Yahoo Finance’s Alexis Christoforous and Michele Schneider, Marketgauge.com Partner and Director of Trading Research & Education, discuss the latest market moves.
ALEXIS CHRISTOFOROUS: I want to stay with the markets now and bring in Michele Schneider, Partner and Director of Trading Research and Education at marketgauge.com. Michele, thanks for being here. So, look, we talked a long time about how the market rally has really been concentrated in a few choice tech stocks. And we're starting to see much greater breath in the rally now. What do you make of the recalibration?
MICHELE SCHNEIDER: I think it's nothing but good news. After years and years of following the rotation into growth and seeing value getting killed, what really I think is the truest measure of optimism for the US economy and not just a lot of hype is the rotation into some of the industrials and manufacturing, particularly, the small caps. I had created something called the Economic Modern Family just to track that, and the three lead instruments in that would be the small caps, transportation, and retail and not just online retail.
So they kind of started the ball rolling this-- even before the election and before we've heard the vaccine news. The fact that they have gapped up and are holding, especially the small caps, even with it being down against the NASDAQ today, to me, that's just healthy digestion.
ALEXIS CHRISTOFOROUS: When you look at market catalysts in the short term, is-- is a vaccine, a viable vaccine, actually more important for the economy and for the stock market than who wins the White House?
MICHELE SCHNEIDER: Well, I don't know if I would necessarily weight one as majorly over the other in terms of influence on the markets because, right now, we have a contested election. And, of course, if that turns out to be more than just allegations, that can really do a lot of damage to the overall market because it sends a shock to the confidence in the United States, first of all, and it will really impact the US dollar.
In terms of the vaccine, I think what makes that so highlighted right now is because we have surging cases, not just worldwide, but here in the United States. And that is definitely being canceled out by the hopes of the vaccine. And, also, what it tells the market right now is that businesses will not shut down, and that's really the major focus when you get down to it is will the economy stay open and continue to open up. And you mentioned before about the airlines. There's a perfect example of where the optimism is really being spread.
ALEXIS CHRISTOFOROUS: What happens if we don't get stimulus right away? I mean, it could be, you know, you have Biden. If he's going to be sworn in January 20, perhaps, stimulus doesn't come down the pipe until February. Are we going to see investors take their money out of the consumer trade and the more retail stocks, as they wait for another round of stimulus checks?
MICHELE SCHNEIDER: I think that's a great question because, already, when you look at some of the numbers that people have been surveyed about how much they plan to spend for the holiday season, it comes out to be about an average of $100 less per family than they spent last year. And so that really shows the strain of the consumers in terms of how much money they have and that they're waiting for more stimulus.
But the market itself may not necessarily care. It may be a temporary blip to the downside because, as we know, it's forward thinking, and that's really why I believe that, with stimulus coming in February, people will get optimistic. And, also, the other part of it is how many people are actually going to continue to return to work. The labor force has increased, which has been another happy news.
Where we might see that impacted, what you're talking about, really is more in these big NASDAQ stocks, which are already drowning in their own greatness. How much more upside they have, I don't know. Apple had good news. How many more people are going to buy the Apple stock or the Amazon stock at these levels?
There are so many other better opportunities that I'm seeing emerge. Whether the consumers have a big party at Christmas time or not, at this point, I think whatever that opportunity that emerges from that will be a good one if you know where to look. And that's where the industrials and the manufacturing comes back into play.
ALEXIS CHRISTOFOROUS: Michele, you touched on it just there, but expand a little bit more on where you see those opportunities for people who want maybe less exposure to those mega cap tech stocks.
MICHELE SCHNEIDER: Well, one of the big groups that we've been looking at-- and I think you and I talked about this months ago-- was the small cap growth stocks, stocks like Fastly, for example. There's a whole bunch of others. There's a couple of bank stocks. I have a list of them, not off the top of my head, but, if you look under small cap growth stocks, those have been really the hot stocks.
You know, like one in particular I can just think of right now is FormFactor, which is a tech stock, but it's not a tech stock in NASDAQ. It's a tech stock that's actually in the small caps. And that just went on to make new all time highs up again today. So that's really kind of what we're looking for.
In terms of value stocks, we're looking for companies that had a pretty good balance sheet, but haven't really gotten going yet. A classic, which would fit with a mega trend, would be like 3D Systems, for example, DDD, because we really believe in 3D printing as the future. And that stock has been basing, hasn't gone anywhere, but we're actually in it right now, looking for it to start making a move.
So, you know, we're mixing up our portfolio. We also have a lot of commodities in there, mainly food commodities, because the food commodities have skyrocketed as well. So we're also looking at some inflation plays as we're adding things in, and we think the opportunity there is still really very green in terms of what can happen with commodities going forward.
ALEXIS CHRISTOFOROUS: Back to techs for a moment, I want to touch on chip stocks. You mentioned Nvidia in your note. How do you like Nvidia right now? We know Intel got hit hard after Apple came out and said they're going with their homemade chips. They're not going to be using Intel's anymore, but it's been quite a year for AMD and a company like Nvidia.
MICHELE SCHNEIDER: Well, right, and Nvidia looked like it was teetering on falling off the cliff, as we came into this week. It hit $500, which is a real big support area, and is bouncing today. It typically does very well seasonally, as people go out and buy cyclicals and buy technology. That's really when Nvidia shines. So I think it's a great barometer to watch.
Right now, last look, it was trading about $533 with a nice bounce today following NASDAQ, but, if it-- it's still inside the range where it was trading yesterday. So it could just be more of a buying against the support, maybe some short covering in that. And, if it cannot continue up from here and starts to roll over and breaks $500, I think that will really be an interesting sign for exactly what we're talking about, which is that rotation out of the monster techs and more into some of the manufacturing, industrials, small caps, and even, like I said, commodities.
ALEXIS CHRISTOFOROUS: All right, Michele Schneider of marketgauge.com, always good to see you.
MICHELE SCHNEIDER: Nice to see you too.