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Stocks slightly higher as investors eye Q4 earnings

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Jimmy Lee, The Wealth Consulting Group CEO, joins Yahoo Finance's Kristin Myers to break down the latest market action as earnings season continues.

Video Transcript

KRISTIN MYERS: Let's bring on Jimmy Lee, CEO of the Wealth Consulting Group, to chat what we are seeing right now in the midst of this earnings season. So Jimmy, considering earnings, you say you imagine it going well. And we have seen earnings season pretty strong so far. But you mentioned that certain receptors are going to be doing much better than others. Can you give us your readout of what you're expecting throughout this earnings season? And which sectors do you think are going to outperform compared to the rest?

JIMMY LEE: Sure. Welcome to Las Vegas. And anyway, I think that tech's going to report well. And companies that are in the ad business, I think fourth quarter with the holiday spending, I know there was a lot of speculation as to whether the big FAANG stocks can hold up. I think for a while longer, I think they will. And but I do think that in the future, we may get volatility in names that have very high multiples.

And as the economy reopens up, I do favor the more cyclical sectors that might even have a value orientation to them. So I think this is a year that we could see a little bit of rotation from the big mega cap growth into some of the other names. And we actually have seen that for a little bit, as the big names sold off. But they've come back roaring, and I do expect earnings to be good in the tech sector.

Other sectors that I expect will do well actually are financials and materials as we get interest rates potentially climbing a little bit. And we'll see how long the Fed stays put with interest rates. But I'm expecting the Fed to keep interest rates low. And I think that will run for a while.

KRISTIN MYERS: And financials and materials right now, at least on a sector basis, are both in the red. You said in your note that you see another double digit year in stocks. That, however, is a pretty big range. How big into those double digits do you think that we're going to be getting?

JIMMY LEE: It's very tough to predict what the actual returns are going to be, but I do expect that we could have another good year in the stock market. And that's strange because the economy is not in the best shape right now with a lot of Americans out of work. But with that said, I think we're going to get some amazing economic numbers in the first two quarters year over year, as compared to last year.

And so, you know, I think that as the fight between the rollout of the COVID vaccine and shutdowns that you just discussed continue to happen, I think that we might see some volatility and pockets of a lot of volatility in certain names that traders are really speculating on. But overall, I expect the general stock market to do well. And like I said, I see a rotation into some other sectors that might lead. But overall, I think, you know, somewhere around 10% would be what I would say would be a good guess.

KRISTIN MYERS: So let's talk a little bit about tech. I know that you're talking about a rotation here, although a lot of folks continue to say tech is going to be strong in 2021. Tech is going to do well throughout this earnings season. I'm wondering, speaking about headwinds, if you see one of the headwinds to tech being enthusiasm and the inability to meet so much, so many of the expectations that folks have and investors have around tech. And how much of a headwind do you actually think regulation is going to be coming down the pike for tech?

JIMMY LEE: I think regulation is a big, big headwind and an obstacle for the big names. And I think you'll hear that more and more as the government takes control of-- the new administration takes control and sets in new requirements. And we'll have hearings about that. Some of those companies already are under pressure, as you know, with lawsuits going on with the government.

Overall, I think what's going to happen with tech is that you're going to see a broader-based movement in tech. So it won't be just the big huge mega cap names that will really outperform the rest of the market. So I think it's going to be a little bit broader, especially some of the more innovative technologies that you see out there.

But as we've seen in some of the more innovative names, we've seen a lot of speculation and a lot of investor money go into those and flows and push those names higher. I expect you'll see a lot of volatility there as well. But overall, I see a broader tech rally. And so, I don't see a crash in the big cap names. But I think the other sectors of the economy will catch up a little bit.

KRISTIN MYERS: You know, I wish we had a little bit more time, Jimmy, because I wanted to ask you all about GameStop and what is going on there. We'll have to see if the rally is continuing in that stock the next time we have you on. Jimmy Lee, CEO of the Wealth Consulting Group, thanks so much for joining us today.

JIMMY LEE: Thanks, Kristin.