There’s a ‘disconnect’ between the market and economy: The Lerner Group

Vanessa Martinez, The Lerner Group Managing Director, joins Yahoo Finance’s Alexis Christoforous and Kristin Myers to discuss market outlook amid the economic recovery.

Video Transcript

ALEXIS CHRISTOFOROUS: The market has been reliant on Fed stimulus for quite some time now. But the economy is starting to gain its footing. And as so, the Fed may start to have to pull back some of that stimulus. Do you think that the market has done a good job of pricing that in?

VANESSA MARTINEZ: I think it has done a good job. One of the analogies that I tie to this, it's like the parents, right? The Feds are parents. And we send our kid to college. We give them that credit card.

And now it's time for graduation, right? So we're slowly getting to that graduation level. We've seen that the economy has recovered, not completely, of course. But 916 jobs, that's a phenomenal number, which I'm quite happy that also 75% of that number was women joining the labor force. So that was a happy moment.

But we've seen the ISM manufacturing and services number also exceeded the expectations. So as the economy recovers, the Fed will need to do a little bit of that pullback. I think and I hope there will be some volatility. But if it's built in enough, it'll just be like those minor blips that we've seen in January and February.

KRISTIN MYERS: All right, so Vanessa, speaking about the economic recovery, I think a lot of folks right now are considering some of those post-pandemic plays. At the start of the show, we had really looked over at some of those cruise line stocks, which are doing very well today, particularly Norwegian. I'm wondering how much you think some of those stocks have really baked in the gains already this year. How much more upside do you think there is, at least on that reopening play?

VANESSA MARTINEZ: I think there is still a little bit of upside left there. But we agree with it's time to rebalance your portfolio. We're focusing more on value stocks, though. So we're playing on yield. So there's a few stocks that we believe with high yield and low forward PEs that that's the focus that investors should take right now.

ALEXIS CHRISTOFOROUS: So are there some individual stocks, some stock picks that you can share with us in that space that you think have good opportunities for investors right now?

VANESSA MARTINEZ: Yeah, I think there's two that I can be specific with. Due to the proposals on the infrastructure bill that we've heard so much about, $3 trillion, so it's more of a commodity and a yield play. There's BHP and Vale. And this is why there is so much opportunity, but you have to be selective.

So to be specific with Vale, it happens to be that it is 18% of the Brazil ETF. So if you look at the Brazil ETF today, it's down year to date 8%. But Vale is up 13.5% year to date, reinvesting that dividend. So if you're selective, that is where the opportunity lies.

KRISTIN MYERS: Vanessa, I was reading your note a little bit earlier. And you said that while the stock market has more than recovered from the pandemic-driven lows, the economy has only recently started to recover in a noticeable way. This is something that we talked about a lot, at least when it came to 2020. I'm wondering how much you see this still existing in 2021, a disconnect, if at all, between the market and where the economy is right now.

VANESSA MARTINEZ: I agree with you. There has been a large disconnect. And even though we get excited with the jobs numbers moving up more than expected, there is still a long way to go. But we have the support of both fiscal and monetary stimulus. They're continued. And they have been supporting.

But we all have to do our part. There's definitely opportunities out there to continue to buy. But it will take some time before there is a full economic recovery, probably more so towards middle of the next year. But in the meantime, this is what makes the market a good place to be in right now. If the economy is continuously recovering and the market stays steady in this increase that it's headed, I feel they'll soon meet up and then we'll be on our way.