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Stocks rally as earnings season kicks off amid coronavirus

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The Wealth Consulting Group CEO Jimmy Lee joins Yahoo Finance's Seana Smith to discuss earnings season kicking off amid the coronavirus outbreak and the new BofA survey that finds investors are hoarding cash.

Video Transcript

SEANA SMITH: We have stocks jumping today as the coronavirus outlook seems to improve a bit. We have the Dow now up 558 points. Now Apple, Home Depot, and Microsoft are the top-performing stocks in the Dow so far today.

The S&P is also holding onto gains, up nearly 3%. Now the rally there being led by some gains in technology, consumer discretionary, and also consumer staples. Those three sectors are the top performers so far today.

And then we're also seeing pretty big gains in the NASDAQ. The NASDAQ is up nearly 4%. Amazon is the big outperformer in the NASDAQ today, with that stock hitting a new all-time high. We're going to dig into what's going on with Amazon a little bit later in the show.

But first, I want to start with the broader rally that we're seeing on the Street right now. And we have Jimmy Lee, CEO of the Wealth Consulting Group, joining us today to break all this down. And Jimmy, when you take a look at the moves today, do you think there's a little bit more reason for people to be a little bit more hopeful, I guess, than maybe we have been in the past couple weeks because of the developments for the coronavirus?

JIMMY LEE: Sure, there is. I think a lot of Americans are focused on watching the news and on the health situation. And, of course, that seems to be getting better. So a lot of states seems to-- seem to have been peaking, or getting close to their peaks. So I think that's positive news.

Also, what you have to think about is that Americans are starting to get their checks from the stimulus package that was released. And I know that for a fact. I've talked to some people that received their money already now.

And also business owners are starting to get the checks for the PPP, the Paycheck Protection Program. And so I think consumer confidence, as well as small business owner confidence, is probably going up right now. And that's probably leading to a little bit more optimism about stocks.

SEANA SMITH: And Jimmy, it's interesting, though, because one of the big challenges, or the big headwinds expected to be this quarter-- or over the next couple of weeks, I guess I should say-- are the results that we're getting from earnings. We had some of the banks-- we had JPMorgan, Wells Fargo out this morning. And Wells Fargo missed.

JPMorgan is interesting here. It's one of the only Dow stocks in the red today. And the move lower comes after the bank warned that borrower defaults could get quote meaningfully worse. When you try to dig in just what that means for the other financials that we have yet to hear from so far, how are you reading that situation right now?

JIMMY LEE: I think it's going to be bank-by-bank. And, of course, people that own homes, the forbearance packages that are-- forbearance programs are out there, the mortgage servicers are going to be in a lot of trouble. I know that the jumbo loan market is kind of frozen right now at the moment as well. So I think as the credit markets start to calm down, we should see that situation improve.

But as far as earnings go, not just in the financial sector, but across the board, I think it's very difficult to estimate earnings for the next quarter or two, or even the rest of the year. So I think, you know, cash is king. Corporations and investors need to look at liquidity, and making sure that we look more at balance sheets, and that companies have access to financing to get through 2020, and start looking at potential earnings forecasts for 2021. Who are going to be the winners after this coronavirus situation is over?

SEANA SMITH: Yeah, Jimmy, you mentioned cash is king. And Bank of America, they had their Fund Manager Survey that they released this morning. And they were talking about cash levels right now. And they were saying that they jumped from 5.1% all the way to 5.9%. And that was the highest level that we've seen since September 11.

When you drill down just what this means, what this is telling us about investors being a little bit cautious at this point, being a little bit nervous, how are you reading that?

JIMMY LEE: I'm not surprised it's not higher, Seana. Well, you know, just like corporations need liquidity, so do-- so do people, Americans. And so assuming that emergency reserve bucket is full, assuming that someone has job security, of course, people are nervous.

But I actually think that for long-term investors, I know personally that a lot of people have put fresh powder to work, you know, cash sitting on the sidelines. Not all at once-- I know that a lot of investors are working with advisors, or seeking advisors now, when once they were doing it on their own. And so I know that from personal experience in our firm, we've got a lot of new assets added that were sitting on the sidelines.

And so a lot of those statistics that we were quoting last year about investors going to bonds and cash, some of that's coming out. And while we've had a incredible run very quickly from the bottom of the market, you know, I think a lot of people still at these levels think that long-term, these are good levels to buy for long-term investors.

SEANA SMITH: Jimmy, how much worse do you think it could get from here? IMF was out today saying that they expect this to be the most severe recession since the Great Depression. What are your expectations for a global recession at this point? Or are we already in the midst of one?

JIMMY LEE: I think we're in the midst one. I mean, I think that's baked in. But this recession, unlike normal recessions, could last a lot shorter. And I think investors need to think about that from separating stocks versus the economy.

The economy, of course, is going to take much longer to get back to where we were before. It's probably to be sector by sector. Even in local states, certain states are going to probably reopen their businesses differently than other states might.

So from that perspective, I think that, again, when things get better as far as the outlook for the health situation, you have to separate out stocks. And we have seen a little bit of a-- almost not quite a V yet, but the start to a V-shaped recovery in stocks. You're probably not going to see that in the economy. It's probably going to take a lot longer for the economy to get back on the kind of footing we had pre-coronavirus.

SEANA SMITH: Yeah, Jimmy, it's interesting, we were talking about the fact that we can see states-- and it's likely that we will see states open up at various times, obviously, depending on what's going on within each state. But when we talk about the potential for states opening up at different times, do you think at all that this could create a potential for more economic turmoil or disruption in the short-term?

JIMMY LEE: I do. I think we should expect that we're going to get mixed news all over the place. I mean, I think we could even have some places open up for business that have to revert back to the decision that they made, and maybe close down again. And so I think it's going to be a very fluid situation.

But it seems that on the health side, things are improving. There are a lot of speculation out there going on around therapies. And I would expect that we'd get a therapy that's recommended by the FDA, or approved pretty soon, one or two or more. And hopefully that we get a virus-- I'm sorry, vaccine for this thing as soon as possible, sooner than what they're projecting, I hope.

And so that's all over the place as far as projections. But we've also seen that these models that we've been hearing about, models from Washington state and other places that the government is using to make their decisions, being adjusted. And that's being adjusted down, meaning that there are less people being infected and dying than originally projected. So that's all optimistic for that situation.

But I would expect a lot of volatility on both the news, and also economic news that we're going to hear coming out of different sectors.

SEANA SMITH: Jimmy, if some of our viewers are looking to put money to work right now, they've seen the losses that we've experienced over the last couple of weeks. What areas, what sectors would you recommend at this point?

JIMMY LEE: You know, I always recommend a good, globally-diversified portfolio. I think that the type of a strategy still stands. I think it's more important right now not which sectors are over or underweight in, but whether you're in the market or not. And so a lot of investors were not in the proper asset allocations for their long-term financial plans. And this is an opportunity to get into that.

So if you haven't rebalanced yet, you know, we've wiped out a lot of years of gains in equity markets, even at these levels, even with the bounceback. And so re-balancing is really important. If you didn't do it before because you had a lot of taxable gains, I think, again, those gains are probably a little less now. And in a lot of situations, people can take tax losses possibly.

So there's a lot of opportunity for many investors to re-balance portfolios. I think it's very important to do so. And as far as different sectors go, once again, we are overweight in certain sectors like utilities, technology, health care.

I don't think it's as important though where you're over or underweight in, versus just being in or out, and not trying to time the market. Investors are trying to time the bottom. We may have gone there already.

And another thing, Seana, that's important is so many people on these shows and experts in the field were thinking that we were going to retest the bottoms. When they were saying that, it really made me think that, boy, that's probably a sign that maybe we set one already. And I think we may have.

And so going forward, these levels for long-term investors, I think, are good prices.

SEANA SMITH: Positive note there. And Jimmy Lee, CEO of the Wealth Consulting Group, thanks so much for joining me this afternoon.

JIMMY LEE: Thank you. Have a good afternoon.