The market in general is a little bit ahead of itself: Analyst

The Wealth Consulting Group CEO Jimmy Lee joins Yahoo Finance’s Seana Smith to discuss his outlook on the markets as stocks surge over hopes of Moderna's coronavirus vaccine data.

Video Transcript

SEANA SMITH: So joining us for more on this we have Jimmy Lee, CEO of the Wealth Consulting Group. And, Jimmy, it's great to have you back on the show. Let's start with valuation, where we're currently trading today. The big question to you is is the market overvalued at this point, do you think?

JIMMY LEE: Well, I think that we've had some very well-known money managers obviously came out and stated that the market was extremely overvalued, and I think that's what helped cause some of the selling over the last week or so. That's a very good question.

I think possibly the market in general-- let's say the S&P 500-- could be a little bit ahead of itself. Investors have crowded into that big mega-cap technology trade again. And so, you know, we know that the indexes are market weighted, and so those names have been driving those returns on the S&P 500. But underneath the overall market, there's still certain sectors and companies that are not going to go bankrupt where you can find a lot of value. And you have to look 24 months out, and I think there's a lot of value in some of those names.

SEANA SMITH: My question to you is if we want to see this momentum continue, what do we need to see in the market? I guess what sectors do you expect to see lead us here with this recovery?

JIMMY LEE: You know, again, I just stated that the sector that has really led the market recovery is the tech sector and the big-cap names. And so as we're seeing today, the big news coming out, possibly a little bit of a-- you know, from the conversations about-- where the Fed Chairman Powell over the weekend was talking about how we have more bullets and the Fed's going to do potentially a lot more in the future. That combined with good news with a vaccine from Moderna today, I think that's obviously helped, you know, a lot of sectors that have been beaten up the most go up.

And I think that's because, we're, you know, giving confidence to investors that want to know when the consumer is going to feel comfortable again being around large crowds. And so you're seeing the sectors that have been beaten up the most-- you know, sectors that are in the industries that-- travel and leisure, those types of sectors, are up a lot today.

And so I think that more good news on therapies or drugs obviously will help push the market forward, higher than maybe the trading range that we'll be in for a while, as well as more government stimulus. And so some of the sectors I think that have been beaten up the most might catch up to the rest of the market.

SEANA SMITH: Well, Jimmy, let me ask you about the more stimulus because that was one thing, like you said, Powell made comments about that last night. He said that the Fed was far from out of ammunition. He also reiterated that Congress needs to step up from a fiscal standpoint. What do you think Wall Street wants to see included in the next stimulus package?

JIMMY LEE: Well, certainly I think there's some bipartisan support on some infrastructure spending, so I think we may get that. And also there's a lot of pressure on Congress to give more money to the states. We know that states are under a lot of duress right now with tax revenues being down.

And I heard you talk about universities, and I've been watching some interviews with the heads of universities and how important that is in those communities. And so I think you can expect to see some funding for those-- for those sectors, and I think it's well deserved.

We've had on our investment-committee calls with several large asset-management firms that do a lot of business in the fixed-income area, in particular municipalities, municipal bonds, in the last three weeks. We feel confident that there are opportunities there and that we think that states are going to be OK. But really, I think a return to active investing, not just in the equity markets but also in the debt markets, is important, and bottoms-up analysis on every single bond is important today.

SEANA SMITH: Jimmy, what about investor behavior? Because when you take a look at some of the stocks that investors have been favoring, a lot of them have been growth stocks, like you've been talking about. That shift there, the fact that investors continue to favor growth stocks, does this worry you at all?

JIMMY LEE: It does. Some of these valuations on some of these names are, you know, back to where they were prior to coronavirus, and that is very concerning. I think it's a crowded trade.

And so I would pay attention to valuations, and I would make sure that your portfolio is diversified and not too concentrated in any one of these sectors, especially the ones have been pushed up so much. And I think you will start to see some of these other areas that are being beaten up at time recover as we get better news on the economy.

Let's face it, the economy is reopening. So depending on-- regardless, excuse me, of your personal opinion on whether we should be opening or not, we are going to reopen. And I think that investors' portfolios need to be positioned properly for that.

And I think that the sectors that are beaten up still the most, that's where you can find the most values. But active stock picking, company by company, is really important right now.

SEANA SMITH: Yeah, and Jimmy, going off of that, I mean, one sector that has been beaten up pretty badly has been energy. It's rallying today. We have crude above $31 a barrel. It's been quite some time since we saw crude trading at that level. When you take a look at that, are you seeing any investment opportunity within the energy sector at this point?

JIMMY LEE: Well, my personal opinion is that I'm happy to see that the energy sector is recovering, and it should have. But I think at these levels, I'd be a little bit cautious, and I wouldn't be surprised if we get a little bit of profit taking. Energy sector is going to be, I think, dependent on how fast investors believe that, you know, people will get back to normal behaviors of going out, driving in their cars, flying in airplanes. And so I think that's going to dictate what happens with energy here in the short term.

But as much as energy-- or as fast as energy fell going down to the bottom and now it's going back up, I think there will be a little bit of profit taking. And I think at these levels, I think that I'm comfortable where they're at. And so I think energy will also be in a trading range as I believe equities may be for a while.

SEANA SMITH: All right, Jimmy Lee, CEO of the Wealth Consulting Group, thanks so much for joining us.

JIMMY LEE: Thank you.