Yahoo Finance’s Alexis Christoforous and Akiko Fujita along with John Petrides, Portfolio Manager at Tocqueville Asset Management, discuss market moves amnid Biden's inauguration.
AKIKO FUJITA: Let's bring in our first markets guest for the hour. We got John Petrides. He's portfolio manager at Tocqueville Asset Management. John, it's good to talk to you today.
We're seeing a rally in the markets right now. The Dow up 200. The NASDAQ up 250 points. How much of this, you think, is around the expectation that, to Janet Yellen's point in her confirmation hearing yesterday, that this administration is going to go big on stimulus? How much of it is really about the focus back to the fundamentals and earnings?
JOHN PETRIDES: Yeah, I think a primary reason-- I've actually been amazingly very surprised by how the market has really brushed aside all the political issues that we've had since the first three weeks of the year. I would have assumed, coming into the year, that had the Democrats swept the Senate, the House, and won the presidency that the markets would have sold off on the back of a potential increase in the corporate tax rate in the future, as Biden's already laid that out.
Then, you had the surge on the Capitol. The market has brushed that aside. So clearly, I think investors are focused on the short term and Biden's go-big policy on the fiscal stimulus, which is clearly much needed as the COVID case continues to rip through the US.
ALEXIS CHRISTOFOROUS: Now, John, we know that former-- now former President Trump liked to talk often about the stock market and how well it was doing on his watch. And he spoke today at Joint Base Andrews about how he, in essence, set now President Biden up for success because he's handed him a great foundation when it comes to the economy. I want you to listen to what he had to say last night regarding some of the things he believes were-- were things that he wanted to shed a light on during his presidency.
DONALD TRUMP: Incomes soared. Wages boomed. The American dream was restored. And millions were lifted from poverty in just a few short years. It was a miracle. Stock markets set one record after another, with 148 stock market highs during this short period of time.
ALEXIS CHRISTOFOROUS: And then, today, he talked about being careful because the Democrats might raise taxes on us all. But here we see that the market is reacting quite positively to the Biden administration and a Democratic-controlled c Congress. Are you surprised by the enthusiasm we're seeing? I mean, it is day one of his presidency, but are you surprised by the level of enthusiasm, John?
JOHN PETRIDES: I am a little bit surprised by it, to be honest. But again, I think the market is focusing very much on the attention that's given to the consumer and to-- and to the US citizen of sending checks directly to the household to boost the economy, something that we need here as we muscle through as the vaccine gets rolled out.
You know, I think President Trump's speech is the speech he would have liked to have given had COVID not happened. I mean, he-- in February, we had a very strong economy with unemployment rate at 3 and 1/2%. Stock market was at all-time highs. And then COVID did happen and derailed everything.
So I kind of think that's the speech he would have liked to have given today. But clearly, that-- that didn't happen. And you know, I think-- again, I go back to the fact that COVID is not going to pay for himself. I do think Trump's comments on increasing taxes is going to come through.
I think Biden really has a two-year window here until-- I don't want to talk about the next elections, but in 2022, we will have congressional and Senate elections. And the margin is so thin in the House and in the Senate that you could swat-- the Congress could be swung either way.
So I think he does have to push through his corporate tax increase sooner rather than later, which, again, will be a headwind for stocks. But again, the market is seemingly not paying attention to that, yet. So as the drum gets beaten-- pounded louder on increased taxes in the future, I do think that will cause more volatility in the stock market.
But until then, with bond yields at historic lows-- and we're hopefully getting a light coming out of the tunnel on COVID, and as money market funds are at all-time highs, investors will want to put that cash to work and not earn 0% of it sitting in the market and ultimately getting chewed away by inflation. So I think that's why you have animal spirits coming to the market and embracing stocks on the debt.
AKIKO FUJITA: And John, really quickly, shifting our attention away from politics, we're, of course, in the thick of earnings season right now. Jared alluding to some of the big banks that have reported so far. We saw Netflix up in a big way on the back of their numbers. What's the headline that stood out to you so far in the reports that we've gotten?
JOHN PETRIDES: Well, you know, the banks kicked this off. And what I appreciated most and looking for most coming out of all the banks earnings is, by and large, their low losses were less than expectation, right? And that's a really good sign in my opinion of how the consumer is battling through this current environment.
And if you inject another $1,400 into many households around the US, they can use that to, again, further defaulting on-- on other loans. They can pay down credit cards. So the fact that the banks are not deteriorating or their loan books are not deteriorating as much as investors had expected, to me, is a really, really good sign.
AKIKO FUJITA: OK. Thanks so much for that, John. Always good to get your insight. John Petrides, portfolio manager at Tocqueville Asset Management.