Breaking down how the recent COVID relief bill will boost the economy and market

U.S. Bank Wealth Management Senior Investment Strategist Rob Haworth joined Yahoo Finance Live to break down how big of a boost the recently passed COVID relief bill will provide Americans and the markets going forward.

Video Transcript

- All three major averages hitting intraday records earlier today. And looking at where we stand right now, we could see all three close at all-time highs. Sector action, communications, services, consumer discretionary, and technology leading the gains today. For more on this, we want to bring in Rob Haworth. He's a senior investment strategist at US Bank Wealth Management. Rob, great to have you back on the show. When you're looking at gains like this today, a lot of that being driven by the headlines that we're getting out of D.C., that new $900 billion COVID relief bill. I guess my question to you is how big of a boost do you see this providing the economy and also the markets here going forward?

ROB HAWORTH: Well, it's certainly something we've been looking for. So we think it provides a good underpinning to the market as we move forward, and a boost to the economy in the first quarter to get us into that point where the vaccine is widely distributed and enough people are inoculated that we can talk about reopening the economy.

- Rob, I'm curious, because one of the things you talk about is the secular story for technology and health care, as well as e-commerce remaining intact and when we see the sell-offs from some of the rotation into I guess some of the more value stocks. I wanted to ask you about health care. And I'm not going to ask you to pick a stock, but I'm going to point out Johnson & Johnson. Pays a dividend, it's doing OK now, but some would say it's kind of expensive. When you're looking at health care, what should you be looking at? Because a lot of news on vaccines right now, but that's going to be short-lived.

ROB HAWORTH: Right. No, there's still a big trend, we'd say, into innovation. And that's what remains important in this space is innovation to deal with the health care problems we have and that continue to grow. And so while the space itself will broadly do well, the winners will probably be more widely distributed than just looking at the big blue-chip names that have been around a long time.

- Rob, digging a little bit deeper into some of the sector action that we have been seeing, because this year technology has by far been the winner. Consumer discretionary has also been a big outperformer. But when you take into I guess a look back at the last three months, financials and energy, they've been leading. They were the worst performers during the first nine months of the year. What do you see outperforming when you look ahead to 2021, and do you think it's going to be more of a sector story similar to what we saw in 2020, or will we see that narrative shift a little bit?

ROB HAWORTH: Yeah, we think the rotation trade is still in play. And so when we look back and take stock of 2020, as we come to the end of the year, energy and financials are really still the laggards. So we think there's some room for them to catch up, particularly as we get to reopening. A lot of the reason energy and financials have done poorly-- we have low oil prices because demand has been really damaged from the lack of travel, and we've had low interest rates, which have been a headwind for financial companies. Those things probably start to unwind, and so there's probably some room for catch up in energy and financials.

In the long term, innovation and growth still remain really important, which is why we'd say for a secular trade, for the long term, still look on dips to pick up technology, health care, e-commerce sorts of names. But in the short term, as we get to reopening, there's certainly some room for earnings and revenues to catch up for these companies that have been so hard hit in 2020.

- For the risk-averse investor, one thing that you point out is municipal bonds in 2021. But you also say, for those who might want to take on a little risk, corporate bonds, the higher-yield bonds. Should the risk-adverse investor be looking at corporate, or should they just stick to munies?

ROB HAWORTH: No, I think they should look at both, and the primary reason is the Federal Reserve remains on its game, continues to hold interest rates low, and continues to provide a backstop to the municipal bond-- to all the bond markets by buying bonds and standing ready to buy corporate and municipal bonds as needed. So we think that provides a little support for the risk-averse investor to look to take on a little more risk to try and get a little more return and a little more yield with the Fed staying at their back.

- Rob, we had news out today, JPMorgan acquiring a credit card rewards business. So it's a clear bet here that travel is going, or they think at least travel is going to rebound next year. I'm curious just what your view is on this and when you expect travel and leisure businesses to bounce back.

ROB HAWORTH: Well, I mean, the companies and the stocks will probably bounce back before we see the activity bounce back. And in our view, leisure probably comes back before business. There's a bit of a long-time horizon here I think for everyone to get back into travel, and into travel as much as we were. And I think we've all learned a lot over the last nine months as we've been under lockdown, making much better use of video technologies and virtual meeting devices. So we're probably not going to see travel rebound to the levels it was at most recently, but it will take some time for all business to come back in that bounce.

- All right. Rob Haworth, senior investment strategist at US Bank Wealth Management, great to have you on the program. We'll talk to you soon.

ROB HAWORTH: Thank you. Very good to be here.