Stock market 'got ahead of itself' in COVID-19 recovery: Wealth Consulting Group CEO
Wealth Consulting Group CEO Jimmy Lee joins Yahoo Finance’s On The Move panel to assess the state of markets as coronavirus cases surge in some states.
ADAM SHAPIRO: This issue of a potential second wave is one which is worrying markets. And to discuss this, we bring in Jimmy Lee. He is the Wealth Consulting Group CEO. It's good to see you, Jimmy.
JIMMY LEE: Good to see you, Adam.
ADAM SHAPIRO: There's the short-term concern. And we see the selloff. But you actually see stocks being higher, perhaps, as you said, a lot higher by the end of the year. Why?
JIMMY LEE: I do. I think we have the potential for that to happen. You know, I was in the camp, as long as-- as well many others that believe that the stock market got a little bit ahead of itself. And so I was expecting a pullback, maybe 5% to 10%. So we may be in the midst of that now. I would view that as a buying opportunity. But I really think it's about balance sheets, not so much earnings. I know that earnings are important but which companies will make it out of this on the other end maybe even stronger.
And so I know we have a lot to go through before then. We have a lot of information on how the second wave will come or not, and will the economy shut back down, which I don't think we will, and elections. But if everything works out, I think the stock market could be a lot higher. And I think there are still sectors that are beaten up that you can invest into that have value.
JULIE HYMAN: And Jimmy, before we dig into those particular sectors-- it's Julie here. Hi. Walk me through a little bit more how we get from here to there. In other words, what does that upside come from? Because yes, we are down off the highs. But still, we've rallied quite a lot from the lows. And one could make an argument that since the stock market's looking forward that it's already priced in to some degree, you know, getting from here to the end of the year without further deepening of the crisis.
JIMMY LEE: Well, I think we might have a rotation in what people really have been investing into. And we've seen a little bit of that, but maybe a rotation out of the some of the big, mega cap stocks and into some of the sectors that are more value-oriented, that are still way off their 52-week highs. And so I think the way that we get there as we pull back. People may rotate, like I said, into some other sectors that is perceived to have more risk due to large gatherings not happening or not. But I predict that, you know, we are going to have [AUDIO OUT] games with people in them, watching. And so if that comes to fruition, I think there'll be a lot of momentum for that.
And of course, this will depend on the medical side. You know, will we get some therapies and hopefully a vaccine in record time? And if all those things play out along with the election, I think we could be much higher.
BRIAN CHEUNG: Jimmy, it's Brian Cheung here. Great to see you, virtually, of course.
I'm wondering about volatility, right? What's the play here when you see the VIX, for example, going up from mid-20s handles to-- I think it's at 38 right now. Not all volatility is the same. It's different now than when it was ramping up in late February. But what is different about the volatility that we're seeing now compared to what we were seeing in late February, maybe early March?
JIMMY LEE: Well obviously, in February and March, we saw some record volatility, many, many days where the stock market was bouncing around, and you know, really unnerving to a degree, unprecedented.
I don't think that we're in that type of situation now. I think that the government stimulus was something that was an unknown. And now we know what we got. And I also expect that we may get some more. And a lot of investors are. So I think the volatility has been muted. We have to think about all the money that has gone out. It will get back into the economy here at some point, which will push equities higher. And so I think with volatility, we're still going to get a lot of it, but not nearly what we saw in March.
And if you think about what what people could have done, one is nothing. Investors could have done nothing, and their portfolios would have come back. But if they would have, like we did, rebalanced and sold off some of the asset classes that were higher, such as bonds and bottom of those equities, the portfolios would have done much better. So I think rebalancing opportunities for all of us as investors were there. But also, potentially, in the future, if you haven't done that, I think that the opportunity is not over.
JULIA LA ROCHE: Hi, Jimmy. It's Julia La Roche. I'd like to get your reaction to the retail investor boom. We've seen a lot of folks talk about this in the last week. Even Jeffrey Gundlach of DoubleLine Capital pointed out that there's been a boom of new accounts on Robinhood and online brokerages and the like. And there's some speculation that maybe some of the stimulus checks have been going into the markets.
Not everyone agrees with that. But I'd like to get your take on that. What do you make of it?
JIMMY LEE: I do have some anecdotal evidence, being a firm that does work with retail investors. We have seen investors that have come in with money that they've never invested before. But I don't really think that's what's driving the market. I know I saw that study from Barclays that we all saw that suggested that it's really institutional investors that are still pushing the market up. And so I believe that.
And while there is a lot of-- there are a lot of new investors and money that I'm not sure if they came from stimulus into the market, people that were sitting on the sidelines, we still have a lot of money on the sidelines that still hasn't been invested. And once we get past the fear of deflation, I actually think that we may be in for some inflation ahead. So I think investors should be poised for that and make sure that their portfolios can perform well in that type of environment.
ADAM SHAPIRO: Jimmy Lee, we appreciate your being here. Wealth Consulting Group CEO, good to see you. Stay healthy.
JIMMY LEE: Good to see you all.