Kim Catechis, Head of Investment Strategy at Martin Currie, joins Yahoo Finance’s Kristin Myers to discuss the market outlook amid wavering stimulus optimism.
KRISTIN MYERS: But let's start right now with what we are seeing in the markets. The markets yesterday closing at their highest level in a month. So for more on this, we're joined now by Kim Catechis, head of investment strategy at Martin Currie.
Kim, thank you so much for joining us today. I always love chatting with you. Let's start with those jobless claims-- not as good as expected. And we've long been talking about how job hiring and job openings, they've started to slow. And we're obviously seeing that now in the numbers.
I'm wondering, as you're looking at this-- because there had been the hope that a lot of those jobs lost, that they would eventually come back. How concerned are you now-- the longer that this goes, you still see those continuing claims very high, those jobless claims still very high-- that, frankly, some of those jobs will not be coming back?
KIM CATECHIS: Yeah, hi, Kristin, it's great to be here. Thank you for having me again.
So yeah, you're absolutely right. This is now, I believe, the sixth week that we've got numbers roundabout that 840,000 level. I think it's slightly worse than expectations. But, obviously, the range of consensus out there is quite big.
What I would say is that within those numbers, there's a couple of things to draw out. The first one is that I believe it's fair to say that a lot of analysts got caught unsuspecting in terms of that, if you go through those numbers and check parts of those sort of sections that are down to municipal governments and local governments, we hadn't, I think, expected that. We thought it would all be predominately private sector.
Second thing to point out-- and, you know, this is a bit of the obvious-- you did mention airlines earlier in your intro. Airlines have already announced job losses. If they don't get a stimulus package or some kind of rescue package or award you want to use, then those losses are going to be piled onto these 840.
And, you know, we're not out of the woods. I think Walt Disney has also announced a number of cuts as well. So the longer that this goes on, it's not really, I think, a question of the exact number every week. It's more of a question of magnitude and how long that curve keeps going.
And it seems pretty clear if you don't have COVID-19 under control, you cannot open your economy completely. If you cannot open your economy completely, it is unreasonable to expect a serious reduction in job losses, you know, in unemployed.
I guess, the last part of this is that, you know, when we went into this pandemic, the economy was really humming. And I guess, unemployment levels were really very low.
So you could argue that a certain percentage of those people who got employed over the last two, three years may well end up being at the back of the queue when the economy starts picking up again, just because, by definition almost, they're not kind of the first choice employees.
KRISTIN MYERS: To that point, Kim, you mentioned the airlines. And I found them in my app. I am following hundreds of stocks. So I figured I'd give a quick update right there.
American right now struggling to stay in the green, up about 0.8%. Delta and United roughly up 1% right now. So they are holding strong. To your point, they have threatened that they will be laying off tens of thousands of workers if they do not get an aid package.
On the numbers, those figures don't include California's numbers. They've put a pause on reporting their unemployment figures until they can address some sort of backlog. These numbers are still persistently high, even without California-- obviously, largest state. And we've got one of the largest states that we've got.
Is there a concern, do you think, that when we get those numbers from California perhaps next week or the week after, that we're going to see a very large pop? And how do you think markets are going to react to see that spike all of a sudden, once those figures are included?
KIM CATECHIS: Look, I think you're absolutely right to point that out. Now, first of all, let's take a step back a little bit and think that if I think I'm right in saying these numbers may be a little bit out, but I think broadly speaking, around 60% to 65% of working Americans were not working for big multinationals. They were working for small to medium-sized companies.
And these are exactly the companies that do not have the depth of cash positions on their balance sheets to be able to tough it out for more than a few months, right? Some of those companies may even be deservedly asking and in the process of receiving handouts from the last package, the last stimulus that was approved in the springtime.
But sometimes that money hasn't come through as quickly as you'd expect. And it's always a little bit of a delayed reaction. So, to answer your question directly, I think most analysts in the market expect these numbers to continue looking pretty poor until such time as I said that we can really, with some kind of confidence, expect the market to open up-- the economy, rather, I should say, open up.
What I think would influence the reaction in the short run is any news we might get on a vaccine. Now, the latest that I've heard-- you may have heard different, but the latest I've heard is that we're probably looking at three to four companies that appear to be getting closer and closer.
If the approval comes, you know, the FDA has recently just reverted some of their guidance on that, on the final stages for safety reasons. So if the approval comes sometime before, say, the end of the year, the market is going to anticipate-- fast forward in its mind, you know, and rocket away with it, be very excited.
The fact of the matter is, though, the economic data will lag because it's going to take a long time to get enough millions of doses out there in the right places to actually inoculate the right number of people to be able to get that economy opened up. Sorry, that's a bit of a long answer, but I hope I hit the nail there.
KRISTIN MYERS: You always hit the nail on the head, Kim. We'll have to bring you back to chat markets even further. Kim Catechis, head of investment strategy at Martin Currie, thanks so much for joining us today.
KIM CATECHIS: Thanks very much for having me.