COVID-19, stock market outlook: 'the new roaring 20s' by the end of this summer

Yahoo Finance’s Akiko Fujita and Zack Guzman break down today’s market action and outlook with Todd Morgan, Chairman of Bel Air Investment Advisors.

Video Transcript

ZACK GUZMAN: The interesting thing on that front, though, kind of connecting the dots between the vaccine rollout and the recovery on the economic front, is getting updated, at least, from one fed official. Interesting to hear the take here. Just recently, earlier this morning, Richmond Federal Reserve president Tom Barkin weighing in on maybe increasing his outlook that we might not need to get to herd immunity that Dr. Fauci says will come by the fall.

He said, "Individual hesitance is going to be a real barrier for herd immunity. The good news is I am not sure the economy requires it. There still may be some caution, but I expect those who have been vaccinated to have large pent-up demand." So kind of speaking to the idea here that meals, entertainment, travel, as cases come down then with vaccines, warmer weather, that he expects businesses to start returning to normal operations.

And we have seen quite a bit of that pent-up demand when it comes to travel and getting out. So could that boost the economy sooner rather than later? Here to join us to discuss is Todd Morgan, chairman of Bel Air Investment Advisors.

And Todd, appreciate you coming on here to chat today. I mean, I guess, you know, there is some reason to believe that we could see, you know, that pent-up demand start to trickle into the market when it comes to consumers wanting to spend and get out earlier than reaching herd immunity, if we are to believe, you know, the positives we're seeing in these vaccine studies. What's your take on maybe when we'll start to see that trickle into the earnings reports? We've already seen strength there.

TODD MORGAN: Well, that's a good question. There's multiple answers. First of all, we're starting to see the earnings increase this first quarter. And I think they're going to continue to be extremely attractive for the rest of the year.

I also believe that people are spending more money. There's somewhere between $4.5 and $6 trillion cash in savings accounts and checking book-- checking accounts that is available to spend. It's not going to all be invested in the stock market, and it's not all going to be spent, but the average savings for an individual historically has been around 6%, and we're at 14%.

Now what's interesting to note, and my numbers might be low, is that a couple of weeks ago, I heard the chairman of Bank of America come out and say they have $3.5 trillion of cash in their checking accounts. And just in that, that bank alone is really enormous. And I can see over the coming months that people are going to get out more. I can tell you, I'm in Los Angeles.

Just in the past week, I can tell you the volume of traffic and foot traffic, automobile and foot traffic, has increased dramatically. And I can see it continuing to do so throughout the rest of the year. So I think by the end of the summer, you're going to see people moving. In addition, a number of my employees are already booking trips to Europe, to India, all parts of the world, to take advantage of this new roaring '20s.

AKIKO FUJITA: How much of that pent-up demand that you're talking about, if you look at sort of the high savings rate and just how much cash is on hand as we look to see the economy opening up increasingly, how much that translates into inflation, you think? I mean, you've heard the warnings from economists who've said, look, things could get a little too hot by the end of the year. What's your assessment on how much of that we'll actually see come through once people feel a little more comfortable going out?

TODD MORGAN: I think inflation is slowly moving higher. The question is how much of it is going to be in wage inflation? Because that's probably the most important. We see commodity prices going up, but I don't think it's problematic. I think we're better off watching where interest rates go. And the 10-year at 130, 129 is acceptable.

Think about those numbers on a relative basis going back in time. If I would have asked you two, three years ago, what do you think about the 10-year being at a 130, you'd say, unbelievable. I'm going to go buy a new house, et cetera, et cetera.

So I don't think [AUDIO OUT] danger [INAUDIBLE] I think to our investing, especially in equities, I think we have the wind to our back for the rest of the year. I think it will be a good year for investors.

ZACK GUZMAN: All right, Todd Morgan, chairman of Bel Air Investment Advisors, appreciate you hopping on to chat that with us there.