Chris Payne, Payne Capital Management Financial Advisor joins the Yahoo Finance Live panel with the latest stock market news.
AKIKO FUJITA: Chris Payne is Payne Capital Management Financial Advisor. And, Chris, you know, we had our guest on earlier who said like it's very important to say we all know this, but repeatedly say, look, the markets may be very, very optimistic, but the economic picture certainly shows that this is still a very long climb out of the declines that we've seen so far this year. And you've pointed out that, as you look to 2021, it's very important to have a portfolio that is economically sensitive. What does that look like?
CHRIS PAYNE: Yeah, so I think, if you look about, the majority the recovery has been focused on large-growth companies, particularly, the tech sector like Microsoft, Amazon, Apple, you know, the FANG trades. But, you know, the one thing you've got to realize is that, after a certain period of time, those stocks are going to start to get a little bit overvalued, whereas you're starting to see a little bit of what I call rotation. And that started back in November where we're starting to see things like small caps, for example, are starting to-- are starting to come back.
So like, if you look at like the last eight weeks, small caps are up like 30% in comparison to like the Dow and the S&P. Those are up only about 14%. So, you know, you're really starting to see some of these sectors that really hadn't done well through the pandemic starting to turn around.
Another example would be like energy. It's hit its highest prices since March even though now it's starting-- it's still down about 30% from its highs, but, again, we're starting to see a recovery there. Other places like emerging markets, they've started to really turn around.
And you've got to remember, like compared to like thinking about forward earnings, the S&P is trading at like 22 times earnings. Emerging markets are only trading at like 12 times earnings. So, you know, these are parts of the economy that are really starting to turn around, but are also still relatively cheap.
ZACK GUZMAN: Yeah, and, Chris, I mean, when we talk about that, how much of maybe those two ideas, whether it is betting on energy here and that recovery or emerging markets, might be covered up by the fact that we've seen the dollar continue to weaken here, particularly, in the back half of the year? I mean, how much of the demand equation in your mind is maybe being covered up by that, particularly, when we think about oil prices there and where that goes in this recovery?
CHRIS PAYNE: I mean, I think-- you know, I think it's really more about, you know, as things start to recover, we're going to see more demand for those things, especially as people start to travel. And, also, people are starting to look for opportunities in their portfolio. Like, right now, I wouldn't be buying into the S&P or big tech stocks. I'm really looking forward to see where the discounts are. Where am I going to get the biggest bang for my buck?
AKIKO FUJITA: And, on that front, when you talk about emerging markets, overseas, you know, we were talking about Europe earlier, seeing big gains of the last few days, partly on the stimulus talks here in the US, but also because of the resolution that is now in place around Brexit. What opportunities do you see there?
And, when you look at sort of investor portfolios, what do you say should be the allocation? Should it be predominantly US equities? Should it be a bit of Europe? Should it be more EM? What are you advising your clients?
CHRIS PAYNE: Our portfolio, for example, is a little bit slightly heavier weighted in US, but, you know, about 30% of the portfolio is in international. We split that between emerging markets, international developed, and, for folks that are on the younger side, also frontier markets and just because our philosophy is that most of the growth overseas-- or, excuse me, most of the growth that we're going to see in the future is probably going to come from overseas.
You know, you think about like emerging markets where you have some of the fastest growing economies and populations in the world. So, you know, just looking at things in terms of opportunity, that's where we see the biggest opportunities.
ZACK GUZMAN: Outside of that, I mean, when we're setting up for what could be another potential injection here, obviously, when we've seen these debates play out, it had seemed to be Republicans, perhaps, the more cautious side here. When we have the Biden administration coming in here, along with Jerome Powell and the way that he's been playing this recovery, along with, potentially, as well Treasury Secretary and Janet Yellen here pairing up to really give another boost here, what are the market expectations in your eyes for maybe seeing that?
Should we see, you know, what's playing out in California right now at 0% ICU capacity maybe start to hit, hopefully not, but maybe back in New York or other areas as well, what do you think the propensity is to see, perhaps, even another stimulus package?
CHRIS PAYNE: Well, I think, you know, the market is always going to be forward looking. So I think what the market is looking at is the fact that we do have a very-- two very effective vaccines. By the end of March, there should be about 100 million people that are going to be vaccinated and, on top of which, you know, you've got a lot of cash on the sidelines. So there's-- and there's also a lot of pent up demand.
So I think, you know, once the floodgates open, so to speak, and we start to see more mass vaccinations, you know, I think those sectors that have really been hard-- hit hard like travel and just people's ability to want to spend and get out and do things, I think we're going to see a major melt up in the markets in 2021.
ZACK GUZMAN: Yeah, and, as Akiko mentioned earlier, still also that question of state aid not addressed here in the latest package. We'll see what happens playing out there, but, Chris Payne, Payne Capital Management Financial Advisor, I appreciate you taking the time to chat with us today. Be well.