Stocks fell Monday as investors gave back some of last week’s gains, which sent the S&P 500 and Nasdaq to fresh record highs and the Dow above 30,000 for the first time ever. Katie Nixon of Northern Trust Wealth Management and Vance Howard of Howard Capital Management joined Yahoo Finance Live to discuss.
ADAM SHAPIRO: We've got three minutes to the closing bell. We want to invite into the stream Katie Nixon, Northern Trust Wealth Management, as well as Vance Howard. He's CEO at-- PM at Howard Capital Management. Good to have you both here. Jared Blikre also on deck. Katie, let me start with you. As we head into the closing bell, three P's you say people should pay attention to-- politics, policy, and the pandemic. Let me just ask you about the pandemic. Is that now rearview mirror and priced in?
KATIE NIXON: Partly priced in, I think. But I do think, as we see continued good news on the rollout of the vaccine, the market will continue to react positively to that. So although I think a lot of the initial vaccine news is priced in, I think as we see the implementation, we'll get some more bumps.
JEN ROGERS: Vance, the market's not perfect. Sometimes we overshoot to the downside. Other times, we overshoot to the upside. Do you think that we're in one of those moments right now, where we may have gotten a little bit ahead of ourselves, a little bit over our skis right now?
VANCE HOWARD: No, not at all. We trade the HCM byline. So we're a mathematically driven shop. The math is pointing to us that we may have another 4% or 5% upside in December alone before the end of the year. The HCM byline is extremely positive right now. Being a quantitative measure that it is, it's usually been very, very accurate. We see the market pushing higher or even into the first and second quarter of 2021.
Yeah, there's going to be some bumps in the road. There are bumps in the road in every single market that we have. So any pullback that we see in the market we see as a buying opportunity.
ADAM SHAPIRO: Let's go to Jared Blikre as we get ready for that closing bell because, Jared, this has been a really terrific month despite what appears to be a down day today. One day does not a market make.
JARED BLIKRE: That's right. And it is the last day of the month. Normal to see selling when we have the markets up this much. You look at the Dow. It's up 11.7% for the month. NASDAQ has some nice gains, a little bit less, 11.6%. S&P 500 sitting on 10 and 1/2%. And a lot of these are setting some pretty big milestones. It's going to be the best month for the S&P 500 since 1987. So not too shabby right there.
We are seeing some profit taking, especially in crude oil and the energy market. Now we've seen energy up. This is the second best month we've ever seen for energy, coming off a little bit today. I do want to note the US dollar index has been especially weak. If we take a look at a three-month chart here, interesting candle. This is called a hammer candle. Not final until we get confirmation the next day.
But if this is an interim low, got to keep in mind that rising dollar could pressure equities in early December. But we just do have these incredible tailwinds at our back from the December seasonality, the so-called Santa Claus rally at the end of the month into the first few trading days of January.
So just taking a look at the NASDAQ 100 here, we can see some pretty good leadership, at least for Apple. That's up 2 and 1/2%. The other majors, big mega cap names, those are down. Google's off about 1.76% here. Amazon is off about 1%. Facebook off about 20 basis points. Tesla was in the green. Now off about 3% for the day, but nice gains for the month. Here's the closing bell.
JEN ROGERS: That's going to be good for November. Wow, the whole month now in the books, as we've been just going through the numbers here, looking at the Dow for our best November since 1928. You do have to remember, it was down today. On the day today, energy our worst performing sector, red across the board, except for the XLK. These are the S&P sectors, looking like it's going to eke out the smallest of gains, up just about 7/10.
Also, S&P 500, NASDAQ, best month since April 2020. So the story here, we've had rotation. We've had re-opening trade. We've had optimism on the political situation here in the US as well. And of course, who can forget the repeated Mondays of news on the vaccine front. And again, today we had more news coming out from Moderna.
I want to bring in Katie Nixon with Northern Trust Wealth Management just to get a little bit of perspective here on all of this as we wrap up this month right now. We're heading into December. It's usually, seasonally, it can be a strong time. You know, just not that long ago, we were saying that we needed stimulus to see anything like this, right? That was the story early in the fall. Stimulus, stimulus, stimulus.
Now what happens? Do we need something out of Congress by the end of the year? We're starting to hear some news reports this afternoon that McConnell wants to maybe get something through the end of the year. To continue this rally, do we need Washington?
KATIE NIXON: Right, so I think this is an important time to distinguish between the market and the economy. I think right now, it's very clear that the market is sort of looking past what is going to be a difficult couple of months, regardless of fiscal stimulus. We're going to have probably more rolling lockdown lights here in the US to try to continue to control the coronavirus. But the market's really firmly focused on 2021, I think. The good news on the vaccine front that you've covered I think is giving investors a lot of optimism.
Now would fiscal stimulus be an additional support for the market? Of course. And we do expect there to be a smaller, targeted, more tactical package probably passed either during the lame duck or soon, after the inauguration. But I don't think it's necessary at this point that we get a fiscal package in order to maintain the market rally.
ADAM SHAPIRO: Vance, gotta give you credit. Back in February, you went 60% into cash. Now you are 100% in equities. Is that a little dangerous perhaps?
VANCE HOWARD: Well, that's what we do for a living. You know, Katie made a good point. There's a difference between the economy and the stock market. Those are two different animals doing two different things. Clearly, that's become the norm history wise. But again, the byline gave us a sell in February. We moved 60% to cash. It gave us a solid buy the first week of April.
We were 100% back in the market in the second week of April, which, you know, the byline's mechanical. It's not emotional. It's repeatable. We take the emotion out of the equation because I don't know what the stock market's going to do tomorrow. And I don't know what the economy's going to do tomorrow. So I could take that out of the equation and trade math. And that's been a great trade force. Clearly, any pullback we've had since April, we've been buying into.
And into what Katie said, you know, there's a big difference between the economy, which the economy is not doing well. With the stock market, if you're playing different sectors like a large cap growth, you're having a great year.
JEN ROGERS: Jared Blikre, back to you. Energy, last time, when we had talked on the three, wasn't down this much, ending the day off more than 5%, 5.4% here. The month, though, a different story. Give us some of the wrap-up on the month.
JARED BLIKRE: Sure thing. Let's go straight to the YFi Interactive. This is our sector heat map. And you can see on the bottom right, we've got energy down 5 and 1/2% today. And the leader today tech and healthcare. But you look at what's happened over the month. Energy is still the clear standout. Now it's up 28% in the upper left there, followed by financials, industrials and materials, and then tech.
Tech still outperforming here, the S&P 500. It just gives you a sense that we have really outperformed, and we have this broad-based leadership, which is necessary to build a long-term secular bull market. It doesn't mean it has to happen overnight. And anything can happen in the coming weeks and days. But the groundwork is being laid here.
So let's take a look at some of our canaries, some of our sentiment market leaders. And you see in the forefront here, MJ. That's the cannabis ETF, up 47%, nearly 50% for the month. And then the IPO market has been extremely hot. The Renaissance IPO ETF, IPO ticker, up 25% month to date. And then you have solar. That's the TAN ETF. Bets-- that's betting-- that's a gambling ETF. XRT is retail.
Then you have SOX. That's a chip index. And that has been making record highs, along with XRT. So you have this broad-based real-- excuse me. You have this broad-based rally here. You throw in regional banks and the transports. A lot of these markets are making record highs, and it just bodes as to the-- or says that the market is strong right now.
And just give you a couple more spaces here. Look at the cannabis space. Incredible gains for the month. You look at Aurora Cannabis, that's up 188%. And also the work from home trade not to be sneezed at. Even though we lost some of its shine this month, we still see Slack technology is up 67%, a lot of that having to do with the expected Salesforce buyout out of it. Guys.
ADAM SHAPIRO: Katie, what should investors make of two very important things you point out? First that with these markets, it could be too much too fast because that's rarely a good thing. And the other, we keep talking about fiscal stimulus, but it could be too little too late. What should we investors make of all that?
KATIE NIXON: Right, so on the fiscal side, with the vaccine coming, the fiscal stimulus becomes a bit less important to investors. However, there is a risk as we see some of the market, some of the economic indicators, rather, soften, whether it's on the manufacturing side or certainly on the employment front, that we don't get a fiscal bridge that's strong enough or long enough to sustain the economy through the next couple of months. So that certainly is a risk.
And on the other front, you know, optimism is a great thing. There's a lot of optimism and a lot of bullishness in the market right now. As you referenced, having a broader market participation is certainly a very healthy sign. But there is a danger that we get overly optimistic at this period of time. And we're certainly seeing retail investor surveys like the AAII survey, other options-based data, show us that investors are pretty bullish now, which doesn't really mean anything in isolation, but it does present a little fragility to the market in terms of being able to withstand any bad news.
JEN ROGERS: Vance, I'm just curious on Katy's point there, just about optimism. And usually, if I asked this question, somebody will say, oh, Jen, you can't time the market. But that's what you do. You move to cash, and you did well. So what signs are you looking for that would make you make a move like that again? What are the signals that you're looking at?
VANCE HOWARD: Right, like I said, the HCM byline is, it's the backbone of our whole company. We've been trading it for 25 years now. It served us well. We sidestepped 2000, 2002. We sidestepped 2008. But you got to trade what's actually happening. And the market's going up. I mean, that's just what's happening. I don't know what the market's going to do next week or next year. All I've got is a guess, like anybody else. But what I do has a quantitative measures. And our quantitative measures are clearly pointing this market's going higher. The bulls have control.
You know, the Dow Jones just hit an all-time record high last week, which is what we call a Christopher Columbus Day. It means that that's territory that's never ever been seen before. New highs are telling you something on major indexes that selling it, there's a lot of buying power out there. We're sitting on a record amount of cash. We're sitting on 1, 5, 10-year treasuries that are barely paying any interest. There's a tremendous amount of fuel in the engine they can push this market higher. But again, the HCM byline is positive. As long as it's positive, we're 100% in.
ADAM SHAPIRO: Just remember, Vance, Christopher Columbus almost got slaughtered by the people when he got to their world. We appreciate your being here, Katie Nixon, Northern Trust Wealth Management, as well as Vance Howard, CEO and PM at Howard Capital Management. All the best to you both.