Even the worst of news has a silver lining: Sit Investment Associates SVP

Bryce Doty, SVP and Senior Portfolio Manager at Sit Investment Associates, joins The Final Round to discuss why he thinks investors should buy on the dip and how the bond market is worth watching.

Video Transcript

MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. Let's take a quick look at the market right now. We've got the Dow moving back into green figures, up just fractionally about 1/10 of 1%. The NASDAQ on track right now to rise more than one percentage point on today's session. We'll see how we shake out in about 11 minutes with the closing bell.

We're joined now by Bryce Doty. He's a senior vice president and portfolio manager at Sit Investment Associates. And Bryce, you say that you are right now in the buy the dip camp in the market. And certainly, that has been the right side of the trade broadly.

When you look at what happened, let's say, last Thursday, right, the market all of a sudden gets very worried for whatever reason about a lot of different things. Does that kind of action-- a 5% pullback in one day-- does that concern you about the current setup right now? Or do you expect we'll see days like this as we move through the rest of the year?

BRYCE DOTY: Well, it just shows how dangerous the investing is these days. I mean, it's just so volatile that you'll have days like that. There will be bad news that's come along. But every time there's bad news, the Fed comes to the rescue, you know, the calvary comes to the rescue.

And today just shows that ever since the Fed started pumping trillions of dollars into the market-- if you want to see what happens to the stock market, you have to know what's going on in the bond market. The corporate bonds-- you know, there's been $1 trillion worth of issuance this year. It's what's pumped up the stock market, because this gives these companies cash-- cash to like, withstand the damage that they're taking.

And what happened last Thursday-- I'm like, yeah, there's going to be more bad days like that where reopening, instead of it being a positive, it's going to be a negative. It's going to be a hit. There's going to be-- you know, it's dangerous. It's a big health risk. And it's very, very real. But every time something goes wrong like that, what happens?

Two things. The government pumps a ton of money into it, and we get smarter about it. We get smarter about opening. So each additional dip is going to be less painful. And each rebound is going to be stronger and stronger. So on top of it, as time passes, you get closer and closer to better treatments, more vaccine. So, yes, we're definitely in the buy the dip camp.

SEANA SMITH: Hey, Bryce, what do you make of the action, though, that we've seen recently, because we've talked about it here on Yahoo Finance the rise of the Robinhood trader's return, the day traders. I guess how big of a force of a driving force do you think it is in the market recently? And then also, do you that this is a force in the stock market that has staying power that can last?

BRYCE DOTY: Well, like, there's a couple of crazy things going on. So with all the money piling into ETFs, you saw anything in an index go up no matter what. If it was in the index, it just got pushed up. And then with what's happened with Robinhood, just, I'm stunned. I did not see that coming. The fact that so much money went into Hertz, OK, the Hertz stock, and they're bankrupt-- we just can't get our head around it.

Or my staff, we talk about it. We're like, OK, so you're going to pile in hundreds of millions to get zero? But you have to pay attention to it because it really moves markets. So those investors are a real force. But they should be a force that you can kind of be a contrarian to and take advantage of. Any flow that's being pushed up by Robinhood, I'd lean against.

MYLES UDLAND: And, you know, Bryce, you kind of mentioned the Fed's role in all of this. And I guess the question is kind of simply like, did investors see enough in the last decade to know the simple playbook in a crisis? Follow the Fed. You're probably not going to end up on the wrong side of that trade at least when it comes to the equity markets. And sure, you can place your discretionary bets, your shorts, longs, here, there, or the other. But when the Fed is in the market, and they're committed to low rates, the S&P, all else equal, is probably going to go up.

BRYCE DOTY: Yeah, that has never been more true than it is right now. And today with them buying corporate bonds, they're not just in index. Now, we no longer have the haves and have nots. It used to be the only companies whose stock was going to benefit from coming to market were the ones with their bonds would end up in the index that the Fed was buying.

Now, it's a lot more corporates are going to do well. Well, what does that do? That means it broadens out the impact that you're going to see in the stock market. So there's going to be more and more strength there. And that is exactly what you said times 10. I mean, that's just crazy how much the Fed is just dominating markets right now.

MYLES UDLAND: And then just quickly, I guess, on this reopening theme, I mean, as you mentioned, it's not likely that we're going to go back to [INAUDIBLE]. But March and April, that's probably never happening again in our lifetimes. But certainly, there are going to be pockets. We're seeing it now. There's going to be a lot of skittishness. Think around when schools come back in session-- colleges go back in session.

Do you worry that these kinds of-- that the COVID trade will once again be a major risk event for the market? And do you think that that's maybe not a retest of the March low but that we could see stocks fall 15% or 20% if the news were to really kind of deteriorate as we got into maybe the fall and the winter?

BRYCE DOTY: Very much so. I think that what you're describing, I like to call them air pockets. You're flying along. And all of a sudden, there's bad news on the reopening. This region or that region really looks ugly. And the stock market assumes that, OK, the whole country is going to look like that. And boom, you're down 5%, 10%. And it feels like it. It really feels like an air pocket. And you just drop.

But I think, again, those are going to be opportunities, because if it really is that bad, there's going to be another fiscal package that's huge and then one after that and after that. And the Fed will keep on pumping. So even the worst of news has a silver lining to it. But this kind of volatility, I mean, you really have a lot-- have to have a lot more intestinal fortitude to be able to survive it, because the indigestion is it's going to be nuts.

At least for the next six months, I mean, I think it's going to be really volatile. And people are going to get whipsawed. They're going to get bullish, think things are on the right track just to hit one of those air pockets. And then, they might bail on the day that they should be buying.

MYLES UDLAND: All right, Bryce Doty with Sit Investment Associates. Great stuff. Thanks for joining the program. We'll have you back soon. Stay safe and have a great summer.

BRYCE DOTY: You too. Thanks.