Tom Essaye, Sevens Report Research Founder, joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss what's moving the markets around Wednesday's opening bell.
ALEXIS CHRISTOFOROUS: And Tom Essaye, Sevens Report Research Founder. Tom, good to have you here. All right, we are less than a week until the election. Tell me what your clients are telling you about their portfolios. Are they making any moves right now?
TOM ESSAYE: No, they're not. And good morning and thank you very much for having me on. I think everybody is sort of just in a wait-and-see mode. I was saying to my team yesterday that when you have these big binary events looming in the markets-- and by binary, I mean it's either going to be somebody wins and somebody loses-- they tend to suck the air out of the room a few days before. And I think part of that is what we're seeing right now. Traders are trading, I think you're seeing some people lighten up some risk, and that's why we're getting some of these bigger declines, but for the most part, longer term investors are just stand-- standing pat, and they're waiting to see what happens next Tuesday.
BRIAN SOZZI: Tom, what we're seeing in the markets today and then even earlier in the week really reflects, I would think, fears about more lockdowns. And in your note this morning, you really handicapped some of the top vaccine plays and-- and some stocks that may not be top of mind.
TOM ESSAYE: Yeah, absolutely. So, you know, we're very focused right now in the markets on the surging coronavirus cases and the potential for greater lockdowns. And that's part of why stocks are declining, it's not the only reason, the election is also tightening. Remember, markets have also priced in massive fiscal stimulus in 2021. If we have a divided government, that doesn't happen. So that's also influencing this-- this sell-off.
But we have to remember too, there are vaccine announcements coming between now and year end, probably four of them, right. And it's entirely possible that we have not one, but multiple COVID vaccines that are being distributed by the end of 2020 into early 2021. And that could be a really big time positive for this market and specifically some of these hardest hit COVID sectors-- airlines, hotels, cruise lines, travel booking companies like Expedia and Tripadvisor all stand to benefit on that vaccine announcement.
ALEXIS CHRISTOFOROUS: Hey Tom, we've got the tech trio, the-- the trio of Titans coming up. They're going to be before the Senate Judiciary Committee this morning talking about Section 230. We're talking Zuckerberg, Sundar Pichai, and Jack Dorsey. What do you do with these stocks? So many, they're widely held stocks, they're-- they're in-- a lot of them are going to mirror a lot of people's mutual funds. What do you do with those stocks right now?
TOM ESSAYE: I think you hold them. I think the bar for Washington to actually prove to the markets it's serious about regulating these companies is very high. I mean, how many years have I been coming on with you guys now, lucky enough, for a couple of years now-- I feel like we talk about this every so often. Washington is going to regulate social media companies. Nothing ever happens, you know? So-- so until Washington actually-- and I know that Google's got the antitrust suit, that's going to end up in a multibillion fine, it's a rounding error for Google-- you know, at the end of the day, until Washington gets really serious with these social media companies, then I think that you-- you hold them. And you just say, OK, fine, every once in a while, I gotta deal with this political headline risk, but these companies are still making money hand over fist.
BRIAN SOZZI: But Tom, perhaps, is it-- is it time to get outside of some of these bigger cap tech names and look at cloud? I mean, look at that Microsoft yesterday, they don't-- they're still-- they're not getting scrutinized, Microsoft, like an Apple, like an Amazon. Is it time now to look at a Microsoft, and-- and that's probably the best bet?
TOM ESSAYE: Yeah, I think that, you know, you're spot on there. So if somebody looks and they say, gee, I have a lot of search and social media exposure in my tech portfolio, does it make sense to diversify that out into some of the, you know, old school tech like a Microsoft or an Oracle? Yeah, I think it absolutely does, because they don't have the headline risk that a lot of these social media companies do, and they also-- those companies are not going to see any sort of a major earnings, I don't believe, if a vaccine is produced, if the world hopefully returns more towards normal by the end of the first half of 2021.
JARED BLIKRE: Hey, Tom, as always, I want to get your take on the bond market. We've seen yields marching down on the long end for about four days in a row now, from 87 basis points on the 10-year to the 75. Do you think that was just a brief spike up and kind of an anomaly, or are we going to head up again, or what's your just-- forecast for the yield curve here?
TOM ESSAYE: Yeah, I-- I hope it was not another head fake, because well, it'd be a really good head fake this time. Have it-- everybody watch 72 basis points, 0.72% in the 10-year yield. That's really critical support that you do not want to have broken. That was the breakout from about three weeks ago, you want to see hold-- it's already held one test, you want to see it hold a second. We've got to remember that yields are essentially trading off stimulus expectations, though. So three weeks ago, everybody expected blue wave, $5 trillion in stimulus in 2021, and you know, we're off to the races in this economy. Now that's come under some doubt. You're seeing yields decline as-- as frankly, they should, but watch 72 basis points. That needs to hold.
ALEXIS CHRISTOFOROUS: What are you doing with cannabis stocks right now? You know, things may change in terms of legislation, depending on who wins the White House. It may not be immediate, but over time. What's your outlook there?
TOM ESSAYE: I think if you can afford to lose the capital, then there are a few sectors in the market that offer more return for the risk you incur than cannabis stocks. So point being, these things have been destroyed, right, these stocks. And now they're seeing a little bump as people expected the blue wave. Personally, if you can afford to lose the capital, I think it's worth some risk here, because if Biden does win, if there is a blue wave, which incidentally, the polls are still saying is going to happen, then these stocks have a very favorable outlook going forward. And I think you could see some substantial gains.
ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Tom Essaye of the Sevens Report. Good to see you this morning.
TOM ESSAYE: Thank you.
ALEXIS CHRISTOFOROUS: All right, and do stay with us. Much more ahead as we are in sell-off mode right now, seven minutes into the trading day. The Dow off more than 500, NASDAQ down more than 230, and S&P giving back about 65 points here in the early going.