The Wealth Consulting Group CEO Jimmy Lee joins Yahoo Finance's Akiko Fujita to discuss his latest market outlook as U.S. coronavirus cases surpass 3.8 million.
AKIKO FUJITA: But let's kick things off today with Jimmy Lee. He is the Wealth Consulting Group CEO with his eyes on the market there. And Jimmy, you know, I was just talking about some of the tech names being down today, potentially some profit taking ahead of the report. There's been some question about we're seeing this rotation out of growth into value. But you say we're not there yet.
JIMMY LEE: I don't think we're quite there. But certainly, there's been so much profit that has been made in the big mega cap tech trade that ahead of earnings, it makes sense to take some of those profits in situations. So but I don't think that we're there yet and that those names have reached the top. I don't think that will really happen until treatments and vaccines are really out there and approved.
AKIKO FUJITA: How are you positioning yourself in the tech sector overall? We've certainly got a number of big earnings on tap, including Microsoft as well as Amazon. And these are some of the stocks that we've seen-- see huge gains on the back of the lockdowns that have been placed, huge growth prospects-- seems kind of like the fallback trade. But how are you positioning yourself overall in this space? Do you feel like valuations have gotten too high?
JIMMY LEE: In some names, certainly. We're still actually overweight tech from an asset allocation standpoint but not invested in the high-flying, you know, incredible valuation type stocks. And so we're being very mindful of valuations. And I think investors should potentially have growth but also value.
And while we don't have a full rotation into value quite yet, if you don't own value now, it's a good time to look at your portfolio. And even though sectors that have been beaten up the most that are sensitive to the economy open back up, if you wait too long, that opportunity will probably be gone. So make sure you're balanced between value and growth.
AKIKO FUJITA: So let's talk about some of those value names. Where are you seeing the opportunities?
JIMMY LEE: Well, I think even in financials, I know that, you know, a lot of financials are beaten up big time. And you really get earnings announcements from the big banks last week that are muted or mixed-- excuse me-- and if you have a trading desk-- and obviously earnings are better than if you don't. So certainly we're going to have some loan losses for the big banks that make loans.
But I think the opportunity in the banking and the financial sector is still great. I think in the health care sector, I think you had opportunities. So I think there is also value in a lot of beaten up travel-related stocks that won't go bankrupt. And so it's time for active investing to scrub the balance sheets and make sure that the companies you're invested in have access to capital or refinancing their debt and make it through the other side of this virus.
AKIKO FUJITA: What specific travel names are you talking about? It seems like when you look at May and June, you know, it felt like some of the demand was coming back, especially in airlines. And, yet, the latest data out from TSA seems to suggest that that has leveled off as concerns about an uptick in these coronavirus cases have reemerged.
JIMMY LEE: Well, I can't give you specific names, but certainly in the gaming sector, the hotel sector, and even the airlines-- if the companies are not going to go bankrupt, you need to see what the additional debt that they might take on in the cycle will do to earnings and try to discount that to get to a true value but or price today.
But I think there is opportunity in a lot of those sectors and in names. And so, again, if you wait too long, and you wait for the vaccine to be out and approved-- and those stocks will probably already gone up a lot. And I don't think we're going to retest the lows. So if the virus case count ticks up, and you have states going back and forth on the reopening plans, you know, what's probably going to happen is we get a pullback in the stock market.
You're certainly going to see more stimulus from the government. It's election year. So between now and November, we're going to probably see some mixed economic data. But certainly more money from the government is expected. And that correction will be supported by that extra money. And I think you'll see a rally in stocks.
And so we've seen this playbook or play out before already in March. And so investors I think can use this as a buying opportunity when it happens if there is some selling going on and some panic selling like there was in March. That's when people like Warren Buffett says to get greedy. So I think investors may have another chance to buy some more equities even cheaper.
AKIKO FUJITA: Jim, you mentioned the stimulus debate that's playing out right now in Washington. You know, certainly, we heard a potential or I guess a starting point, as the Senator Mitch McConnell put it for the Republican proposal. How much of what comes out of the ultimate proposal that's decided on between Democrats and Republicans?
How much of that actually changes your positioning in the market? As you say, there's a lot of people who are looking to this to see how much additional help there will be, not just for sort of those who are unemployed, but also businesses. How much of that you think is actually priced in the market already?
JIMMY LEE: I think a lot of it. In fact, that's why when people ask me how can the stock market be up so much and back to where we were before almost with the economy so horribly? It's because of the stimulus. And I think investors that have bet against the stimulus and against all the Fed action were wrong when they were predicting a retest of the lows.
And certainly, again, this is an election year. Between now and November, we're going to get more stimulus in my opinion. And that's going to help support stocks. But as we get, you know, case count on the medical side that's negative news on the medical side, we could potentially, as the states sort of stay shut down, see opportunities to buy stocks on the correction.
But, you know, I think the election has potentially a lot of risk associated with it in terms of positioning. But up until then, I think the stimulus is something you can't ignore. And if you're an equity investor for the long run, you can count on it. And it will help you potentially give you support for a buying opportunity next time again.
AKIKO FUJITA: Always good to get your insight. Jimmy Lee there with the Wealth Consulting Group. He's a CEO there.
JIMMY LEE: Thank you.