Why FAANG and growth stocks don’t need to be completely abandoned

Michael Antonelli, Baird PWM market strategist, joins Yahoo Finance to discuss the latest round of stimulus checks and near term catalysts for the market.

Video Transcript

MYLES UDLAND: All right, we're back to "Yahoo Finance Live" on this Monday morning. Let's take a look at futures here, about nine minutes away from the opening bell. We see all three majors pointing to gains at the open. This after the Dow and the S&P both closing at record highs on Friday.

Let's stay on the markets and talk about everything going on and where we could head from here. Mike Antonelli joins us now. He's a Market Strategist over at Baird Private Wealth Management. Mike, always good to talk to you. So let's-- let's start with something that you flagged in your note to us, we were just chatting about it in the break a little bit, and that is what's happening over in growth land.

You know, all of a sudden, everyone woke up. February, they said, wow, these things haven't gone anywhere in six months. And you know how it is. No one notices, then everybody does. So how are you thinking about that part of the market as every reopening trade really remains the flavor of the day?

MICHAEL ANTONELLI: Yeah, that's right. Good morning, gentlemen. It's a good point that-- that growth, in general, has-- has suffered over the past few weeks as the rotation, as the reopening trade kind of comes online. What I'm trying to remind our clients and some of the advisors I speak to, and now you guys, is that we don't have to abandon all growth.

You know, growth does get kind of a term that kind of layers on top of all sorts of stocks, whether they be super high-flyers or whether they be quality growth. And what I'm trying to say to people is a barbell approach-- I might have said this earlier this year on Yahoo, a barbell approach. I want to have some re-opening trades yes, but I don't think we need to abandon growth completely. Let's look at quality growth and stick with quality growth.

You know, we don't need to buy stocks that are trading at 50 times sales. But the Costcos, and the Apples, and the FANGs, and the quality growth stocks of the world yes, they have been punished in the rotation. But let's see with earnings, let's see what they have to say during earnings.

These aren't bad companies, they're just suffering from the rotation themselves. I don't want people to think that FANG is-- you know, is a name that needs to be completely abandoned. Maybe we need to keep a toe into both things, which is kind of the reopening trade and the companies that are really, really executing well on their business plans, kind of regardless of what the interest rate environment is doing.

BRIAN SOZZI: Mike, I'm being hit over the head over the past week on notes from the sell side suggesting that stimulus checks, as they flow in, that money is going right into Bitcoin. It's going right into stocks. Do you think that is a-- a near-term market catalyst? And if so, how big a catalyst is it?

MICHAEL ANTONELLI: I think it probably is, because what we really care about right now is price momentum. Price momentum's kind of driving the narrative right now. And-- and as we go into the next month, April, guys, it's what? One of the best sports months. We get-- we get the tournament right into Augusta.

Now you have these stimulus checks kind of hitting the market. April, for the past decade, has been kind of the second best month. So will these stimulus checks, stimi checks, hit the markets? I do believe they will, in some sense, and that will continue that price momentum. Regardless of why it's happening, price momentum is what I'm looking at.

And what does that kind of stuff go into? If you look at charts, it's-- you know, retail traders have embraced options. They've embraced some of the meme stocks. They've embraced bitcoins and NFTs, and all these things that we talk about all day long on Twitter. But I do think it will have an impact. Even if it's a drop in the bucket, those ripples can get really big as they kind of go out.

So we do have to be watching the fact that this week most people will be getting their stimulus checks, and some of it, no doubt, no doubt is going to find its way to the market and continue this, honestly, really good breadth. The Cumulative NYSE Advance-Decline Line made a new high on Friday, and the 52-high week-- the lifted 52-high list continues to expand on the NYSE. The stimulus checks should keep that going.

MYLES UDLAND: And you know, Mike, speaking of a conversation that I'm guessing you're-- because I'm guessing your clients are asking, like, what's up with NFTs and all that kind of good stuff? Another question I know they're asking is about inflation and-- because everybody's always scared about it if you grew up in the '80s and the '90s. How are you guys thinking about the risks right now and obviously what we may or may not hear from Powell on Wednesday?

MICHAEL ANTONELLI: It's a great question, Myles. It really is a good question, because inflation is like the number one topic that I'm fielding on top of the national debt. And these things generally tend to get brought up in times where the market's doing well and people are looking for a worry. People are always kind of looking for a worry.

We like to remind our clients inflation is an average. There are things that go up. There are things that go down. I can get a really good TV for $300. My first plasma was $2,000. College, medical costs, those are going up. If you're worried about those, you can do something about that on the planning side.

But when we talk about inflation, we remind them that it's an average, that what the market is saying-- the five-year break-even's about 2 and 1/2%, so that's the average inflation over the next five years, that's higher than it's been in the past. And if you think that that's a little concern to you, there's things you can do. We need to be in the right sectors, the right investments.

But we do not view inflation as this runaway train that we're going to kind of relive the '70s through. So-- so we're watching it. We remind them it's an average, and there's things you can do about it. Be in the right sectors and asset class.

JARED BLIKRE: Jared Blikre here. I want to ask you about the Fed meeting and this decision we have on Wednesday with the accompanying presser with Jay Powell. We've seen some short-term plumbing issues in the market right now. And without getting into the weeds, we have this COVID-era restriction that might be lifted-- or actually an exception that might be reversed here that allows banks to keep more Treasury securities on their balance sheets. Just wondering what are you expecting from Jay Powell? And could we have more disruptions in the Treasury market that leak over into other risk markets like stocks?

MICHAEL ANTONELLI: Yeah, so the number one concern that I've had so far this year, and it's-- I'm generally a bullish guy, if you follow me, you'll know I'm generally an optimistic bullish guy, the one concern that I have is any sort of Fed hinting that-- that easy monetary policy might be-- the clock might be ticking on it, so any language at all, any dot plots at all, anything at all that says that our easy monetary policy and our low rate commitment is wavering. I don't believe they're going to do that, I really don't.

That concern, to me, will probably likely come up at speeches sometime maybe next year or the year after that. I don't see that easy monetary policy promise being wound down. The plumbing of the market is certainly one of the things that the Fed, I'd say, do a good job at. They do a good job. Especially during crises, they do a good job at keeping the plumbing liquid.

So if there's a concern and they need to address that, I think they will. To me, the Fed right now is the only thing I would be concerned about in terms of the stock market, and it's just, just, just around their language. I'm sure we'll be parsing it. Everybody will be trying to see what everybody's-- what the dot plots or anything are saying. But-- but, to me, that's the concern, and I don't see that as a near-term-- near-term threat.

BRIAN SOZZI: Michael, good to see some of the preannouncements this morning out of JetBlue and Southwest. JetBlue issuing some positive guidance for the first quarter. Do you think the market is underestimating an economic boom? Because when I see some of these preannouncements, I see the roads by me packed again, and this wasn't the case six months ago, tells me, really, economic activity, it's starting to build and potentially in a big way.

MICHAEL ANTONELLI: Yeah, Brian, one of the things we watched for the longest time was that high-frequency data, right. We all watched the open table stuff, and the TSA stuff, and-- and the credit card spending. I still think we do need to watch that. But-- but look at the TSA data. It's continuing to inch higher. I think I saw 1 and 1/2 million go through a checkpoint recently.

The airline stuff, I think, will be really important. And I also think we're going to start to see a lot of people posting on social media, oh, my god, I'm on a plane and it's packed. I think you're about to see a lot of those type of posts. But we do need to keep watching that.

I am-- I want to see that data start to take off. If we're going to have this 8%, 9% nominal GDP year, we're going to have to see this data start to pick up in the spring. It's a month where people start traveling. Spring break is right now. I'll be getting on a plane with my family to go on spring break.

So we want to see this data pick up, and especially that credit card spending data. I've been watching that. JP Morgan puts out a good-- a good tracker. I want to see that pick up. I want to see that start to put the COVID thing behind.

And then, like you guys said in the previous blocks, we need to think globally too. Is the US going to be the only place that's opening up? We need the rest of the world to also start picking up.

MYLES UDLAND: All right, there we're seeing live pictures from the floor of the New York Stock Exchange, getting ready to ring the bell on this Monday morning. Aeva is ringing the bell. It's a company that makes LiDAR components going into self-driving cars. And we're talking to the company's co-founder and CTO coming up in the next hour of our program.

Mike, before I let you go, I got to get you out of here on this one. I'll be honest, I have really not followed it at all. I know you kind of made the tournament, so that's exciting. Who do you like?

MICHAEL ANTONELLI: I'm probably going with Michigan. I like the Big Ten. Michigan's got a good track record, a good tenure. I'm not-- I'm not, you know, looking at the-- the ACC this year. I mean, Duke and Kentucky aren't even in it. So I'm taking Michigan this year.

MYLES UDLAND: All right, there we go, Midwestern roots staying close there for the man out of Milwaukee. All right, Mike Antonelli, Baird and Private Wealth Management, always good to talk to you. I know we'll talk soon.

MICHAEL ANTONELLI: Thanks, guys.