health care? You're getting the sense that Abbott Labs, Johnson & Johnson are finally getting some transformational products and vaccines to market.

VICTORIA FERNANDEZ: Yeah, Brad, it's not that we don't have any health care names in the portfolio or that we don't have a positive outlook for what they're doing currently. But we are looking longer term. And we are thinking more 5G. We're thinking more technology going forward.

I think with so many people working from home right now-- and over the weekend, the president came out. We're extending that to the end of April now. I mean, both of my children, a high schooler and a college age student, are doing school from home. So I think there's a lot of opportunities on the technology side. That's why Microsoft and Apple-- Amazon, obviously, for the reasons people being at home as well. And the 5G play that we see coming forward as well. So these are reasons we're seeing those names being added in our portfolio over, like, a health care name.

HEIDI CHUNG: Victoria, you briefly mentioned oil earlier. But I want to get more insight on that right now, especially as there's some talk out there on the street of potentially negative oil prices. What should investors be thinking at this point in the price war?

VICTORIA FERNANDEZ: I'm no expert on the oil industry. But what I think we need to look at, and what we look at when we're looking at oil and energy names, is the balance sheets. So many of these companies, their balance sheets are in poor shape. And without having the revenue coming in, if they're going to have to shut down some of their drilling and they don't have that revenue stream coming in, they're not going to be able to meet those debt obligations. That's where I think we're going to see some businesses going bankrupt. That's where I think we're going to see some consolidations coming in.

So I'm not saying that you have to eliminate oil or energy from your portfolio. You don't. But you have to focus on the balance sheets in this industry more than anywhere else.

- And Victoria, we're trying to bring the discussion looking forward. You know, one, two years down the line, how do you think the coronavirus situation will impact longer term investing?

VICTORIA FERNANDEZ: Well, that's a tough question, Brad. I think people are so focused right now on the immediate term and what's happening over the next one to two weeks, especially with people losing their jobs. And we had the St. Louis fed come out and, you know, kind of categorize jobs into high risk and low risk. About 45% of jobs in the US were considered high risk.

So when you're looking at the unemployment number going up to possibly 10%, 11%, 12%, if some of what we're anticipating comes to fruition-- I don't think people are looking as long term now as they should. And that's an issue. That's the conversation we're having with our clients.

We always say, look through the headline noise and focus longer term. It's much harder to do when that headline noise is not necessarily a trade war or geopolitical event somewhere else. It's harder to do when it's something that's hitting you at home. So education and focusing long term is going to be difficult, but it's really what investors need to do. Because this is going to be temporary.

- Victoria, a moment ago you were talking about the technology play, especially when it relates to education during this pandemic. I myself have three school-age kids who are doing all their schoolwork using things like Zoom and Google Meets. We're broadcasting using Google Meets. A company like Zoom, incredible to see that stock rise throughout the past few weeks. In fact, year to date-- taking a look at the Yahoo Finance chart right now-- up about 140%. Investors looking for opportunity right now. Is it too late to get into a stock like Zoom at this point?

VICTORIA FERNANDEZ: I think investors have to be really careful going into stocks that have had such a high run because of just the coronavirus. When we're talking about some of the names that we've been adding, those are longer term plays. Yes, there's some benefit because of the coronavirus that perhaps those prices have come down. Perhaps there's some upside on the technology front going forward. But when you've had a stock go up 100% in that short a period of time, perhaps you wait for that to come back a little bit.

I don't think these things are going away. As I mentioned a moment ago, companies are looking for more technology solutions. Schools are looking for additional solutions I wouldn't be surprised if online universities actually pick up going forward once people realize they can actually do things like this. So those are plays that you could put in for the longer term. But I wait-- might wait for a little bit of a pullback from these really high levels.

- All right, we'll leave it there. Victoria Fernandez, chief market strategist at Crossmark Global Investments. Always good to see you. Thanks so much.

VICTORIA FERNANDEZ: My pleasure.